Zalora quietly profitable amid the rise of Shein, TikTok Shop

This week’s The Checkout dives into how the marketplace turned profitable and analyzes the possible tie-up between TikTok and Tokopedia in Indonesia. [Read from your browser]( The Checkout 🛒 --------------------------------------------------------------- Welcome to The Checkout! Delivered every fortnight, this free newsletter breaks down the biggest stories and trends in ecommerce. You can find past issues [here]( or [sign up here]( to receive future newsletters. Also, If you’re not a subscriber, get access by [registering here](. IN FOCUS In today's newsletter, we spotlight: - How Zalora [achieved profitability]( as a vertical ecommerce in Southeast Asia - The potential partnership between TikTok Shop and Tokopedia in Indonesia --------------------------------------------------------------- Hello {NAME} Fashion is one of the top-selling categories in ecommerce. Personally, I prefer shopping for clothing online to going to offline stores. The reason is convenience. I can check the product catalog and see whether my preferred sizes are available, all from the comfort of my home. It's impossible not to mention Zalora when speaking of fashion ecommerce. The company, founded in 2012 and backed by Rocket Internet, has become profitable - a goal that its ecommerce peers have yet to achieve. Last year, the marketplace reported a positive [adjusted EBITDA]( margin of 0.7%, with 2.9 million shoppers purchasing at least one item from the platform. This translated into US$451.4 million in net merchandise value. In this week’s Big Story, my colleague Melissa examines how Zalora managed to achieve profitability amid the rising popularity of Shein and TikTok Shop in Southeast Asia. One factor is that Zalora not only focuses on the marketplace model but also provides ecommerce solutions such as warehousing, fulfillment and logistics, as well as marketing. Meanwhile, I analyze the potential collaboration between TikTok Shop and Tokopedia that is brewing in Indonesia. TikTok is looking for ways to revive its ecommerce operations in the country, and partnering with a local player is one of its options. -- Jofie  --------------------------------------------------------------- THE BIG STORY [Now profitable, Zalora bets on B2B, subscriptions for growth]( Zalora may not be as popular as Lazada, Shopee, or TikTok Shop in Southeast Asia, but the ecommerce marketplace was profitable in 2022.  ---------------------------------------------------------------  THE HOT TAKE Making sense of potential partnership between TikTok Shop and Tokopedia Here’s what happened: - TikTok is reportedly [in discussions]( with Indonesian ecommerce players about potential partnerships to revive its ecommerce unit. - Recently, a rumored [possible collaboration]( with Tokopedia has been the most talked-about. - The Ministry of Cooperatives and SMEs [stated]( that TikTok Shop seems unlikely to establish a local entity in Indonesia. Here’s our take: TikTok Shop has been closed in Indonesia for almost two months. To date, TikTok seems not to have taken the necessary steps for its ecommerce business to make a comeback in the country. These include establishing a local entity and applying for an ecommerce license. Both of these steps have been taken by two other foreign ecommerce firms: Shopee with PT Shopee International Indonesia and Lazada with PT Ecart Webportal Indonesia. Even then, TikTok would still need to separate online shopping and social media. The company would have to develop a standalone app specifically for its ecommerce operations. Amid this complexity, TikTok is reportedly open to the possibility of teaming up with local ecommerce players who are already licensed. Tokopedia is said to be the frontrunner for any such collaboration. Although there is no clarity yet, one can imagine how this tie-up could unfold. For example, TikTok sellers and content creators could promote products to users on its platform, with purchases directed to the Tokopedia app. In fact, after TikTok Shop was shut down, many users [continued to sell]( on the social media platform. However, they now include links to other ecommerce platforms, so the transactions occur outside the TikTok app. See also: [Anatomy of a comeback: Can TikTok resurrect its ecommerce biz in Indonesia?]( In 2022, Tokopedia's market share in Indonesia was 35%, slightly behind Shopee’s 36%, according to Momentum Works' [estimates](. Meanwhile, TikTok Shop, which started gaining traction last year, already had a 5% market share. For this year, Momentum Works [projected]( that TikTok Shop's market share would jump to 13% in Southeast Asia, even though it's no longer operating in Indonesia. This figure would approach the predicted market share of Tokopedia (14%) and Lazada (18%) in the region. If TikTok Shop becomes part of the Tokopedia ecosystem, the latter will pose a threat to Shopee in Indonesia - potentially surpassing its market share. Moreover, TikTok is known for its strength in the lower and middle segments, while Tokopedia is [stronger in the more premium segment]( so the two platforms could complement each other. The latter could also strengthen its live commerce features through this collaboration. However, this may be a short-term solution for TikTok - it might choose a different route in the long term, given the potential it has demonstrated as a standalone app.  ---------------------------------------------------------------  NEWS YOU SHOULD KNOW Also check out Tech in Asia’s coverage of the ecommerce scene [here](. 1️⃣ [Sea Group returns to net loss in Q3, posts 4.9% revenue uptick]( Sea’s sales and marketing expenses, which almost doubled to US$918 million compared to Q2, is among the factors contributing to this reversal. 2️⃣ [Meituan mulls acquisition of Delivery Hero’s operations in SEA]( While there are ongoing talks, there’s no certainty this will lead to a deal. 3️⃣ [Unicommerce eyes IPO for late 2024, sources say]( Although the ecommerce enabler did not comment on the report, Kunal Bahl - co-founder of Unicommerce owner Snapdeal - hinted at the move in a LinkedIn post. 4️⃣ [JD.com posts minimal revenue gains in Q3, misses estimates]( Despite the numbers, this quarter is the most profitable so far for the Chinese ecommerce firm. 5️⃣ [Carsome cuts hundreds of jobs to meet 2024 profitability goal]( The layoffs mainly affect Indonesia- and Thailand-based employees of its 4,000-strong team.  --------------------------------------------------------------- That’s it for this edition - we hope you liked it! Do also check out previous issues of the newsletter [here](. Not your cup of tea? You can unsubscribe from this newsletter by going to your “edit profile” page and choosing that option in our preference center. See you soon! [ADVERTISE]( | [SUBSCRIBE]( | [HIRE]( | [FIND JOBS]( P.S. Don't miss out on the biggest tech news and analysis. Add newsletter@techinasia.com to your address book, contacts, or safe sender list. Or simply move us into your inbox. Too many emails? Switch to a different frequency or get new content through our [preference center]( or [unsubscribe](. You can also break our hearts and remove yourself from all Tech in Asia emails over [here](  Copyright © 2023 Tech in Asia, All rights reserved. 63 Robinson Road, Singapore 068894