ShopBack's losses widen amid revenue decline, one-off expenses

In The Checkout this week, we look at ShopBack’s most recent financials and why a lawsuit Shopee filed against a former employee failed. [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: - What [ShopBack’s latest financials]( say about its voucher business - Why Shopee took a former employee to court - and lost - How [Indonesia’s presidential elections]( could affect the ban on social commerce transactions --------------------------------------------------------------- Hello {NAME} Everyone likes a free lunch. My poison is airline miles - I’ll buy vouchers to dine at a restaurant just to earn nine miles per dollar from Kris+, the lifestyle rewards app run by Singapore Airlines. Others may use apps like ShopBack to earn cashback on their purchases and other rewards. Singapore-based ShopBack also sells vouchers that people can use to make purchases. In its most recent financial year ended March 2023 (FYE 2023), revenue from selling these vouchers accounted for 41% of the company’s overall figure, the second biggest item after revenue from commissions. As my colleague Samreen explores in this week’s big story, selling such vouchers remains a “significant and growing” part of ShopBack’s business in selected markets. However, the company is also trying to break into new businesses, such as buy now, pay later (BNPL). Yet, these initiatives come with risks. ShopBack cited an [impairment of goodwill]( arising from the [acquisition]( of BNPL startup Hoolah as one of the reasons for its widening losses in FYE 2023. We all like a free lunch, although someone always ends up footing the bill. -- Simon  --------------------------------------------------------------- THE BIG STORY [ShopBack feels the pinch as voucher revenue dips 50% in FY23]( While it has closed its pay-later business in Thailand, the cashback and rewards platform is expanding to Germany.  ---------------------------------------------------------------  THE HOT TAKE Sea you in court Here’s what happened: - A [lawsuit]( filed by Shopee against a former senior employee, Lim Teck Yong, who joined ByteDance was dismissed last week - The ecommerce giant alleged that Lim’s move to a competitor violated terms in his employment contract - A Singapore judge found that Shopee failed to show there was a breach of non-competition and non-solicitation restrictions Here’s our take: Most of us wouldn’t think too much about the repercussions of leaving an employer to join another company. However, when you’re a senior employee leaving the firm to join a competitor, there may be consequences. Shopee took Lim to court for joining ByteDance, the parent firm of TikTok, alleging that he was breaching the terms of his employment contract. It even tried to obtain an [injunction]( to prevent him from joining any Shopee competitor. Lim had been with Shopee for eight years. However, Justice Kwek Mean Luck dismissed the lawsuit, questioning whether Shopee had a “legitimate proprietary interest” to project and how reasonable it would be to apply a restraint that would prevent Lim from seeking employment in all markets Shopee operates in. This is the dirty secret of clauses in employment contracts that seek to restrain employees from joining a competitor - they’re often seen as unreasonable and so will not be enforced, even if the parties agreed to them. Tech companies are likely to continue inserting such terms into their agreements. After all, competition in the industry is cutthroat, and tapping into the expertise of former employees is a good way to get ahead of the competition. In light of the judgment, tech employers may want to consider imposing more specific restrictions in their employment contracts. For example, instead of prohibiting an employee from working for a competitor in any market the company operates in, the restriction can be for a specific market. In Lim’s case, that might have been Brazil, where he served as executive director of operations for Shopee. While it isn’t clear whether Lim’s contract specified a time limit, having a reasonable one for these clauses - six months, for instance - may also make them more likely to pass muster with the courts. Ultimately, enforceability aside, much of this boils down to deterrence. Having such a clause may discourage employees from breaching the terms, even if they prove to be unenforceable. Many who are not legally trained may not even be aware of the likely unenforceability of such clauses. Even if they are, they may be unwilling to deal with the hassle, expenses, and uncertainty of a lawsuit. Finally, Lim will now have to be extra careful in how he interacts with his former company and colleagues. While Justice Kwek found that there was no proof Lim was about to breach the [non-solicitation restrictions]( Shopee may act if this changes. By moving aggressively now, Shopee may have been hoping to shape Lim’s future conduct, even if it knew it would lose the battle. All is fair in love, war, and, we suppose, business.  ---------------------------------------------------------------  NEWS YOU SHOULD KNOW Also check out Tech in Asia’s coverage of the ecommerce scene [here](. 1️⃣ [Lazada’s laid-off union members to get training fund, better support package]( This settlement comes about a month after the National Trades Union Congress and the Food, Drinks and Allied Workers Union - the union representing Lazada employees - first voiced its disappointment over the layoffs. 2️⃣ [Delivery Hero denies that deal to sell Foodpanda to Grab was canceled]( A Foodpanda buyout would cement Grab as the leading food delivery player in Southeast Asia. 3️⃣ [ByteDance exec takes the helm at Tokopedia as merger closes]( Vonny Ernita Susamto, who has been part of ByteDance’s category management team since 2021, has been appointed as the ecommerce firm’s president director. 4️⃣ [Meesho’s valuation slashed to $3.5b by Fidelity]( In the second quarter of 2023, Meesho emerged as India’s most downloaded ecommerce app, with 30.2 million downloads, according to Data.ai. ---------------------------------------------------------------  FYI  1️⃣ [At a crossroads: Indonesia’s elections will decide tech future]( Local regulators are expected to continue monitoring the operations of the TikTok-Tokopedia entity, and potential policy shifts in the incoming administration could still influence this merger. 2️⃣ [Kopi Kenangan, Fore Coffee find right blend for international expansion]( Growth at all costs is no longer a maxim in the tech startup scene, and it’s the same case for both Kopi Kenangan and Fore Coffee. --------------------------------------------------------------- That’s it for this edition - we hope you liked it! 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