SEA plays catch up to India in babycare commerce

In The Checkout this week, we look at why Southeast Asia’s parenting firms lag behind their India-based peers and why ShopBack pulled the plug on BNPL [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: - Why Southeast Asia’s mom and babycare firms are [lagging behind]( India-based players like FirstCry - ShopBack’s retreat from the buy now, pay later space - Whether Qoo10’s bet to enter the US market through its Wish acquisition [could pay off]( --------------------------------------------------------------- Hello {NAME} I’ve been learning a lot about postpartum care and things like when to start a baby on solids from a friend who’s a certified nutrition consultant for moms and babies. In the past year, she’s created an online community for time-starved moms juggling the demands of raising a child and managing work and their households. She dishes out tips for managing recovery after pregnancy, restarting fitness journeys, and caring for babies, which has led to the community’s growth. I’m not a parent, but I can only imagine what a dizzying journey it is - riding the highs of watching a little human grow, punctured with anxiety, stress, and exhaustion. With all that parents have to juggle, it’s no wonder the mom-and-babycare sector in Southeast Asia is booming. It’s expected to be valued between US$26 billion and US$29 billion by 2027, my colleague Samreen writes in this week’s Big Story. Still, that’s less than half of India’s babycare sector, where players like FirstCry, soon to IPO, sell a range of home-branded products - which include apparel, diapers, feeding and nursing items, as well as toys - both online and in its over 900 stores in the country. Competition from strong horizontal ecommerce marketplaces like Shopee and Lazada, the operational challenges of scaling across different markets, and limited capital vis-a-vis their India-based counterparts, are just some of the limitations that Southeast Asian babycare players face. Mom and babycare platforms aren’t the only ones facing challenges. In this week’s Hot Take, I look at cashback and rewards platform ShopBack’s retreat from the buy now, pay later space and discuss why - despite what the move suggests - we likely aren't seeing the end of BNPL just yet. -- Melissa  --------------------------------------------------------------- THE BIG STORY [FirstCry leads baby care ecommerce in India, but consolidating SEA a far cry]( Socioeconomic hurdles and smaller market sizes make it harder for baby ecommerce startups to scale in Southeast Asia. ---------------------------------------------------------------  THE HOT TAKE ShopBack discontinues BNPL service, but is it any surprise? Here’s what happened: - Last week, Singapore-headquartered ShopBack [announced]( that it will be discontinuing its BNPL service, PayLater, from March 22. - The Temasek-backed cashback platform said the move to shut the service was part of a periodic review of its business units. - PayLater will also be discontinued in Malaysia. Here’s our take: In just over three years since I first covered the [emerging BNPL trend]( the fever pitch that spurred the [emergence of new entrants]( and numerous [M&As]( in Singapore is losing its legs. Like ShopBack, platforms such as Grab and Fave launched pay-later features to complement their offerings. Fave [discontinued]( its BNPL service in September 2022, however. For ShopBack, its PayLater product - which it [acquired]( as part of the Hoolah deal - was a short-lived endeavor, lasting [under two years](. PayLater was meant to add a payments layer - and potential revenue stream - on top of ShopBack’s existing ecommerce offerings, which include cashback, deals, and vouchers to shoppers both online and at physical retail stores. The BNPL service would have given ShopBack a chance to capture a shopper’s end-to-end journey from discovery and shopping to payments, instead of channeling it to a third-party brand’s site to complete the transaction. In theory, if ShopBack could convince the [over 8,000]( brands it works with to adopt BNPL on top of its cashback offering, it could drive increased sales for both the brand and itself. Merchants that offered PayLater as a payment option saw a [20% increase]( in average basket size, the firm previously said. See also: [ShopBack feels the pinch as voucher revenue dips 50% in FY23]( PayLater likely struggled for the same reasons that many other BNPL firms did: rising interest rates, [slowing]( ecommerce growth, and intensified competition squeezing margins. In an already saturated market like Singapore, expanding the pie could entail targeting less creditworthy customers and lead to a rise in bad debt down the line. Managing delinquencies at scale in a rising interest-rate environment will squeeze margins even further, notes Dylan Tan, co-founder and CEO of now-defunct BNPL service Split. In its financial year ending March 2023, ShopBack posted a [20% year-on-year decline]( in revenue. Income from the sale of vouchers fell by more than 50% over the same period. Its BNPL business posted a revenue of US$3.4 million for FY 2023 - less than 4% of total revenue. That said, ShopBack launched PayLater in July 2022 and was not available for the full 12 months of the period. To many skeptics, ShopBack’s closure of PayLater doesn’t come as a surprise and is in line with a trend of [hard times]( falling on BNPL firms. Still, it’s unlikely that we’ve seen the end of BNPL just yet. In the six months ending December 2023, Australia-based Zip reported [positive cash earnings]( of A$30.8 million (US$20.1 million), driven by transaction volume growth in the US and improved credit losses in its core markets. Transaction volumes grew [9.6% to A$5 billion]( (US$3.3 billion) year on year, while bad debts remained under control at [1.9% of sales](. Zip has managed to stay afloat by paring back growth in Europe and the Middle East, [levying more merchant or customer fees where required]( and making cost improvements, laying off [up to 20%]( of its staff. In 2022, the firm had also raised A$200 million (US$130 million), giving it some buffer to tide itself through the storm. Surviving BNPL firms now stand to benefit from the decreased competition. “The BNPL players that are left will have the advantage of being able to operate in a significantly more rational market. We might not see astronomical growth, but we are seeing profitable growth,” Tobias Yao, portfolio manager at Wilson Asset Management, told the [Australian Financial Review](. ---------------------------------------------------------------  NEWS YOU SHOULD KNOW Also check out Tech in Asia’s coverage of the ecommerce scene [here](. 1️⃣ [Sea hit first profitable year in 2023, eyes positive EBITDA for Shopee in H2 2024]( The New York Stock Exchange-listed company still posted a net loss of US$112 million for the fourth quarter of 2023, though that slightly narrowed from US$144 million in the previous quarter. 2️⃣ [Alibaba-backed Daraz lays off staff in bid for long-term growth]( In an internal memo, the Pakistan-based ecommerce platform, which also operates in Bangladesh, Sri Lanka, and Nepal, said it would significantly reduce employees in all markets. 3️⃣ [Coupang’s revenue up in Q4, developing offerings unit losses widen]( While the South Korea-based ecommerce platform saw strong growth and improved profitability in the product commerce segment, its developing offerings unit - which includes international services, fintech businesses, Coupang Eats, and Coupang Play - reported a negative adjusted EBITDA of US$150 million for the quarter. 4️⃣ [Thrasio, once king of ecommerce aggregation, files for Chapter 11 bankruptcy protection]( The US-based ecommerce roll-up firm, which has raised over US$3 billion in funding and acquired several hundred third-party brands that sell on Amazon, has been laying off employees and restructuring the business since 2022. 5️⃣ [Shein may seek London IPO amid challenges in US]( The firm filed confidentially to IPO in the US in November 2023 but has faced pushback from lawmakers over its ties to China and alleged use of forced labor. ---------------------------------------------------------------  FYI [Is Qoo10’s latest deal Wish-ful thinking for a turnaround?]( Entering the US market with an established brand such as Wish could give Qoo10 a leg up. --------------------------------------------------------------- That’s it for this edition - we hope you liked it! 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