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Qoo10 faces down the competition
IT IS an increasingly tough world out there for e-commerce players. From Amazon to Taobao, the competition has become cutthroat for a local player like Giosis Pte Ltd which runs e-commerce platform Qoo10. Still, its founder and chief executive Ku Young Bae is sticking to his guns in his ambitions to make Qoo10 one of the top four e-commerce players in Asia, after Alibaba's Taobao, JD and Rakuten. This is in line with the group's goal and vision to sell its shares in a public listing, and become a US$10 billion company in market capitalisation. "Once we reach that, we will become one of the top four e-commerce players in Asia and No 1 in SEA," says Mr Ku.
Today, the group has a gross merchandise value of about US$800 million, with 40-45 per cent coming from Japan, 30 per cent from Singapore, and the rest from Hong Kong, Indonesia and Malaysia.
Qoo10 has a target of reaching US$1.2 billion in gross merchandise value this year, and US$2 billion next year. It takes a cut of 9 per cent from the selling price of each item, and hopes to eventually raise this to 10 per cent.
These are certainly big dreams, not least for one who first started out as an oil and gas field engineer. Finding the e-commerce offerings in South Korea lacking, Mr Ku decided to venture into the sector in 2003 to start Gmarket. It was, after all, the height of the dotcom bubble then.
Starting as an industry outsider had its benefits, says Mr Ku. "It's helpful because you can actually see it from a different angle." And while the oilfield services sector had a very different focus, it was a very technologically advanced field. The Internet, in comparison, was still nascent, and most industry players were also new to the game, he adds.
In three years, the group became the fastest-growing and also the most innovative e-commerce company, big enough to be listed on the Nasdaq in the US.
Then, the financial crisis hit. Gmarket's investors and board wanted to sell the company, but Mr Ku believed that it was too premature to do so, given the potential in Asian markets and even the US. According to Mr Ku, Gmarket was much more advanced than even Alibaba then, and was the first to have a B2C marketplace; eBay was then more focused on C2C.
When the company was eventually sold to eBay for about US$1.2 billion in 2009, many people thought Mr Ku would have been proud or happy. But not so. "I was frustrated because I was ready to make a much bigger business but I had to stop because of other reasons."
Mr Ku stayed on in the acquired company for barely a few months before he left, feeling that eBay had its own strategy for the firm and that he wouldn't fit in there.
He decided to start Gmarket in Japan and Singapore in 2010; eBay entered as a joint venture partner. At that point, Mr Ku had envisioned an initial public offering by 2015. "But since then the market has changed quite a bit especially in terms of competition. There are some big successful examples like Taobao and even Amazon, which has turned around (in profitability)."
With investors pouring money into the sector, costs rose. For the same advertising display, he found himself having to spend more as other companies were able to access cheap financing. It was also harder to find investors as they were attracted to those with aggressive growth plans.
Because of the intense competition, the firm's initial plan has been delayed by two to three years, says Mr Ku. The platform was also rebranded as Qoo10 in 2012. The group is now in the process of looking for another S$100-200 million in Series B funding; it has spent S$200 million so far, twice its initial estimate.
Still, the group has completed its set-up phase, and is now ready to take the leap to the next stage. "Now we've pretty much secured what we need to do and execute for the growth." This included building a platform for a multi-country marketplace, the management teams in the six countries it is present in, cross border fulfilment service and backend support services.
To differentiate itself from the competition, Qoo10 focuses on supporting local merchants. "We are much more optimised for small and medium enterprises (SME) merchants to do the e-commerce businesses, whereas the other companies are intrinsically favourable to the bigger guys . . . Our platform and programmes, and the dynamics we are trying to create, are optimised for SME merchants."
While many retailers have turned to Facebook and Instagram, these are just communication and community channels and don't allow for transactions to take place, he says. "Overall Facebook and Instagram are focused on relationships. You can't do too many commercial activities."
With this strategy, the group hopes to scale up further with the intention of conducting an initial public offering by 2019 and becoming a S$10 billion company by 2021. The group is now the top player in Singapore, but that is just a start, says Mr Ku.
"This is the necessary position to acquire, to have a strong position in Singapore and Japan, but eventually what we are targeting going forward is to be a pan-Asian marketplace."