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BT EXCLUSIVE

Qoo10 takes e-commerce fight to next level with bulked-up war chest

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Qoo10 Singapore country manager Cho Hyunwook said many global brands have told him Singapore is their fourth largest market in Asia, after China, Korea and Japan.

Singapore

CAUGHT in a raging battle between Chinese tech behemoths Tencent and Alibaba, Singapore-based Giosis, which operates Qoo10, is not going down without a fight after acquiring a hefty war chest from the sale of its Japanese business to eBay.

"We are much more ready in terms of cash, and our focus will also be only one - Singapore," Qoo10 Singapore's country manager Cho Hyun Wook told The Business Timesin an exclusive interview.

eBay announced in February that it will be acquiring Giosis' Japanese assets, including the Qoo10.jp platform, for an undisclosed amount. As part of the deal, eBay said it would give up its stake in Giosis' non-Japanese businesses.

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Industry figures put the value of the sale at about US$700 million, which is set to close this month.

Mr Cho said that after the sale, Qoo10 will spend 80 per cent of its total budget on the Singapore market. Other than Singapore, Qoo10 now runs marketplaces in Korea, Indonesia, Malaysia, Hong Kong and China.

The choice of Singapore may be surprising to some, given that Singapore has a relatively smaller market size, which Mr Cho acknowledged.

He revealed, however, that many global brands have told him Singapore is their fourth largest market in Asia, after China, Korea and Japan.

"Though the market might be the largest in Indonesia due to population size, it is actually not very meaningful to global brands, because it is fragmented into many areas," he said.

"But in Singapore, they see meaningful growth... It might be the only country they can see the ROIs (return on investments) in South-east Asia."

A closer look at Qoo10's gross merchandise value (GMV) - the total sales dollar value for merchandise sold on the platform - provides further insight.

BT reported earlier that Qoo10 targeted US$1.2 billion in GMV last year. Mr Cho said that before the sale, Japan was the largest contributor, providing 50 per cent of GMV, while Singapore was the next largest with 40 per cent.

Without Japan, Singapore now becomes the dominant contributor with 80 per cent of GMV.

Mr Cho admitted that the company wanted to hold on to Japan, but had to make a choice because of costly "money games" in the region.

He explained that if they could develop a sophisticated platform in Singapore, they could then replicate, recombine and export this platform to other South-east Asian countries.

Both Tencent and Alibaba have taken a keen interest in Qoo10's Singapore-based rivals, carving them into two separate factions, as they vie for dominance in South-east Asia.

Tencent began investing in Sea, which runs Shopee, since 2013. By the time Sea was publicly launched on the New York Stock Exchange last October, Tencent had a near 40 per cent stake.

Alibaba acquired control of Lazada in 2016 with an investment of US$1 billion. With that injection of funds, Lazada acquired RedMart, a grocery-focused e-marketplace.

Last year, Alibaba pumped a further US$1 billion into Lazada to up its stake to 83 per cent, and another US$2 billion last month, bringing its total investment in Lazada to US$4 billion.

BT understands that Qoo10 is unlikely to seek any investments from either of the Chinese tech giants for now.

Nevertheless, it is still the most-visited e-marketplace site in Singapore, with more than 13.4 million monthly visits in Q1 2018, according to meta-search website iPrice. This was over 3 million visits more than nearest rival, Lazada.

Qoo10 saw a 15 per cent year-on-year growth in GMV last year, but only a 10 per cent increase in the number of transactions, which Mr Cho attributed to the growth of the digital category.

The digital category, where products could cost thousands of dollars, has been the top category contributor in terms of GMV. But he said this category was price-driven, meaning it led to loss-leading products and unsustainable price wars.

"All the competitors I see want to make their GMVs look nice, by focusing on digital products, but that is the easiest way to kill themselves.

"We will focus more on the beauty and fashion categories where the customers do not just look for price only... they look for style, stories and content."

Qoo10 will also be adopting different strategies to compete more on a non-price basis.

Mr Cho said the company is actively engaging local brick-and-mortar merchants to further expand its product offerings, which currently stand at over 10 million. If there are not enough local merchants, Qoo10 will bring in merchants from other countries.

Qoo10 is also looking to shorten delivery time. Last year, it introduced a quick delivery option, promising a three-hour timeframe. Now, it is in talks with 7-Eleven to allow customers to pick up items at the chain's stores.

The company is moving into a 21,810 sq ft office at Gateway West next month, more than double the area it now occupies at Tampines Plaza. Qoo10 said it expects to increase its staff size by 30 per cent this year.

Adrian Lee, research director at Gartner, said: "They have the merchant base, the inventory and fulfullment networks. Now, it is about how they improve and overhaul the user experience - they could be one of the biggest success stories if they get it right."