For ecommerce and logistics companies, battling in Singapore can be an all-out war. Sure, the country’s a crown jewel in Southeast Asia for its sophisticated consumers and booming startup scene. But it’s also a saturated market with a small population. That’s a lesson learned for aCommerce, a Thailand-headquartered startup that provides logistics, fulfillment and last-mile delivery services to online retailers.
The company has ceased logistical operations in Singapore, while keeping on board a sales and marketing team, Paul Srivorakul, group CEO of aCommerce, tells Tech in Asia. The downsizing is happening as we speak, and could see the office shrink down to just over 10 staff from a team of about 20 – including drivers. Some of its staff have been hired by affected startups who are now bringing their logistics in-house. We’ve also heard that aCommerce is working on transferring some of its clients to other fulfillment services.
Now here’s the why: Singapore doesn’t make sense for aCommerce from a revenue perspective. “If you’re doing the RedMart model, that would be different,” says Srivorakul. RedMart is a Singapore-only online groceries startup that has brought its entire operation in-house. But aCommerce is regional from day one.
For the most part, the country is an incredibly competitive market for both logistics and ecommerce. Srivorakul describes it as a bloodbath where they were engaged in a price war with SingPost, the country’s national postage service that has its toes in logistics, as well as other players like TA-Q-BIN. Anchanto is another startup competitor in the Singapore market.
After speaking to clients, the CEO was alarmed to learn that even large retail players hesitated to put money into Singapore not just because of its small population, but also because it’s a mature market where returns are minuscule. “You can put one million dollars in and get only one percent market share,” he says. Even Lazada, an online retail site started by the well-funded Rocket Internet, entered Singapore last after opening in surrounding markets. Then there’s cost: doing business in Singapore is expensive.
Singapore is a harbor, not a hinterland
So, while Singapore makes sense as a regional HQ where international companies make decisions for Southeast Asia, large retailers are really only interested in consumers from bigger markets like Indonesia, Philippines, Thailand, and Vietnam. ACommerce had a hypothesis when they went into Singapore and hired a logistics team: they would pitch the region but cross-sell Singapore, and customers would bite. Turns out they weren’t that interested.
For customers affected by aCommerce’s withdrawal, this is a bad time. With the holiday season approaching, online retailers are doing capacity planning and trying to forecast demand in the coming months. Having one of your service providers withdraw would mean you’d have to switch to another one. For lean startups, that’s an outsized impact on your operations.
But something had to be done. ACommerce concluded that serving startups in Singapore was no longer pragmatic. In Srivorakul’s words, downsizing was a “business decision” that works for aCommerce and allows them to go deeper into countries like Thailand, Indonesia, and Malaysia. “If you look at the math [in Singapore], it does not make sense. It’s a red ocean where you’re fighting over a population of five million.” ACommerce is still a startup after all, albeit a relatively well-funded one. The CEO adds they’re trying their best to manage the transition, in some cases getting their staff to join the startups themselves.
One thing to watch for is how aCommerce’s exit from Singapore will impact ecommerce logistics in the region. ACommerce’s Thailand operation seems to be doing well. It recently reported that it has doubled its clientele and increased deliveries four times in the last month. It did not disclose specific figures. However, as a whole, retailers might be more wary of upstart logistics services since their plans could change after assumptions about a market become disproven, as was the case with aCommerce. Startups might find that they’ll want to bring more of their logistics operations in-house and be the captains of their own fulfillment ship.
Men’s fashion brand Tate & Tonic is one of the companies affected by this change. Its CEO, Matteo Sutto, planned for such a fiasco by making sure that his startup wasn’t relying on just one service to handle all its logistical tasks.
“The main challenge is to find a balance between diversifying your risk – that is, by not relying 100 percent on only one provider, also for negotiation power – and avoid complicating your processes too much by adapting them to each different logistic provider you are using,” he says. Sutto adds that he has been satisfied with aCommerce’s services.
While aCommerce may be scaling back in Singapore, Srivorakul is not content to sit back in the country. The prolific entrepreneur tells Tech in Asia that he’s working on a new venture there, without giving specifics.