Profitability path key, says WearYouWant CEO
Thailand’s online fashion and beauty marketplace WearYouWant has warned startups to have a clear strategy toward profitability, which is now being demanded by investors.
CEO and co-founder Martin Toft Sorensen says there was considerable discussion at the Last Mile Fulfilment Asia (LMFAsia) Conference & Exhibition in Singapore on how startups should focus beyond just team, product and market to become successful. The event brought together retailers, eCommerce businesses, logistics and parcel-industry professionals.
“Startups should have a clear path and strategy toward achieving profitability by scaling the business, without forgetting the lifetime value of the customer versus cost per acquisition,” says Sorensen.
“If eCommerce businesses simply follow a desire to climb user acquisition heights quickly without keeping an eye on the ROI, there is a higher risk of a greater fall.
“Penetration from online platforms can go far, wide and deep, but the trajectory needs to be based on running a business that brings in money for investors, shareholders and other stakeholders in the near future.”
Sorensen also says that as well as having a viable business model, startups should be creative in attracting and keeping customers.
High sales, no profits
While many eCommerce sites are reporting high sales growth, he says the reality is that they may not be showing any profitability.
“In Thailand, we have yet to see any eCommerce companies proving they can scale yet become profitable.
“The recent acquisition of Rocket Internet’s fast-growing, yet loss-making, Lazada site by Chinese eCommerce giant Alibaba, and Zalora (Thailand and Vietnam) by Central Group, has definitely created waves in the eCommerce industry.”
Sorensen says that while Lazada will pave the way for Alibaba to penetrate into Southeast Asia as a market leader, it remains to be seen whether Zalora’s acquisition by a traditional offline retailer will kickstart true omni-channel experiences in Thailand.
He says it is an exciting time for eCommerce companies and startups in general, as well as for investors.
“There has been a lot of noise on increased funding in various eCommerce businesses lately, but little on acquisitions and exits, which are important factors. I think acquisitions are just the beginning of market consolidation and a signal to what this year will bring.”