Making e-commerce social
New method expected to gain traction in the region
E-COMMERCE has made quite a mark in the retail scene. As brickand-mortar businesses face the challenge of slower sales and the need to adapt, the fast growing digital retail segment, it seems, is also faced with increasing competition as e-commerce evolves.
Newly launched e-commerce operator Fingo says there is a new business model in town and this is expected to eventually catch on with merchants and consumers.
Its chief executive officer Dong Fang says that Fingo is a social e-commerce platform, a concept made popular in China thanks to companies such as Nasdaq-listed Yunji and Beidian. These socialbased e-commerce platforms operate on the new retail management model known as the S2B2C (supply-to-business-to-customer) model.
Like Yunji, Fingo is a membership-based e-commerce platform. Through the platform, merchants are able to reach out to an ever growing network of consumers, which enables them to gather data and feedback that would give them a better idea of what customers are looking for, says Dong. Consumers or members, on the other hand, are encouraged to grow the network by sharing product links and related content with new users. They assist in the buying and selling of products and are then rewarded with points and coupons when others use their referral links.
Dong explains that this model combines social media and e-commerce elements. While it is an e-commerce platform, it uses the group-sharing and marketing model to market products and merchants on the site.
Fingo works with established names in the consumer products industry from China as well as emerging local brands.
Dong says there is an untapped potential in South-east Asia for this new model and he is confident that it can compete with established e-commerce players as it addresses a new segment of consumers who are essentially social media savvy and are more drawn to the opinion of trend setters.
According to Dong, Fingo is currently ranked sixth in terms of the number of downloads in Malaysia.
He has a clear ambition: to be the dominant e-commerce and marketing platform for SMES in the region.
The company will start talks by this year to raise up to Us$100mil (Rm419mil) in new funds to help its expansion into at least six other markets in the Asean region, says Dong. It is targeting investments from Chinese venture capitals (VC) and other South-east Asia technology focused funds.
Dong and Messi Wang Nan, Fingo’s co-founder and chief operating officer, are currently the majority shareholders in the company while a China-based VC holds a minority stake.
The company started its Malaysian operations in December last year. Expansion into Thailand, Vietnam, Singapore and Indonesia is expected to start in the next few months, followed by the Philippines by the end of the year.
Fingo currently has more than 200,000 active members in Malaysia alone and the number is expected to exceed 500,000 by year-end, says Dong.
Dong says the company has invested about Rmb100mil (Rm58.9mil) over the past one year to set up the entire operations, including an IT support operation in Hangzhou, China and its Malaysia mobile e-commerce app and operation platforms.
He adds that Malaysia made for a good base for Fingo due to the favourable demographic, relatively cheaper cost and high penetration rate for social media platforms. Operations here will provide the company with a strategic base to eventually penetrate the major markets in Asean.
Hangzhou remains its preferred IT support hub as the city has become an e-commerce hub thanks to Alibaba’s headquarters and the city’s proximity to consumer goods suppliers, many of whom have factories in the region.
Troubled start
While many see the present as the “golden age” of e-commerce, Dong notes that the industry is rife with competition in almost every area. But with the right data and strategy, he says it is not impossible for a new kid on the block to make a breakthrough.
Fingo has laid out a clear vision on how to change the e-commerce landscape here with its retail concept, but it has to clear a few hurdles following its initial introduction in Malaysia.
After its public launch in July, Fingo received some unpleasant surprises. There were complaints from the public unfamiliar with its model and calls to stay away from the site.
Dong maintains that Fingo has obtained the necessary approvals to operate its platform. The company has also taken the effort to meet with the relevant ministry to explain its model and seek assurances that its business is legit.
“Our B2C platform does not require any sales agents or distributors and all sales and distribution including after-sales service and collections are managed entirely by Fingo Malaysia. We are purely an e-commerce platform that offers referral incentives,” he says.
Inflection point
Fingo is convinced that most Asean countries are at an inflection point in e-commerce, similar to where China was 10 years ago when Alibaba first pioneered the adoption of online commerce in the country.
Dong, who spent 13 years with the Alibaba Group, says Asean, including Malaysia, presents the company with a vast opportunity to introduce its services. To demonstrate the potential the region has, Dong points to the value of China’s market.
The market scale of China’s social commerce sector is expected to reach RMB2.07 trillion (RM1.2 trillion) in 2019, an increase of 63.2% year-on-year, given the increasing use of mobile technologies to access social media.
One of the reasons social commerce has become a driving force for e-commerce is due to the growth of mobile technology. With more and more people using their mobile phones and tablets to do online shopping, group buying has gained traction and fuelled the proliferation of e-commerce on social networking platforms.
However, he notes that each market in the region has its own unique characteristics, which means the company has to take on a careful approach with each market. Malaysian consumers, he notes, favour a good mix of diversified and personalized products.
Currently, more than 80% of Fingo’s products that are listed on the platform are from Alibaba’s e-commerce sites Tmall and Taobao but Dong expects that over time, over 60% of the total products will be sourced from merchants and businesses from within Asean. He adds that many local entrepreneurs are already thinking about starting an e-commerce business and this could be a good opportunity for them.
Another potential that the company is hoping to tap is the opening up of cross-border marketing for SMES in the region. Compared with the traditional e-commerce model, the essence of social e-commerce is to leverage the role of consumers in the sales process. Through the decentralisation of customers and services, businesses will have better market reach.
Having taken the bold step of making Malaysia its base, Fingo aims to be the catalyst for business owners to embrace change not just in the way products and services are sold, but also in the way businesses communicate directly with consumers.
Should Fingo’s social commerce model gain traction, it would certainly attract more tech newcomers to join the fray. While competition will no doubt intensify as the market in South-east Asia matures, Dong says Fingo’s first mover advantage will ensure its pole position in replicating Alibaba’s success in this new era of e-commerce.