Taiwan’s ecommerce industry might seem too small or insular for investors to take notice, but look carefully and you’ll see that it’s changing quickly. Giants from the Web 1.0 era are racing to stay relevant in an era of smartphones and social networks. Meanwhile, behemoth messaging app Line has expressed interest in tackling peer-to-peer ecommerce, which could also affect the fortunes of incumbents. And as mobile devices that track one’s location grow more powerful, many are wondering how to bridge the gap between physical storefronts and virtual ones.
N Squared is one startup that’s looking to capitalize on these trends. Co-founded in 2012 by Steven Ho, former general manager of Yahoo Taiwan’s ecommerce division, the company’s 91App helps online merchants set up mobile storefronts quickly.
91App basically offers a set of front-end templates and back-end levers that let vendors manage sales through a mobile app. Merchants can upload product descriptions and pricing, and choose from a number of payment and shipping options to ensure that money and packages each go in the right direction.
91App-powered storefronts are aggregated on 91Mai, a consumer-facing mobile app that lets people discover new products and shops.
Ho says that 91App monetizes by charging merchants subscription fees, with the lowest starting at NT$29,900 (about US$ 942) annually. Depending on sales, it also imposes referral fees on purchases, which range from 2.5 percent to 5 percent.
Taiwan and the marketplace conundrum
91App’s premise is not new, of course. It’s basically an app-centric, Taiwan-oriented version of Shopify, the Ottowa-based startup that helps merchants build online storefronts. Shopfiy launched in 2004 as an ecommerce-focused website builder, but has since evolved to become a “Wordpress for sellers”-type platform that’s likely valued at nearly US$1 billion. Its users include many vendors who eschew garden-variety ecommerce properties like Ebay or Amazon Marketplace for standalone virtual real estate. While those marketplaces will always attract eyeballs, a Shopify pitchman might say, independent web storefronts give vendors greater control in management and more opportunity for brand loyalty. The tradeoff, of course, is sellers will have to spend more time and money driving traffic to their pages.
Shopify isn’t entirely absent from Asia. It has feet on the ground in Singapore thanks to a partnership with Singtel. Last September, Shopify CEO Harley Finkelstein told Tech in Asia that the company has more than 1,000 paying vendors in the city-state. But the firm has no further plans to move beyond Singapore and Malaysia – possibly because marketplaces like Tokopedia and OLX remain fresh concepts in Southeast Asia.
Taiwan, meanwhile, might be a market in Asia where Shopify’s premise makes sense. For one thing, the island’s ecommerce industry is well out of infancy, but growth is still on the upswing. Taiwan’s Institute for Information Industry says that total revenues from business-to-consumer and peer-to-peer shopping sites hit NT$764.5 billion (US$25.5 billion) in 2013. That figure is expected to jump 15 percent this year to NT$879.4 billion (US$29.3 billion). In the US, meanwhile, Forrester expects ecommerce revenues to hit US$294 billion in 2014. On the back of our envelope, Taiwan’s ecommerce revenues are one tenth of those of the US, despite a disproportionately lower population and lower average household incomes.
More importantly, online marketplaces have dominated Taiwan’s ecommerce industry for more than ten years. Yahoo Taiwan and PCHome, the island’s two ecommerce titans, each added ecommerce extensions of their portal properties in the early 00’s. To date, they both offer three tiers of online shopping – a curated and internally-managed business-to-consumer tier, a storefront marketplace business-to-consumer tier, and a peer-to-peer listings site. Successful as these companies are – PCHome just hit a US$1 billion market cap on Taiwan’s stock exchange – Ho believes that vendors are starting to feel fatigued by the pitfalls of online marketplaces.
“[For marketplaces], traffic and membership all belongs to [the marketplace’s] centralized business model. None of these marketplace sellers are making any money, because after you open a store you don’t have traffic, and buying traffic is expensive,” says Ho. “Savvy sellers are now starting to think, ‘I’m making less and less money on big platforms, and marketing expenses are getting higher and higher. Why don’t I just open up my own shop?’”
Yahoo and yonder
That simple observation rings of boldness given that Ho was one of the architects behind Taiwan’s ecommerce marketplace boom. As a co-founder of NeoCom Technologies, Ho helped build Ubid.com.tw and Bid.com.tw into the island’s leading peer-to-peer and business-to-business marketplaces. In 2002, four years after NeoCom’s founding, eBay acquired the company for US$9.5 million, only to promptly shut down the business-to-consumer site. Ho and his colleagues left eBay to create Monday Tech (xingqi keji), which powered Yahoo Taiwan’s business-to-consumer ecommerce properties starting in 2004. Ho claims that his team helped Yahoo Taiwan surpass rival PCHome in transaction volume by 2007, leading Yahoo to acquire Monday Tech and its 500-man team the following year. Perhaps not coincidentally, the same year Yahoo solidified its grip on the island’s ecommerce industry, Yahoo Taiwan general manager Rose Tsou was promoted to senior vice president of APAC. She retains that position to this day.
Despite his success in transforming Yahoo Taiwan from a portal to an ecommerce channel, Ho departed the company in December 2010 to start N Squared, along with ten other colleagues. In Ho’s view, Yahoo faced a strategic disadvantage before coming tide of decentralized ecommerce.
“Even though Yahoo is a mobile company, N Squared is more than just a mobile company – we’re about decentralization. A centralized business model can’t transform into a decentralized business model,” says Ho. “Decentralized ecommerce is about helping brands do business, but centralized ecommerce is about squeezing the merchants. It’s not an easy transition.”
Steven Ho, co-founder and Chairman of N Squared
Ho also describe what sounds like a misalignment between Yahoo’s goals as a global company and the prerequisites for fostering a localized ecommerce business.
“Yahoo in the US has recently been going through changes, and they have always hesitated when it comes to ecommerce – they’re never sure if they should go big or small, and will discuss this every two years. In Taiwan, this isn’t a problem, because ecommerce makes up 50 percent of Yahoo Taiwan’s revenues. But globally, Taiwan makes up maybe 1.5 percent of Yahoo’s revenues, so headquarters probably feels that profit isn’t high,” says Ho.
N Squared isn’t the only startup looking to transform Taiwan’s ecommerce industry. Shopline, founded in 2013 by a small team of Hong Kong entrepreneurs, helps online vendors create mobile web storefronts. Like 91App, they hand over market-specific back-end levers to sellers that allow for convenience store pick-ups and payments through banks and third-party processors. Unlike 91App, they offer no app component. They’re also much, much cheaper – charging merchants NT$539 (about US$16) a month.
Ho says that 91App also introduced a mobile web service early on, but transitioned to apps after a sluggish start. “Mobile web isn’t the preferred environment for consumers because it’s dependent on internet speeds – it’s possible they’re not fast enough,” Ho says. “According to our statistics, mobile web generated one tenth as much engagement as apps, and transaction volume is also about one tenth. We decided to switch our focus towards apps, but web will become our core as internet infrastructure improves.”
But beyond a strict stance towards the apps versus web dilemma, 91App’s true advantage is its experience and local know-how. While Shopline’s team travels to Taiwan regularly to meet with customers, there’s arguably no substitute for 10 years of ecommerce experience in one’s home market.
Ho claims to have accumulated 1,000 merchants on 91App since it’s launch in July 2013. It’s targeting 3,000 total merchants in 2015. N Squared received seed funding from Cherubic Ventures this year, but the investment sum hasn’t been disclosed.
This post Meet N Squared, a mobile app startup founded by Yahoo Taiwan’s ecommerce architect appeared first on Tech in Asia.
Meet N Squared, a mobile app startup founded by Yahoo Taiwan’s ecommerce architect
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