How Vietnam’s richest billionaire is secretly building Vietnam’s biggest ecommerce site

VinEcom is a massive ecommerce operation under Vingroup, one of Vietnam’s largest real estate companies, founded by Vietnam’s first ever billionaire, Pham Nhat Vuong. In February, we reported that the VinEcom would receive US$30 million to take on e-commerce. But we can now confirm via Vingroup’s own website that the division is slotted for US$50 million in total. No local Vietnamese startup has nabbed funding rounds of that size for projects that have yet to see the light of day.

Who is Pham Nhat Vuong?

In 2010, Pham sold his noodle processing company to Nestle for an estimated US$150 million. That company began in Ukraine in the mid-1990’s, originally out of his own small noodle shop. He then began investing in resorts, apartment complexes, malls, hospitals, and schools in key areas in Vietnam. Each investment built on the last one’s success, and now Pham is worth over US$1.3 billion, making him the richest man in Vietnam. In the midst of his company’s boom, Pham made a rather discrete investment in 2006 in a company called VC Corp, one of Vietnam’s top three internet companies. Through this subtle move, Pham showed an early taste for the online world more than seven years before launching VinEcom.

VinEcom calm before the storm

When Vingroup first announced its entry into the ecommerce space in February, it was met with both considerable skepticism and cautious enthusiasm.

On one side, many people in the press speculated that a real estate mogul would not know how to do ecommerce. After all, the two industries require different mindsets. Real estate folks build, sell complete products, and then collect on their assets. Ecommerce, on the other hand, requires intensive operations, razor thin margins, state of the art logistics, expertise in online marketing, and excellent buying prowess.

On the other side, Vietnam’s current ecommerce leaders – folks from Vat Gia, Hotdeal.vn, Lazada, Tiki, Zalora, CungMua, Sendo, Project Lana, and more – were excited to see a larger player enter the market. It meant that Vingroup would also be willing to grow the nation’s then-nascent ecommerce market.

But right away, the key ecommerce players could feel the burn of a new major player in the market. Since Vietnam’s ecommerce market is so small, in terms of human resources, there are only so many people with ecommerce experience in the country. Vingroup shopped around the ecosystem for potential companies to acquire as well as people to hire. With potential acquisitions, VinEcom assessed the size and potential of the market. With people, the division at times offered to double the salary of key people it wanted to join. Most notably, Erik Jonsson, former head of Zalora Vietnam, is now on board as deputy general director of VinEcom. Kyle Pham, former CFO at NhomMua, once one of Vietnam’s bright ecommerce players, is now on as head of service at VinEcom.

Erik Jonsson is pictured behind Nguyen Lam Thanh, current deputy general director of VinEcom and former head of the Vietnam Internet Association.

But Jonsson and Pham, both of whom are big names in the small world of Vietnamese ecommerce, aren’t the only employees that got poached into VinEcom. You can see more of the people that have been hired on LinkedIn here and here. If you look closely, you’ll see former startup founders, respected bloggers, and logistics veterans. VinEcom is hiring from well beyond the retail and ecommerce market. Rumor has it that today the company has over 2,500 employees to date. Sources tell Tech in Asia that each of the teams, from marketing to content to logistics, numbers in the hundreds. This likely puts VinEcom’s monthly overheads in the millions.

On top of all the hiring, VinEcom has undergone some top level shuffling. In May, we reported that the the CEO of VinEcom, Le Thi Thu Thuy would resign. Shortly after, a new woman stepped in to fill her place, only to be replaced just this August by Mai Huong Noi, who is now general director of VinEcom. Each new CEO has had to struggle to keep up with Pham’s vision. In the beginning, his role was more as an investor, but now he’s stepped in more to execute his vision. But until last August, the actual substance of that vision remained unknown to outsiders.

VinEcom’s leaked slides

In early August, slides (published in both English and Vietnamese) were leaked from VinEcom outlining its plans for ecommerce in Vietnam. The numbers are most telling:

• VinEcom promises 1.3 million SKU’s on its first day of operation


• Over 2 million items are expected to go through production studios for photography after its first year of operations


• 1.5 hour delivery times for fresh groceries


• 6 hours estimated delivery times for other products, including fashion and electronics


• Thousands of mobile trucks that ship products (potentially out into the countryside)

The document states that VinEcom plans to “create Vietnam’s largest, most professional, and reliable online marketplace.” For perspective, according to our sources across the ecommerce ecosystem from Lazada to Tiki, the average number of SKU’s in Vietnam’s other ecommerce sites is near 45,000. And of that average number only a small percentage actually get visibility and purchases. So it’s baffling to consider what a site with over one million SKU’s must do in order to to circulate its inventory healthily.

Some evidence indicates that VinEcom has ambitions well beyond becoming a popular click-and-buy ecommerce site. On Vingroup’s main recruitment website, there’s a position for head of Adayroi TV. Adayroi.vn, which is not yet live, is rumored to be the domain for VinEcom’s ecommerce site. In the job description, the position asks that the applicant be able to choose products for their TV channel as well as work closely with the VinEcom division. This hints that VinEcom may launch a full retail TV channel to accompany its ecommerce efforts. This makes more sense when you consider how Pham Nhat Vu, Pham’s younger brother, is the general director of AVG, a satellite broadcast station. No startup could do this. This is a massive investment that would be totally unique across Asia.

Even more baffling is Vingroup’s recent 10 percent investment in Vinatex. Vinatex is one of Vietnam’s largest textile companies and the investment is in sync with Vingroup’s June announcement of launching Vinfashion. Could this US$1 million investment mark a bid by Vingroup to get enter the fashion industry?

All of these recent moves paint a perplexing picture of what is possibly one of the biggest unlaunched ecommerce projects Asia has ever seen.

Local ecommerce bloggers have also dug up more than 40 domains (from Vinpay.vn to Vinmall.vn to Vindeal.vn) that Vingroup registered around the time of its initial announcement. The domains indicate ambitions for a marketplace, a payment gateway, a daily deals site, a logistics service, and maybe even an ad network. If one examines the list of Vinecom’s domain names and assumes that all yield fruit (they might not), one could assume that the company aims to become Alibaba’s Vietnam, borrowing and adopting concepts from Tmall’s branded e-retailing and Alipay’s escrow payments service.

But additional evidence indicates otherwise. A recent deal with Vietcombank, Smartlink, and VinEcom ten days ago shows that VinEcom may not create its own payment gateway. By partnering with Smartlink, Vietnam’s number one payment gateway, VinEcom can get favorable access to the banks. If VinEcom built its own gateway and online bank, like Mobivi did last year, the local banks may find this threatening.

Building an ecommerce house of cards

Given everything we’ve covered above, you start to picture a leviathan. At its current size, it’s possible VinEcom will burn through its US$50 million initial investment by the end of the year or early next year. According to sources within VinEcom, the company will likely unveil Adayroi.vn, rumored to be its main domain, to the public in December, though little is known about the site besides its expected release date. It will take perhaps a year to experiment and test the market, and perhaps another US$50 million. Pham is potentially paying US$100 million for a lesson in ecommerce.

The hefty investment accompanies a hefty risk. Most startups face chicken-and-egg dilemmas. They have a hard time getting users onto a marketplace, or getting businesses to join a place where users are. With all the cash and resources in the bank, VinEcom not only faces the chicken-and-egg dilemma, it sits on a house of cards. Many factors have to lock into place for success. With ecommerce, this might be problematic. In ecommerce, it’s apt to play a long term game where you can test the market, build trust, and train a team before going big, but VinEcom is doing everything in the opposite order.

See: E-Commerce in Vietnam: The Big Players for 2013

Moreover, it’s not clear if the Vietnamese ecommerce market is really big enough for such a player as big as VinEcom apparently aims to become. VECITA, a national Vietnamese ecommerce trade association, estimated the market at US$2.2 billion in sales, but most industry leaders that Tech in Asia talked to agree that this estimate is not clear on the methodology and is overblown. They argue that pure ecommerce sales are likely in the ballpark of half a billion to a billion dollars. Is VinEcom overestimating the size of the online retail market? Or extremely confident that it can quickly flip the retail market into an online one?

With such a large team, and with such lofty goals, speed remains key. In addition, with multiple teams in place, and with a massive launch around Christmas time, every team, despite its size, will be overwhelmed with all the problems that ecommerce veterans know all too well. Even seasoned companies like Lazada, which can tap into regional insights and a wisened playbook from Rocket Internet, face technical and operational issues. People will become exhausted. So if they want to win, they have to win fast, and all at once.

How Vietnam’s richest billionaire is secretly building Vietnam’s biggest ecommerce site

Japan’s DeNA makes rare double acquisition for $50M in an effort to diversify

DeNA added new punch to its business today, announcing acquisitions of Iemo and Peroli. Total cost was not disclosed but a DeNA representative confirmed to Tech in Asia that the two deals are worth US$50 million.

Both are news curation apps. Iemo is focused on home-design whereas Peroli’s key product, Mery, targets ladies fashion. “[This is] part of DeNA’s previously-announced strategy to bring digital innovation to offline industries,” a company spokesperson told Tech in Asia.

Both services are young. Mery launched in April 2013 and Iemo followed suit. Mery’s monthly active users exceed 12 million while Iemo is hitting a more modest 1.5 million. Regardless, DeNA intends to make the companies a major part of its business going forward as it becomes a key player in the lifestyle space. Within a few years, it intends to attract 50 million monthly active users.

Leading the charge will be Iemo’s founder Mary Murata, arguably the biggest winner from this deal. She is a senior vice president at DeNA as of today and will oversee the Curation Platform Business. Murata is no stranger to the corporate world either, having worked at CyberAgent prior to striking out as an entrepreneur.

DeNA confirmed to Tech in Asia that both deals came together very quickly. Peroli was in the midst of fundraising when it decided to change course and throw in with DeNA in order to launch an ecommerce business. Talks with Iemo began this past July and accelerated quickly from there. For Iemo, which wants to move into the housing and real estate industry, the opportunity to draw from DeNA’s brand recognition is particularly tempting.

The acquisitions are also notable because they give the Japanese ecosystem a couple sorely needed exit stories. In Japan, a successful exit is often seen as an IPO. It is much more rare to hear companies talk about how they want to be acquired. As tech giants like DeNA continue to search for new ways to keep their businesses strong, the acquisition rate for exits might rise.

See: Japanese gaming giant DeNA ventures into DNA with new genetic testing service

Japan’s DeNA makes rare double acquisition for $50M in an effort to diversify

The next big job perk? Uber is coming to workplaces in 45 countries

Uber now wants to drive your employees around. The global transportation company has announced that it is launching Uber for Business in all 45 countries it’s operating in – or over 200 cities.

In a blog post, Uber describes this service, which was piloting in the US and Canada, as a “dedicated platform that enables small and mid-sized companies or teams to set up a corporate Uber account. The platform includes a centralized billing system and a travel dashboard that business administrators can use to manage budgets – all at no cost.”

Employees can access this option using the standard Uber app. Companies like Evernote and Freelancer have been using the service.

According to an Uber spokesperson, the service was being tested with businesses in Singapore, Indonesia, Malaysia, and the Philippines. Unsurprisingly, Singapore is Southeast Asia’s largest Uber for Business market, accumulating over half the total fares with an average fee per trip that’s over twice of other cities.

Uber’s entry into the business space has probably been on the minds of its local competitors for a while. Easy Taxi unveiled their B2B product in Singapore in August 2014, while India’s TaxiForSure also has a similar arrangement with businesses.

Uber, however, is different in that it enlarges the aggregate taxi fleet in a city by adding private drivers to its inventory. While consumers may not feel the benefits directly, it does meet a need in markets where the demand for cabs often outstrips supply.

See more: UberTaxi launches in Singapore to do battle against GrabTaxi, Easy Taxi

The next big job perk? Uber is coming to workplaces in 45 countries

Government regulation is strangling China’s smart TVs and set-top boxes

“Why should the government adapt to the internet, rather than the internet adapting to the government?” That was the question a Chinese State Administration of Press, Publication, Radio, Film and Television (SAPPRFT) reportedly snapped at representatives of the country’s online video industry last month. It reflects a growing disconnect between the way government regulators want to run the internet industry and the way that China’s tech companies want the market to operate.

Tensions between China’s streaming video tech companies and regulators have been high for since June, and as SAPPRFT tightens its grip on the industry, some companies feel they’re being squeezed out. The Chinese regulatory agency has been cracking down with the apparent intention of consolidating the industry, and making sure that set-top boxes and smart TVs are using the Chinese-developed and government-funded TVOS operating system. Just a few of the industry’s complaints, via Caijing magazine:

• On June 23, SAPPRFT released a document naming internet video license holders Huashu and Baishitong and demanding that they shut down of their all apps, video collection software, and browsers for internet TV products (like set-top boxes).


• On July 9, SAPPRFT encouraged cable TV companies to strengthen their development of the TVOS experience, and ordered them not to install operating systems other than TVOS.


• On July 14, SAPPRFT demanded all internet TV set-top box makers cease including Tivo-like pause and rewind functions.


• On July 15, SAPPRFT placed additional restrictions on set-top box content and decreed that new set-top box-like products could not be promoted before receiving government approval.


• On August 20, SAPPRFT criticized CNTV subsidiary Future TV for violating regulations on set-top box UIs via its partnerships with LeTV and Xiaomi.

The tension in the streaming video industry reflects a broader problem that Chinese tech companies and the Chinese government have been fighting about for the past decade: should the internet be an open market where privately-owned companies can vie for dominance, or should it be controlled by the government? In the case of the online video market, it seems SAPPRFT is looking for a broad level of control, where it defines which videos can be streamed, which software and hardware can be used to stream them, and what features that software can include.

And unsurprisingly, the agency has apparently chosen to push TVOS as China’s universal standard for video streaming on televisions. The software, which was developed by the state-owned electronics company Changhong, was funded thanks to government R&D grants and includes only domestic proprietary technologies. It is a smart TV OS that is truly by China, and SAPPRFT appears to be trying to ensure that it is also the only smart TV OS for China.

(See: China forces video sites to hire government-approved censors)

But this approach is restricting what many of China’s privately-owned tech companies can do, and many are arguing that it destroys competition and harms end-users by limiting their choices. And by limiting content and OS choices, SAPPRFT is also running the risk that Chinese users will just bypass the TV screen altogether, and instead choose to consume all of their video content via websites and mobile apps (which is an increasingly popular option already anyway).

The restrictions and regulations could also harm Chinese companies looking to do business abroad. In the best case scenario, they could be forced to simultaneously develop multiple products: one for the Chinese market and another for the global one. Alternatively, they may be pushed by SAPPRFT into including Chinese government proprietary technologies like TVOS on their global products, regardless of what the global market wants. China’s tech companies have shown that they can compete in the global marketplace. But Chinese smart TVs and set-top boxes are saddled with software restrictions and an operating system users may not want. SAPPRFT may be unintentionally crippling the Chinese companies best-equipped to develop China as a global powerhouse in the smart TV industry.

Government regulation is strangling China’s smart TVs and set-top boxes

Daum and Kakao merge, massive valuation puts them head-to-head with Naver-Line

Two of Korea’s strongest players in the mobile space, Daum and Kakao, have officially merged today. According to Yonhap News Agency, the new entity is valued at close to a massive sum of 10 trillion won (US$9.45 billion).

Despite Kakao’s market value nearly quadrupling Daum’s, the latter will be taking over former. The report adds that Kakao will be getting a backdoor listing through the merger on KOSDAQ, instead of going public the following year as they initially planned.

The newly merged firm, which will be called Daum-Kakao, will certainly give Korea’s other unicorn Naver a run for its money. Naver continues to enjoy local dominance as the number one search engine in Korea, though its Line messenger service, which operates from its subsidiary in Japan, has a wider audience beyond their borders rather than within.

Interestingly, Naver had recently held off on an IPO for Line, believing that they can command a better valuation by further building its revenue and profit, according to Naver’s chief financial officer. If they had gone ahead with the IPO, the resulting valuation would certainly have exceeded US$10 billion.

See: KakaoTalk reveals it has 140 million users, made $203 million in revenue last year

Daum and Kakao merge, massive valuation puts them head-to-head with Naver-Line

Chinese mobile phone startup Smartisan planning a retail store

Chinese mobile phone startup Smartisan has been making big moves this year. This past spring, its launch event for its T1 smartphone became China’s most-livestreamed tech event, and although it did hit a bit of a snafu this summer when the phone actually launched in such limited quantities that hardly anyone could get it, the company is still shooting for the stars.

Or rather, it would be more precise to say that it’s shooting for the streets. According to Chinese tech blog 36kr, the company is planning to build at least one retail store, and hopes to open one in Beijing as early as this year. That project is still in the early stages; the company hasn’t chosen a location yet. But in the meantime, Smartisan has just today opened a Smartisan T1 product experience center at the Suning on 118 Zhongguancun East Road.

Smartisan also announced via Weibo that it has made significant improvements to its production capacity. Anyone who has already preordered the T1 should be seeing it ship sometime within the next couple weeks, and future orders should be shipped more quickly too. Of course, we’ll have to wait and see if Smartisan can actually deliver on this promise.

(See more: The one-man show that carried Smartisan to stardom in China)

(Source: 36kr)

Chinese mobile phone startup Smartisan planning a retail store

Hong Kong protesters boo the Chinese flag as Beijing’s shadow looms

HONG KONG-Since 1949, China has celebrated “National Day” on to celebrate the October 1 anniversary of the creation of the People’s Republic of China. The holiday is usually punctuated with pomp, fireworks and ridiculously large flower arrangements on the mainland, as well as in Hong Kong and Macau.

But this morning’s National Day flag-raising ceremony in Hong Kong highlighted the growing tensions between the Asian financial hub and Beijing. As Hong Kong’s pro-democracy protesters demanding universal suffrage—specifically the right to nominate candidates for the city’s top elected position—expand in size and scope, everyone is waiting to see how and when Beijing will respond.

Chinese and Hong Kong flags are raised every morning at Golden Bauhinia Square, outside Hong Kong’s massive convention center, in a short ceremony that is usually just attended by mainland and foreign tourists. (A bauhinia is the flower that adorns the Hong Kong flag.) This morning, because it is National Day, Occupy Central organizer Joshua Wong and a group of about 20 Hong Kong protesters staged a silent protest in the square during the ceremony, turning their backs to the flags as they were raised, forming crosses with their hands.

Joshua Wong leads students in silent protest at National Day flag-raising in Hong Kong http://t.co/uGlGTxAcvT pic.twitter.com/EczQ7KibaU

— SCMP News (@SCMP_News) October 1, 2014

Outside the official flag-raising ceremony area, things were much less sedate. Several hundred black-clad, yellow-ribboned protesters ranged across pedestrian walkways and thronged streets outside the square, carrying signs and volleying back and forth shouts of “universal suffrage” and occasional cries for Hong Kong to become independent.

The growth of the protests in recent days has been both a blessing and a curse, some participants said. “We appreciate all the people who have come out,” said Daniel Chan, a 21-year old student who has been participating in the Occupy Central protests for the past three days. But, he said, some of the newer recruits “don’t understand the meaning of the movement.” Chanting slogans of independence “is not our purpose,” he said, the movement only wants Hong Kongers to be able to vote freely.

As the Chinese national anthem played as the China and Hong Kong flags were raised, protesters outside the square unfurled umbrellas, which have become a symbol of the demonstrations, and held them silently aloft. But they didn’t stay silent for long: When two helicopters flew past the crowd over Victoria Harbor, one carrying a giant Chinese flag and the second a smaller Hong Kong flag, the protesters burst into spontaneous jeers.

Umbrellas up and boos as the Chinese flag is flown by over HK harbor #OccupyCentral pic.twitter.com/fOMGihVqYI

— Heather Timmons (@HeathaT) October 1, 2014

After the flag raising, Bloomberg reported, Hong Kong chief executive Leung Chun-ying and other officials “drank champagne on a red stage in a reception hall festooned with Chinese and Hong Kong flags as a white-coated band played patriotic tunes.”

Minutes later, protesters quietly dispersed into the streets of Wan Chai, one of Hong Kong’s main business districts. Chan said he didn’t expect any reaction from Beijing to the Occupy Central protests. “I don’t think they will respond at this moment,” he said. “We’re all protesting in a peaceful way.”

 

Hong Kong protesters boo the Chinese flag as Beijing’s shadow looms