1. E-commerce markets in SEA are increasingly being dominated by well funded Horizontals…

Indonesia and Vietnam e-Commerce GMV has been dominated by large horizontals and their share has been increasing progressively.

Strong funding support along with Tech enabled scaled up operations and massive assortment across categories among other factors, have helped the horizontals gain significant traction.

Indonesia eCommerce GMV share of horizontals

Vietnam eCommerce GMV share of horizontals

2. …and verticals have not been able to scale up yet, owing to some teething challenges

Vertical players have faced multiple challenges in scaling up and finding the right segments to target in the face of strong competition from the much larger horizontals. The funding inflow also has been relatively low.

In this backdrop, it has been difficult to find and create long lasting value in niche segments while maintaining customer delight, and most players have been unable to carve out those strong niches, leading to their eventual downfall.

Key Challenges faced by Verticals

3. Learning from India – there exists opportunities to create differentiated offerings in verticals/super verticals space, and we expect innovative models to start springing up soon

However, based on our in-depth work in the India market, which has many similarities with some of the SEA counterparts, we do believe there is a strong underlying potential for verticals and super verticals to emerge in this region.

We do see signs of this playing out in certain pockets – E.g. Blibli which was a horizontal, pivoted to create a strong focus on the grocery segment which has helped them build a more compelling value proposition in the minds of consumers.

Winning Levers for leading Verticals in India

There are multiple sectors that exist with a large enough TAM and relatively lower price sensitivity, where customers will be willing to pay for superior product/service. This is an aspect that is again validated from the India example where the GDP/Capita is ~ ½ that of Indonesia.

However, the frequency of purchases, Basket sizes and AOV of some of these categories are very different and they need very tailored fulfilment mechanisms to create long lasting impact across the customer facing Value chain.

We believe that the opportunity is ripe and there could be strong winners emerging in some of the segments in the next 3-5 years.

List of Sectors where Vertical play could emerge (non-exhaustive)