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Singapore e-commerce agents face uncertain future as middlemen
THE dust-up between Singapore-based online shopping platform ezbuy.sg and the Alibaba Group’s Taobao marketplace has turned the spotlight to the role of intermediary merchants in e-commerce.
Companies such as ezbuy – which purchase items on customers’ behalf and ship them here for a fee – took off by offering consumers a convenient way to shop online with sellers overseas.
But as retailers such as Alibaba and Amazon expand their international footprint, third-party resellers may not be around much longer, industry watchers told The Business Times.
ezbuy recently became a casualty of a crackdown on daigou – a Mandarin term that refers to third-party shopping agents – when Taobao shut down more than 1,000 accounts that ezbuy was using to place orders.
ezbuy founder He Jian penned an open letter last Friday, complaining Taobao was bullying a smaller player, and the Chinese giant shot back with a statement calling ezbuy’s practice “a typical case of scalping behaviour”.
Analysts believe there is ample demand at the moment in South-east Asia for services like that of ezbuy, which also resells goods from other marketplaces, such as China’s JD.com and Mogujie, as well as Amazon.com.
Sandy Shen, Shanghai-based research director with consultancy Gartner’s e-commerce team, said: “These intermediary services are mostly to serve customers that have technical difficulties – for example, international website access, payment methods, shipping, and so forth.”
This is particularly helpful for consumers who face challenges in navigating websites and handling logistics in a foreign language.
Chu Junhong, associate professor of marketing at the National University of Singapore Business School, added: “Most Chinese consumers are used to buying directly from Taobao with no or low shipping costs, so overseas Chinese consumers used ezbuy primarily because the bulk shipping reduced the shipping costs.”
Riku Vassinen, head of digital business at marketing communications firm J Walter Thompson Singapore, noted: “There is definitely a need in the marketplace for these kinds of services and these delivery agents have contributed a lot to the international growth of Taobao.
“However, I don’t necessarily believe this to be a long-lasting business model. Eventually, the e-commerce platforms would want to conduct these sales without third-party middlemen.”
Enthusiasm for third-party agents is also likely to fizzle out as e-commerce giants make inroads into local markets.
Arvind Sainathan, from Nanyang Technological University’s Nanyang Business School, said resellers lack a true supply network of their own, and would struggle to compete with the resources of the e-commerce big boys.
“This might also explain the reason behind Alibaba’s move: They possibly want customers to purchase from Lazada instead of ezbuy,” he said.
“In the longer run, the prospect for resellers in Singapore looks bleak unless they can somehow differentiate themselves from bigger e-commerce players.”
Alibaba in June this year upped its stake in South-east Asian merchant Lazada, while Amazon launched its Prime service here this month.
“Once Alibaba had a stake in Lazada, it was inevitable that it would want to stop this practice,” said Prof Chu. “Now that Alibaba and Taobao have overseas operations, most of these companies cannot survive longer.”
Sumit Ramchandani, managing director at digital marketing agency Lion & Lion, noted another issue could crop up when brands have official partners for distributing their wares.
“For brands, it’s not just the question of capturing the lost margins, but also about protecting and enriching the customer experience,” he said.
“One of the risks… is the growing influence of bots as scalpers that hoard the products offered on deals.”
In the meantime, what can bargain hunters expect when dipping a toe into foreign marketplaces?
According to Mr Vassinen, “Alibaba benefits from these delivery agents, so I would assume the business will remain a ‘grey area’ for a while, with an increase in similar shutdowns to ezbuy”.
But, while the clampdown on ezbuy has driven traffic to rival resellers such as SGshop, Peeka and Oops, Mr Vassinen said: “These competitors are smaller than ezbuy and there is no reason to believe that Taobao would tolerate these competitors any more than ezbuy, once they reach a certain threshold of popularity.
“The market is also already quite saturated, there is a little differentiation, and margins are low.”
Source: http://www.businesstimes.com.sg/consumer/spore-e-commerce-agents-face-uncertain-future-as-middlemen