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Intro to E-commerce in South East Asia - Citibank

Pomelo Fashion presents at 2014 Citibank ASEAN stars of the next decade! Includes, e-commerce growth trends in south east asia and sectors most likely to benefit from emerging mobile and social media trends.

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Intro to E-commerce in South East Asia - Citibank

  1. 1. Market perspective on E-commerce Trends in South East Asia Citibank Research Conference www.pomelofashion.com
  2. 2. South East Asia (‘SEA’) is a large unified market with increasingly growing spending power Though the 3rd largest population center in the world, minimal focus on technology sector until now has created a unique greenfield opportunity 1347 Population by Region (M) 1210 617 504 314 1600 1400 1200 1000 800 600 400 200 0 China India South East Asia EU US 60.8 17 9.6 9.1 4.8 4.3 3.7 70 60 50 40 30 20 10 0 GDP per Capita PPP basis (K of USD) Population(M): 5 29 67 247 97 89 • SEA has 2x the population of the US • SEA is evolving into one addressable market with ASEAN free trade zone in 2015 • Singapore, Malaysia, and Thailand have higher GDP per capita than China • Indonesia, Philippines, and Vietnam are catching up quickly Sources: World Bank
  3. 3. Rapidly accelerating internet and smart phone penetration driving this trend A step-change increase in internet access is expected over the next 5 years SEA Internet Users (M) 166 360 400 350 300 250 200 150 100 50 0 2010 2020E 3.4 SEA smartphone sales (M Units) 6 11 20 28 36 43 51 59 70 60 50 40 30 20 10 0 2008 2009 2010 2011 2012 2013E 2014E 2015E 2016E Penetration: 25% 62% • Approx. 200M additional internet users gaining access this decade Sources: “We are social”, Accenture; Euromonitor 2013
  4. 4. Additionally, SEA is the social media capital of the world Social networks are powerful and expansive, core to the internet adoption revolution Top Facebook Cities in 2013 # City Country Facebook • Bangkok and Jakarta are #1 and #2 for Facebook users in the world Sources (1) Social Bakers; Instagram Users Users/Popu lation 1 Bangkok Thailand 8,682,940 104% 2 Jakarta Indonesia 7,434,580 34% 3 Istanbul Turkey 7,066,700 63% 4 London UK 6,139,180 74% 5 Bogota Colombia 6,112,120 82% 6 Sao Paulo Brazil 5,718,220 30% 7 Mexico City Mexico 4,294,820 23% 8 Santiago Chile 4,129,700 73% 9 Mumbai India 3,700,460 19% 10 Buenos Aires Argentina 3,533,840 29% Most Instagram’ed Locations in 2013 # Location City 1 Siam Paragon Bangkok 2 Times Square New York 3 Disney Land California 4 Bellagio Fountains Las Vegas 5 Disney World Florida 6 Staples Center Los Angeles 7 Central Park New York 8 Dodger Stadium Los Angeles 9 Bangkok International Airport • Bangkok has 2 of the most Instagram’ed locations in the world Bangkok 10 The High Line New York “Social networking is what Southeast Asian consumers everywhere do during their online leisure time” – Accenture, Surfing Southeast Asia’s Powerful Digital Wave
  5. 5. E-commerce penetration is relatively low but ramping up quickly Internet access, smart phone availability, hyper connectivity through social media driving rapid rise in E-commerce TH, PH, & ID - Online Retail Sales Forecast (B USD) 46% CAGR 1 1.8 2.2 2.5 2.8 3.5 7.1 9.2 13.5 18.7 23.5 25 20 15 10 5 0 2005 2006 2007 2008 2009 2010 2011 2012 2013E 2014E 2015E E-commerce as % of Total Retail Sales (2014) 16.3 11.7 10.4 8.2 7.9 7.2 1-2% 18 16 14 12 10 8 6 4 2 0 Korea USA Japan Australia Global China SEA • SEA’s total e-commerce market size is expected to reach $24B USD by 2015 • If E-commerce represents 7% of retail sales, the market size in TH, PH, and ID alone would be $50-100B USD Sources: ICD Research; JP Morgan E-commerce Report
  6. 6. China an example of the speed at which E-commerce penetrates a market 18 39 70 127 199 283 369 461 1.1% 2.0% 2.9% 4.3% 6.0% 7.4% 8.5% 9.3% 9.5% 8.5% 7.5% 6.5% 5.5% 4.5% 3.5% 2.5% 1.5% 0.5% -0.5% 500 450 400 350 300 250 200 150 100 50 0 2008 2009 2010 2011 2012 2013 2014E 2015E As % of China’s retail sales Online Shopping transaction Value (US$bn) 1. Surging domestic consumption 2. Low availability of products outside major city centers 3. Rapid increase in internet penetration 4. Rapid development of delivery and logistics infrastructure 5. Major capital investment in E-commerce sites The same drivers that drove 10x growth in China’s E-commerce market over last 5 years to drive 5x E-commerce growth in SEA Sources: Morgan Stanley Key Drivers of Chinese E-commerce SEA? Current SEA E-commerce penetration rate
  7. 7. Rocket Internet was 1st mover helping drive initial wave of e-commerce adoption Rocket Internet has 2 major e-commerce plays in the region with backing from major European and American investors Investment Details Investors  Started in Q1 2012  Regional adaptation of Amazon.com  Price driven discount retailer of all vertical categories  Over $400M USD of raised capital  Started in Q4 2011  Regional adaptation of Zappos.com; viewed as price-driven discounter due to aggressive growth targets  Shoes and apparel retailer  Over $200M USD of raised capital Sources: Ardent Capital
  8. 8. Investors now funding more targeted vertical plays as reach of E-commerce expands Investors seizing opportunity to scale up cheaply and be #1 in a specific vertical, as E-commerce seen as certainty in SEA Company Focus Most Recent Round Investors Reebonz Regional luxury flash sale site $40M (2014) Luxola Regional online beauty site $10M (2014) Redmart Singapore online grocery site $23M (2014) Eduardo Saverin, Garena, Softbank Ventures A-commerce Regional E-commerce logistics & support service provider $3.1M (2013) POMELO Regional online fast fashion UNDISCLOSED Sources: TechinAsia, Techcrunch, E27.com
  9. 9. Fashion is the single largest retail category in SEA and has the highest average retail GM Fashion and Beauty account for 50% of non-consumable retail sales 12% 35.7 SEA Retail Sales 2013 (In B USD) 11% 33.8 30 10% 13.4 4% 10.3 3% 7.4 2% 177 57% Fashion Home & Living Electronics Beauty & Pers. Care Home Appliances Consumer Health Kids & Toys Other (Food, Travel, etc) Fashion typically has highest retail gross margins 53 49 49 40 34 31 28 28 27 24 24 75 50 25 0 US Gross Margins by Retail Category 2010 (%) Sources: Euromonitor; Annual Retail Trade Survey 2010
  10. 10. Fashion has leading share of online spending in the US and China In more developed markets Fashion and Beauty consistently rank as top E-commerce categories 57 46 41 35 29 27 25 23 22 20 60 50 40 30 20 10 0 Best sold items in China over Internet (% of shoppers) 56 49 24 20 19 12 9 8 60 50 40 30 20 10 0 US Ecommerce Sales by Category – 2013 (B USD) Sources: I Research; eMarketer
  11. 11. SEA fashion E-commerce to reach 6 to 14B USD by 2018 Fashion E-commerce market size in SEA can be calculated by taking a top down approach to the forecast 2018 Fashion and Beauty Retail Sales: $70-80B USD • Assumes 10% CAGR from 2013-2018 x Sources: “We are social”, Accenture; Euromonitor 2013 2018 Fashion and Beauty E-commerce sales: $6-9B USD Expected E-commerce share of retail sales: 7-10% = • Assumes E-commerce penetration in line with China in 2013 • 10% market share implies $600-900M USD revenue • 1% market share implies $60-90M USD revenue
  12. 12. Global fashion E-commerce valuations higher for own-brand due to product differentiation and higher margins (In M USD) Merchandizing Company Focus Revenue @ Investment EV EV / Revenue Comment Own-brand + curated 3rd party Asos Fast Fashion with own-brand #1 online fashion site in UK 1,240 6,800 5.5x 4-6x valuation at scale Own-brand VANCL Own-brand Fast Fashion #1 online fashion site in China 800 3,000 4.0x Own-brand + curated 3rd party Zulily Mom Fashion & Babies Flash Sales 500 2,600 5.2x Own-brand Bonobos Men’s own-brand fashion #1 online men’s fashion site in US 80 800 10x 8-10x valuation during growth phase Own-brand + curated 3rd party Nastygal Women’s LA Street Fashion 100 800 8.0x Own-brand Warby Parker Own-brand Eyewear #1 online eyewear site in US 50 500 10.0x Resell 3rd-party brands Zalando Broadline shoes & apparel 1,800 3,900 2.2x 1-2x valuation regardless of size due to threat of competition and lack of differentiation Resell 3rd-party brands Zappos Broadline shoes & apparel 1,000 (‘09) 1,000 (‘09) 1.0x Resell 3rd-party brands Myntra Broadline shoes & apparel 150 300 1.7x Sources: Techcrunch, Google Finance, FT.com, Dailypando, Bloomberg
  13. 13. Thank you! For more information please contact:  David Jou at david@pomelofashion.com

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