HKMB Hong Kong Means Business

Hong Kong Means Business Hong Kong Means Business
  • Login / Register

Languages

  • EN
  • 繁
  • 简
  • Events
  • My Feed
  • Contact HKTDC
  • Subscribe
  • Subscribe

Section Menu

  • multimedia
  • market spotlight
  • first person
  • Venture Hong Kong
  • heads-up
  • inside china
  • life & style
  • hktdc research

Languages

  • EN
  • 繁
  • 简
  • HKTDC.com |
  • About HKTDC |
  • My HKTDC |
  • Login / Register |

HKTDC.com About HKTDC My HKTDC

Login Register

Hong Kong Means Business

Section Menu

  • multimedia
  • market spotlight
  • first person
  • Venture Hong Kong
  • heads-up
  • inside china
  • life & style
  • hktdc research

https://hkmb.hktdc.com/en/OTY0Mjk3Mjcy

hktdc research
SAVE FOR LATER
SHARE / SEND

"Scan QR Code" in WeChat and tap "..." to share.

ASEAN E-commerce: The Aggregator Business Model, an Exit Option for E-commerce Businesses

Interview with J.J. Chai, Co-founder and Chief Executive Officer of Rainforest

25 January 2022

David Sit, Corey To



Photo: J.J. Chai, co-founder and CEO of Rainforest

J.J. Chai, co-founder and CEO of Rainforest.

As e-commerce continues to grow at a record pace amidst the Covid-19 pandemic, entrepreneurs across the globe have increasingly turned to online retail platforms to launch their start-up businesses. Amazon Marketplace – Amazon’s e-commerce platform for third-party sellers – saw a 50% increase in gross merchandise volume (GMV) from US$200 billion in 2019 to US$300 billion in 2020, accounting for 62% of total GMV on Amazon.[1]

The surge in both the number and growth potential of third-party vendors has led to the rise of “e-commerce aggregators” (also known as “e-commerce roll-ups”) – companies that acquire successful small e-commerce businesses. While many of these aggregators are based in the US and Europe, a handful of Southeast Asian aggregators such as Rainforest have found success acquiring and developing brands from the region. HKTDC Research sat down with J.J. Chai, co-founder and CEO of Rainforest, to find out more about the opportunities that e-commerce aggregators present to entrepreneurs and small businesses in the region.

A Way Out

Founded in 2021, Singapore-based Rainforest is one of the first e-commerce aggregators in Southeast Asia. Since its first acquisition in March 2021, Rainforest has amassed ten brands under its management. The company specialises in acquiring the full or majority stake of small businesses in Asia that sell to the US through Amazon.

Aggregators serve as an exit strategy for owners of small- to medium-sized enterprises (SMEs). Chai highlighted several reasons why entrepreneurs may want a way out, with the most common being the desire to move on to a new business venture: “In most cases what we’ve seen is that these entrepreneurs have another idea they want to do. They want to cash out on their business and start a new idea.”

Photo: Entrepreneurs may prefer to exit the market to avoid the difficulties of further expansion.

Entrepreneurs may prefer to exit the market to avoid the difficulties of further expansion.

Chai added that another barrier to expansion for small businesses is human resource management, saying: “It’s expensive and difficult to hire, attract, retain and manage good talent. Usually solo and mom-and-pop entrepreneurs don’t want to or don’t know how to hire a team, but it’s hard to really go from there unless you start hiring. That’s where we come in to give them a full exit.”

An alternative is partial ownership, where Rainforest acquires a majority stake of the business and facilitates its expansion by providing expertise in key aspects ranging from marketing to supply chain management.

One example of the company’s successful ventures is the acquisition of a bedding brand, where Rainforest revamped its inventory management, pricing strategy, product page design and performance (pay-per-click) marketing, leading to a growth in sales of almost 30% within three months.

The More the Merrier

Rainforest focuses on acquiring brands that sell household, mother and baby products. Chai explained: “We tend to avoid categories like fashion and electronics, because the innovation cycles are too fast. A product portfolio of more basic products, such as baby bibs, is more long-lasting.”

The main advantage that aggregators such as Rainforest have over small independent retailers is economies of scale. Chai said that, by selling similar or complementary products on the same platform, Rainforest can manage the brands in similar ways and share common resources. This allows for greater efficiency in many aspects of business operations, as Chai explained: “The nice part about having multiple brands is that you can make use of existing supplier relationships and negotiate for better deals.” For instance, Chai noted that shipping costs are lower on a larger scale of production, saying: “Instead of filling half a container or just one pallet, sending a full container of products to the US is considerably cheaper.”

Focusing on Amazon vendors allows Rainforest to make use of the Fulfillment by Amazon service, which allows it to utilise Amazon’s logistics networks and customer service, further simplifying the management process and reducing costs.

Specialising in e-commerce also means that aggregators like Rainforest enjoy lower investment and transition costs than conventional acquisitions of physical retail stores. Chai illustrated this advantage, saying: “When the entrepreneur hands over the business it is usually the Amazon account, contracts, rights, trademarks, and that’s about it. Transition of the business is fast, and the business model is rather asset-light.”

Photo: Consumer reviews are a key indicator of the potential of a product.

Consumer reviews are a key indicator of the potential of a product.

Chai noted that Rainforest is selective when it comes to deciding which firms to acquire, saying: “We’re looking for products and brands that are already established.” As well as growth potential and a strong track record of sales and profitability, Chai added that customer satisfaction with the product is also a major consideration: “A key piece of information is around ratings and reviews. If your product has a 4.5- or 4.7-star rating and a lot of customer ratings and reviews, this makes it very attractive for us.”

Rainforest also runs an in-house product development team, which is responsible for developing and improving its products based on customer reviews.

Covid-19 and Future Expectations

Contrary to the general pessimistic outlook for business activity during the pandemic, Chai believes that, to some extent, Covid-19 has created opportunities for aggregators like Rainforest. With the pandemic devastating global and regional supply chains, he noticed that an increasing number of entrepreneurs are willing to sell their brands to avoid the difficulties of managing the supply chain complexities.

Chai recognises the importance of “doing more than being the best local presence”. While Rainforest has not acquired any brands from Hong Kong so far, it has been actively assessing brands from Hong Kong, mainland China and the rest of the Asia-Pacific region. Besides deploying a brand manager in Hong Kong and sourcing teams in mainland China, Rainforest recently acquired a bathroom accessories seller in mainland China and is in ongoing negotiations with two others. Rainforest also sources from Vietnam and other countries in Southeast Asia.

In the future, Rainforest plans to expand to different distribution channels, including e-commerce platforms in the US such as Walmart, Shopify and eBay, and eventually Southeast Asian platforms such as Tokopedia. Chai also highlighted the possibility in the long term of extending to offline distribution channels, partnering with physical retail outlets to reach a wider range of shoppers.

Ultimately, Rainforest aims to grow over time into a collection of household brands akin to multinational conglomerates Unilever, Procter & Gamble (P&G) and Helen of Troy. Expounding on his vision for Rainforest, Chai said: “The idea is that we acquire these brands, and some but not all of them will grow to become household names over time, not just on Amazon but also on other online and offline channels. At some point it won’t be necessary to aggregate brands; we would just focus on growing our brands.”

Tips for E-Commerce

Chai believes that the first step towards success in e-commerce is to have a good product, saying: “Make sure you’re listening to the consumer. If you’re getting feedback on the product from consumers, make sure you fix that for the next round, so you keep the ratings and reviews.” He suggested that a common mistake among start-ups is to rush into marketing and packaging design without developing a high-quality product.

Photo: Bed bridges - a niche product with high scalability in the global e-commerce market (Source: FeelAtHome)

Bed bridges - a niche product with high scalability in the global e-commerce market (Source: FeelAtHome)

Chai added that focus is also an important consideration, saying: “Think hard about what niches or sectors you are really good at. Having one or two good ‘hero’ products is better than having ten that are doing okay.” Considering the vast scale of the e-commerce market, Chai argues that even a niche product, such as one of Rainforest’s best-selling products – a bed bridge that connects two twin bed mattresses, can become a sizeable and profitable business.

Pointing out that another key to success is research, Chai suggested: “Use the tools that are there to find out about what people are searching for and your competition. A couple of weeks of research will pay off in the long run.” He believes that the best businesses have a clear and detailed idea of what their competitive edge is, whether it be pricing, innovation or bundled deals. This is especially true for e-commerce, where Chai said that younger entrepreneurs have the advantage of, in his words, being “very innovative about using information and what’s enabled by technology”. An example of this is the use of customer surveys, where sample webpage designs can be presented to the participant to gain insights into what makes a product more appealing than its competitors.

Chai acknowledged that there are differences between e-commerce platforms in Southeast Asia and those in other more developed countries. Using the US as an example, Chai said: “Platforms in the US like Amazon reward you for having a good brand. Consumers there will pay for products with a higher reputation based on reviews and ratings.” As a result, products can be priced higher and having a high volume of positive reviews is key.

In contrast, Chai observed different preferences in Southeast Asian markets, saying: “There is still a segment of premium buyers, but most buyers are very price sensitive. It’s a price war, and it’s very promotion-driven.” He suggested that it is difficult to build a brand with low profit margins and different consumption patterns, so affordability and value for money are the priorities when selling via e-commerce platforms in Southeast Asia.


[1] Marketplace Pulse, Amazon GMV in 2020

BACK TO TOP ^
    Topics:
  • Finance & Investment,
  • Household Products,
  • ASEAN,
  • Southeast Asia,
  • Singapore,
  • e-commerce,
  • digital marketing,
  • start-ups,
  • entrepreneurs,
  • AGGREGATORS,
  • acquisitions
  • Finance & Investment
  • Household Products
  • ASEAN
  • Southeast Asia
  • Singapore
Home

Article Topics

ARTICLE TOPICS

FINANCE & INVESTMENT24664
HOUSEHOLD PRODUCTS24688
ASEAN37801
SOUTHEAST ASIA36184
SINGAPORE36193

ARTICLE TOPICS

FINANCE & INVESTMENT24664
HOUSEHOLD PRODUCTS24688
ASEAN37801
SOUTHEAST ASIA36184
SINGAPORE36193
E-COMMERCE72199
DIGITAL MARKETING99291
START-UPS98715
ENTREPRENEURS85176
AGGREGATORS150034
ACQUISITIONS85821

interest_article

YOU MAY BE INTERESTED IN

17 May 2022

INDONESIA: VAT on Fintech Services and Crypto Transactions Starts 1 May

27 April 2022

SINGAPORE: Application Guidelines for Family Office Tax Incentives Amended

28 March 2022

Always at your service

10 March 2022

SINGAPORE: Digital Trade Agreement Signed with the United Kingdom

Related Events

RELATED EVENTS

22 - 24 June 2022

ASEAN Lifestyle Explorer – Malaysia Gifts Fair 2022

5 - 8 July 2022

HKTDC Hong Kong Houseware Fair 2022

5 - 8 July 2022

HKTDC Hong Kong Electronics Fair (Spring Edition) 2022

26 - 29 October 2022

Eco Expo Asia 2022
FIND AN EVENT

Social Share

FOLLOW US

GET WEEKLY UPDATES

newpaper-img

GET OUR WEEKLY EMAIL UPDATES

banner-img


I acknowledge that the above information may be used by the Hong Kong Trade Development Council (HKTDC) for incorporation in all or any of its database for direct marketing or business matching purpose (and may therefore become available to the public within and/or outside of Hong Kong for use by them), and for any other purposes as stated in the Privacy Policy Statement; I confirm that I have the consent and the authority of each individual named in this form to release their personal data for the purposes stated herein.


*For non-EU/EEA customers, please skip this box which is solely for EU/EEA customers as required by the relevant data protection law in the EU.

THANK YOU

Thank you for registering.

SHARE THIS STORY

EMAIL
LINKEDIN
WeChat
FACEBOOK
TWITTER
WHATSAPP

ID: HKTDCofficial

Don't have an account?

Create An Account

successfully added on your preferences.