A retail revolution in Southeast Asia is taking place. In this digital age, global consumers are now pushing the boundaries of what shopping means, causing disruption to the value chain of traditional brick-and-mortar businesses. Stakes have never been higher for retailers and consumer goods companies hence establishing an online presence is imperative.

On the flipside of things, opportunities are abound and the rewards are up for grabs. In an initial joint report released in 2016 by internet giant Google and Singapore sovereign fund Temasek Holdings, it was reported that the internet economy in Southeast Asia is expected to surge to US$200 billion by 2025. Due to an acceleration of growth last year, Google-Temasek revised their prediction upwards in a follow-up edition.

In spite of the secular growth story for the internet economy, global equity markets recently witnessed a tech bloodbath, revealing some major concerns over the softening of growth outlook. Amidst weaker sentiments, local e-commerce enabler startup Synagie Corporation (Synagie) is slated to make its debut on 8 August 2018. Shares Investment met Synagie’s CEO Mr. Clement Lee to see how the group is positioning itself in Southeast Asia’s highly fragmented market.

A Burgeoning E-commerce Market

Southeast Asia’s e-commerce market is still in the budding phase and is set to explode. In 2017, the gross merchandise volume (GMV) in the business-to-consumers (B2C) segment touched US$10.9 billion, doubling from US$5.5 billion in 2015. By 2025, GMV is expected to rise to a whopping US$88.1 billion!

Driving the growth is none other than the region’s 330 million internet users and rising middle class. But with a population of over 650 million, internet penetration rate of 50.7 percent still trails the US’ 87.9 percent and the EU’s 85.7 percent.  This suggests that there are still plenty more of new internet users to add to the mix.

Despite certain challenges in the region, such as lack of accessibility and low internet speeds, mobile internet users are spending more hours on their mobile devices compared to counterparts. According to data from Google-Temasek, Southeast Asia is spending 3.6 hours per person, per day, compared to China’s 3 hours and the US’ 2 hours and UK’s 1.8 hours. This further highlights the region’s e-commerce potential.

Unique Business Model


Source: IPO Prospectus

Officially founded in 2015, Synagie started out as a B2C online retailer with its beautiful.me platform with focus to help the traditional retail sector to expand their online exposure. Focusing on Body, Beauty and Baby (BBB) products, the online retail platform sold products targeting female consumers and succeeded in gaining a sizeable following.

In the meantime, other online marketplaces such as Lazada and Qoo10 have been gaining traction amongst online shoppers. Seeing that traditional retailers were in fact lacking in multi-channel online exposure, Synagie transformed its business model from an online retailer to that of an e-commerce solutions provider and enabler, offering and distributing its catalogue of brands on other online marketplaces.

Today, Synagie has built an ecosystem that provides end-to-end solutions to both its customers and consumers. Using third-party warehousing and logistics partners, Synagie could deliver and fulfill the whole process involving any online transaction.

Giving it a stronger edge, the group developed its own proprietary cloud-based Synagie platform that allows its brand partners the ability to monitor and optimise product control across various online sales channel.  Harnessing big data, the platform could also perform real-time analytics to manage their e-commerce business through an integrated system.

SEA Fastest Growing E-Commerce Player

According to Frost and Sullivan, Synagie Corporation is the fastest growing e-commerce player in Singapore, with revenue surging at a compound annual growth rate (CAGR) of 551.8 percent from the time it was founded in FY15 to FY17.  In the period, revenue jumped from $0.2 million in FY15 to $8 million in FY17.

In FY17, Synagie added another new 77 brand partners to the existing 109. Since the start of FY18, new brand partners continue to come onboard and Synagie now boasts more than 250 brand partners that include reputable brands like Johnson & Johnson, Unilever, Shiseido and Kimberly Clark.

Though the group is still unprofitable with net loss of $3.4 million in FY17, investors should recognise the improbable feat of attracting a sizeable base of brand partners in a span of three years, all while building up its own ecosystem.

Further value-adding to consumers and partners alike, Synagie acquired a third party administration in April 2017, to extend warranty and accidental damage protection options for certain products. The Insurtech subsidiary is already profitable and taking into account the 12-months revenue as if the acquisition occurred at the start of FY17, Synagie’s pro forma revenue would have been $12.3 million and net loss would have been lower at $2.3 million.

All About Scale

The viability of a business model or concept for startups is often validated by revenue growth. In this aspect, Synagie’s performance is in a class of its own. To become profitable, the remaining missing element for the group is scale.

As more brands continue to jump onto Synagie’s platform, transaction volume would scale up and the group could eventually see some cost-savings in its fulfillment process. As such, it seems like a sound strategy for Synagie to focus on the online BBB market since brands are constantly fighting over female consumers’ attention. Notwithstanding that, the online BBB market in Southeast Asia is also growing fast at CAGR of 25.2 percent to reach US$2.6 billion by 2022.

Going forward, investors can expect Synagie to replicate its model in other geographical markets to meet local requirements. Already, the group has expanded its operations into Malaysia towards the end of 2017. Notwithstanding that, China UnionPay has also partnered with Synagie to utilise its platform to provide China out-bound parcel delivery services for its 6.8 million small-medium enterprises as well as 2000 courier customers.

Expecting A Warm Debut

In Synagie’s IPO, the invitation shares of 43 million represent a public float of just 16.4 percent of the post-invitation share capital. Meanwhile, the remaining 83.6 percent of shareholding is under the restrictions in initial lock-up period.

While Synagie is riding on strong industry tailwinds and its unique asset-light business model, the limited invitation offer could potentially see oversubscription. However, investors should bear in mind that the e-commerce market is increasingly crowded and competition is getting extremely intense. Synagie’s closest peer, Thailand-based aCommerce, has already raised US$94 million to date and is aggressively expanding its operations as well. In addition, there is no moat that actually safeguards Syangie’s model from being duplicated by other e-commerce companies. As such, it seems like a vital need for Synagie to quickly scale up and establish itself as a dominant e-commerce enabler.

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