Zilingo may not be a name known to many prior to today, but the under-the-radar e-commerce company has closed an impressive $8 million Series A round to scale its fashion-focused operations in Southeast Asia.
The round was led by Sequoia India, Indonesia-based Venturra Capital and Susquehanna International Group, with Wavemaker Partners, Beenext, Beenos and Digital Garage also chipping in. Zilingo previously raised $2 million, so this takes its total to $10 million. Not bad for a company that has deliberately kept a low profile.
The days of capital intensive business dominating e-commerce in Southeast Asia are over. In this post-Rocket Internet era, startups are pioneering more sustainable business models having learned the lessons of Lazada, which ran out of money before being bought by Alibaba, and Zalora, the parent of which closed a huge downround following issues raising.
Zilingo is one such company. Founded by former Sequoia India analyst Ankiti Bose (CEO) and ex-Yahoo engineer Dhruv Kapoor (CTO) after a trip to Bangkok stirred an awareness in fashion in Southeast Asia, the service is a marketplace for fashion sellers in Thailand, Singapore and (soon) Indonesia.
There’s a lot to like about Zilingo’s business. Not only did the founders move to Southeast Asia for the potential of the region — where smartphone sales are rising among its 600 million consumers and the digital economy is tipped to hit $200 billion by 2020 — but they are building a sustainable business to boot.
The company targets the long-tail of vendors, otherwise seen as too small for larger e-commerce companies, the kind that exhibit and sell offline within markets and malls across Southeast Asia.
Why the focus on the smaller retailers when others have deemed them too much hassle?
Well, Zilingo believes that Southeast Asian fashion sellers — such as those in Bangkok that attract weekend shoppers from Singapore, China and elsewhere — have vast potential online that nobody else is catering to. On the business side, it estimates that small sellers collectively account for 60 percent of retails sales in the region. Zilingo pegs the entire long-tail fashion and beauty industry at around $20 billion per year.
“We saw that there was 60 percent of the fashion market being catered to by SMEs, but none of these had ability to sell online at scale [and] all other online businesses wanted to get sales or push their own brands,” Bose said.
Zilingo lets its sellers — it claims to have over 2,000 right now — price their goods as they’d like, it simply takes 10-15 percent of any sale. That is enough to cover costs since Zilingo itself doesn’t house product. Indeed, once it has covered promotion, packaging and other costs, that boils down to a positive margin of one to two percent, Bose told TechCrunch in an interview.
That translates to positive unit economics and in the near future, she admitted, higher GMV — the total volume of sales on the Zilingo platform — and user growth could increase those take home margins to four or five percent.
“Never once did we sacrifice the unit economics for GMV to order to get a better valuation for fundraising,” she added. “We said: ‘Hey, that is a bad business.’ Instead, we let the business pay for the business and money we raise covers salaries, marketing, etc. Essentially we don’t end up burning a lot of money, we might even get profitable soon, and this excess cash allows us to aggressively market ourselves.”
Zilingo has one other particularly notable feature. Kapoor and his Bangalore-based tech team built out a seller management platform which helps small retailers — who again are often dismissed as not being worth it for larger platforms — formally organize their business.
Zilingo’s software is free and it also hooks up to other e-commerce platforms, such as Zalora, which Bose believes helps establish relationships with new sellers and maintain those with existing ones.
“It offers inventory management, API for logistics, bank account integration and we are adding working capital loans and other features,” she explained. “We’ve created a nice moat around our business to give us access to 60 percent of the market supply. We think we can get fairly unrestricted access to the long tail.”
Zilingo co-founders Bose and Kapoor
With this funding in the bank, Zilingo plans to launch for sellers in Indonesia — Bose, who currently resides in Bangkok, will move to Jakarta to get a proper feel for the local market — and ramp up its technology and marketing.
Indeed, one of the early fruits of that push is the new look Zilingo mobile app which includes more video coverage of products. That’s designed to rotate on a three-day schedule that, in theory, has customers coming back to check out what is hot.
“We want users to come on board to discover fashion trends,” Bose explained. “Even if they shop just once a month, that would be great. Our userbase is 23-40 years old, but we want younger users [and] they engage way better with video than static images.”
Right now, over 80 percent of Zilingo’s sales are within Southeast Asia itself, but Bose revealed that there has been interest from wholesalers in Europe and Asia Pacific who see the service as a convenient and cost effective way to move product into their markets for resale. Right now, she clarified, there is no plan to offer a different kind of service to accommodate this demand, but that could change if the future if supply is high enough.
The immediate focus is more local, to take on competitors like Zalora and newly-minted Orami.
“We want to get more sellers, expand into Indonesia and win the fashion commerce market,” Bose said.