This year has seen unprecedented interest in Southeast Asia’s startups from Chinese tech firms, and today we can add another deal to the pile. JD.com, the close rival to Alibaba, has led a $19 million investment in Bangkok-headquartered online fashion brand Pomelo.
The deal, which is the largest Series B for a Thai startup to date, is co-led by Indonesia’s Provident Capital Partners with participation from PE firm Lombard Investments. The round takes Pomelo to $31 million in capital from investors, which include Jungle Ventures and 500 Startups.
Founded in 2014, Pomelo operates an online fashion site that sells its own branded clothes across Southeast Asia. While it does ship to over 40 countries worldwide, the business is predominantly focused on Thailand, Indonesia and Singapore.
CEO David Jou said the new capital will go towards tripling Pomelo’s product line and “doubling down” on Indonesia, the world’s fourth largest country with a 260 million population that is also Southeast Asia’s largest economy.
Indonesia is where its relationship with JD.com, which has been making moves in the country for several years, will bear fruit, Jou added, although the company is “researching” possibilities in China, too. The partnership will likely also boost Pomelo in Thailand where JD.com recently announced a fintech and e-commerce joint venture worth $500 million.
Beyond those core markets there’s an ambition to do more globally. International sales (excluding Southeast Asia) account for five percent of business right now, according to Jou, but a new cross-border warehouse located in Hong Kong has been set up in a first step to grow that.
The Pomelo brand is best known in Southeast Asia, but CEO Jou sees potential to make a successful expansion into markets like Europe in the future.
“The whole way people experience fashion has changed,” he told TechCrunch in an interview. “They want international branded fashion [and] with Instagram and Snapchat, trends are no longer local, I would say they are global.
“In the past,” he added. “If you lived in New York you might know the trends first, but today you log into Instagram and follow an influencer. If she posts an outfit of the day that’s the trend and millions of people will see that photo.”
The Pomelo website in Thailand
For now, though, the focus is very much on Southeast Asia, where e-commerce spend is forecast to grow from $5.5 billion in 2015 to $88 billion in 2025 fueled by increased internet access and rising consumer spending power.
That potential has attracted much interest. Despite competition from well-financed rivals like Alibaba-owned Lazada and Shopee from newly-IPOed Sea — both of which target a range of verticals including fashion — Jou said Pomelo will “go a lot deeper into figuring out how fashion can work.”
Right now that is best exemplified by a move into offline commerce (well, offline-to-online) through experience stores which Jou said are a first in the region. Pomelo has piloted one in Bangkok, and it plans to introduce as many as half dozen more in the city next year and branch the initiative out into Singapore.
“‘Let’s not just do in-store collection, lets turn it into a better experience,’ we told ourself,” Jou recounted.
“Everyone [in Southeast Asia] still spends their leisure time in malls, but the inherent issue with stores is that you’re restricted to the inventory that fits that store. We’re allowing people to order anything from our web store, and it will be waiting for them in a dressing room at a scheduled time. Pus we take all payment info ahead of time so they simply keep what they want and walk out,” he explained.
Jou said that while Pomelo has profitable unit economics, a focus on growth means that it isn’t profitable right now.
This large round follows an $18 million round for Zilingo, a similar fashion-focused e-commerce business that also targets Singapore, Thailand and Indonesia.
Note: Article updated to correct that JD.com’s joint-venture investment in Thailand is worth $500 million not (of course) $500 billion as initially. Our apologies for any confusion.