Excerpts from this interview with Nicole Jao were featured in her TechinAsia deep dive on “Explaining Pinduoduo, and whether the model can work in Southeast Asia“

Pinduoduo has emerged as a strong (if not leading) contender in China’s e-commerce scene. What has made its trajectory interesting for many has been its definitive approach to e-commerce, leveraging social interactions to make e-commerce more accessible and “sticky” as an activity among its users.

With Southeast Asia’s e-commerce activity continuing to increase year-on-year, with first-generation platforms (marketplaces) at the helm, there’s certainly questions around whether social commerce models will define a new generation of e-commerce in the same way that Pinduoduo did for China. We took some questions from TechinAsia and shared our thoughts on Southeast Asian startup’s approach to social commerce.

Q: How would you describe SEA’s social ecommerce scene? Do you think there are a lot of opportunities for startups to capture or is it still nascent?

A: The appeal of social commerce comes from its ability to bring down costs for the consumer through group buying and agent-based distribution networks. We’ve seen how this appeal resonates in second-tier and third-tier cities in the region where costs are not only a key pain point but strong communities exist that could facilitate the entry of a social commerce model. 

From the perspective of startups and investors, the social commerce model offers an effective way to tap into the massive rural economy in Southeast Asia. In Indonesia, we are already seeing a number of players making breakthroughs in the space. Our portfolio company Super offers FMCG group-buying solutions for communities in Indonesia’s second-tier and third-tier cities.  

Listen to our podcast with Super co-founder and CEO Steven on their version of social commerce in Indonesia >>>

Q: Pinduoduo built its business on the C2M (Customer-to-manufacturer) model that cuts out the intermediaries between customers and manufacturers. Do you think the same model works in SEA or do you think that certain modifications are needed? Why?

A: Achieving C2M in Southeast Asia means having an efficient logistics backbone. This logistics backbone should not only be able to support the economics of the platform (ie lower prices in bulk) but also the distribution of communities in the platform’s target areas. Both conditions require modifications that cater to the local market. 

In the case of Super, Steven and his team work closely with local community leaders to build out their logistics backbone. These agents, ranging from housewives to mom-and-pop shop owners, are able to offer their spaces as micro-fulfillment hubs. 

Q: Which Southeast Asian markets do you think have the most potential for social ecommerce boom? Where do you think could be the breeding ground of the next Pinduoduo?

A: Social commerce in Southeast Asia has the potential not just to be an alternative to first-generation ecommerce, but an evolution of it. Considering how many people in the region either do not actively use ecommerce platforms or do transactions over other non-ecommerce platforms (eg WhatsApp or Facebook), there is space for social commerce to be an affordable and practical proposition. Given that this model’s success relies heavily on the size of its user base, Indonesia is the obvious breeding ground for a Pinduoduo-like company. Vietnam’s abundance of ecommerce players also presents an opportunity for social commerce to carve out a piece in the country’s second-tier and third-tier cities. 

Q: Aside from the C2M model, Pinduoduo owes much of its success to super app WeChat. Do you think in order to succeed in SEA, startups need to go about the same route (i.e. tap into the platform of a super app to get traffic and to build group-buying communities on)?

A: Pinduoduo making its entry through WeChat made sense in China because WeChat’s near-ubiquity as a “super app” and online communities made it a viral launchpad. WeChat’s mother company Tencent also reaped the benefits of decentralizing its “super app” capabilities to companies like Pinduoduo. 

In a heterogeneous market like Southeast Asia, super apps with the same ubiquity as WeChat do not yet exist, and it will be difficult to achieve that same level of reach quickly. While there are strong players like Gojek in Indonesia, the growth potential of riding on a “super app” this early on in the game might not catapult a Pinduoduo-esque platform high enough. The benefits for super app hopefuls in the region are also unclear with many contenders already stretched thin across various verticals. 

Another key difference is that the gap between first-generation ecommerce and social commerce platforms in China is larger than that of Southeast Asia. Hence there are more untapped and “ripe” consumers in Southeast Asia when it comes to using ecommerce platforms. This opens up the opportunity to educate and lead the way instead of piggybacking on an existing platform. 

The opportunity right now in Southeast Asia is to be a leader and first-mover in the space. In terms of creating significant traffic as a social commerce platform, the best approach this early in the game would be to bring together a mix of online (social media, WeChat-type platforms like WhatsApp) and offline (agent networks) strategies. The key here is to balance virality (scale) and activity (monetization) so that revenue is not just dependent on top users but distributed across as large a network of users as possible.