COVER STORY

Zilingo: The Singapore-Based e-Merchant of Small Things is Getting Bigger

The Southeast Asian fashion and lifestyle marketplace raises $17M in Series-B round

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BY Tricia V. Morente - 13 Sep 2017

PHOTO CREDIT: Joel Lim

 

Any shopaholic worth her salt has made the pilgrimage to Southeast Asia’s most vibrant weekend market: the busy and bustling sensory overload that is Chatuchak along Bangkok’s Kamphaeng Phet 2 Road.

In 2014, on a trip to Thailand with her colleagues from McKinsey & Company, Ankiti Bose was one such shopper. Bose quickly noticed that people, not only locals but travelers from all over the region, came to shop at Chatuchak and yet none of the items in the market, all very high in demand, were online. “Everybody clearly wanted to buy this stuff,” says Bose, “and it didn’t make sense that these vendors were not online when every other industry was already there. So the question was: Why?”

The question perplexed and pursued Bose home to Bangalore, where eventually her research revealed that in Southeast Asia, 60% of fashion retail sales is generated by small-scale brands and designers, and these sellers were being left behind in the race toward digitization. So with the help of her neighbor Dhruv Kapoor, a technologist who at the time worked for an American gaming company, Bose and Kapoor created Zilingo, a mobile marketplace that gathers small-scale fashion vendors across such vibrant markets as Chatuchak in Thailand and Haji Lane in Singapore.

Earlier this week, the independent fashion marketplace, which has remained largely under the radar, raised $17 million in its Series B round of funding, bringing its total to $27 million. The round was led by Sequoia Capital India — whose Southeast Asia portfolio includes Tokopedia, Go-Jek and Traveloka — and Burda Principal Investments.

“We have been extremely impressed with Zilingo’s growth and focus on strong unit economics,” says Albert Shyy, Principal at Burda. As the marketplace assumes no logistics and warehousing costs, compared to other e-commerce sites like Amazon, Zilingo’s costs are lower. “We believe there is a massive opportunity to build the leading fashion marketplace in the region and we are very excited to join their journey,” Shyy adds.

Tim Draper, founder of DFJ, also joined the round, along with the family office of Manik Arora, founder of IDG Ventures India. The Zilingo investment represents Arora’s first in Southeast Asia. “Ankiti is an exceptional founder with solid business judgment and an incredible work ethic which has shaped the high-performance culture of the organization,” says Arora, adding “the Zilingo team has built a differentiated cross-border asset leveraging mobile-first technologies, a focus on millennials, and the widest product selection, to become the fastest growing player in fashion e-commerce in Southeast Asia.”

 

Empowering the small and independent vendor
With two-thirds of the world’s population on one continent, the online retail potential of Asia is vast. The explosive growth of Alibaba in China, whose revenue in the first quarter of 2017 alone jumped 60% to $5.6 billion from the same period last year, is the example most often cited. Such success has lured in giants like Amazon, which has been fighting fiercely in India since June 2013 for a slice of India’s now estimated $33 billion online retail pie and is making inroads into Southeast Asia through its Amazon Prime service launch in Singapore last July.

But beneath all the dazzling numbers, there is a humbler reality: Many shoppers in Asia still buy their clothes in sweaty and crowded street stalls from vendors for whom the digital economy is little more than an afterthought. Enter Zilingo. “It’s {a product} for sellers first,” 26-year-old Bose says, describing her site. Zilingo helps vendors aggregate their products in one place, in their language, and in their currency. “So it’s all very localized,” she says. And easy to understand for a vendor unfamiliar with currency exchanges or even English.

The numbers of brands on Zilingo’s platform is rising fast. Around 250 brands are added on to the site every month, generating approximately $3.5 million in monthly sales. From starting two years ago with only 100 styles, now over 60,000 new styles are added on Zilingo every week, with customers coming from markets beyond Southeast Asia, including Australia and the United States.

Beyond access to a marketplace, the Zilingo platform provides sellers with tools and services—all for free, and with no membership fee—that include inventory management, pick-up scheduling, data analytics, access to working capital, and distribution as Zilingo maintains relationships with multiple logistics providers. The site makes money mainly from sales commissions—at least 15% to 20% for every transaction—and generates further revenue from sellers who bid an average $100 to have their products prioritized in a Zilingo-based search.

It’s a proposition that seems to sit well with Zilingo’s over 5,000 merchants—30% of which are from Thailand. “You’d be surprised how quickly the latest designs from Milan’s fashion week hit stores in Thailand,” she says. “Anywhere else, it takes months.” Beyond Thailand, Zilingo has seller hubs in Hong Kong, Korea, Vietnam, Cambodia, and Indonesia; and it intends to use this round of funding to strengthen its position in the latter to further expand its supply base.

 

A new, bright, and accessible space
Manila-based e-commerce consultant Teri Canayon, an eight-year eBay alumna who used to lead eBay’s cross-border business in Singapore, points out that, while Zilingo’s potential will be driven by upcoming indie brands targeting the younger set—“They could potentially share the same success story as Colourpop, which started as an indie lipstick brand in the U.S. with a young following,” she says—there are some hurdles to achieving this.

First, differentiation in an increasingly crowded e-commerce marketplace isn’t easy. “While I don’t think the e-commerce market {in Southeast Asia} is saturating,” says Paul Ong, Associate Director at VC firm Innoven Capital Singapore, “connected consumers now have endless choice, and the power and accessibility to data and information to help them make decisions. Standing out from the market has become infinitely difficult….” 

“The e-commerce industry is still in its infancy in Southeast Asia,” Arora concurs. “Horizontal leaders have been clearly established in the last two years while industry-specific leaders, like Zilingo, are currently being established. Over the next few years, e-commerce in Southeast Asia will have a few horizontal leaders, a few vertical leaders, and perhaps a couple of private label online-offline players all carving out their slice of the retail pie.”

From the buyer’s point of view, Zilingo’s identity can be confusing. Global brands like Prada, Longchamp and Tory Burch, sold largely by resellers, share the same space as low-cost products from Thailand, Vietnam, China, Singapore, and Cambodia. Korean fashion has seeped into the marketplace as well. The fact that the majority of its sellers come from Southeast Asia’s open-air markets may be lost in the communication process. “A potential seller of an upcoming local brand could lose interest because of the lack of direction,” says Canayon.

Even so, by bringing the small-scale vendors of Southeast Asia’s bustling open-air markets to a new, bright, and accessible space, niche marketplaces like Zilingo are not only filling a gap in the market that large free-for-all players like Lazada and Zalora may have overlooked, they’re also feeding the growth of Asian fashion subcultures that would otherwise remain underground.