Tiki-Sendo speculation piques sector interest

Tiki has been battling for market presence with Sendo, Shopee, and Lazada

The local market last week reacted to speculation about merger talks between two domestic leading e-commerce platforms in Tiki and Sendo. They have been negotiating to agree a partnership in the near future.

While Tiki has kept silent about the issue, a representative of Sendo would only tell VIR, “We have no comment regarding the rumours in the market.”

According to industry experts, once the negotiations are taking place, the relevant parties rarely issue comments, even to disclaim leaks.

A VIR source revealed that discussions about the merger had been taking place since August, and only leaders of each company knew of the details. As a result, most of the shareholders have expressed surprise over the news.

If the partnership comes to fruition, the M&A trend will become more dynamic thanks to that and another major deal – last year’s alliance between local conglomerate Vingroup and food giant Masan Group. These two groups last December reached an agreement about merging Vincommerce JSC, which operates Vinmart supermarkets and VinMart+ convenience stores, and VinEco Ltd., which specialises in agricultural manufacturing, into Masan.

Breaking the dominance

Thanks to the huge support of Singaporean-based Sea Group and leading Chinese e-commerce company Alibaba, Shopee and Lazada quickly seized the upper hand in the local e-commerce market. Through data from e-bills, Japanese-backed market research company Intage Vietnam estimated Shopee’s market share to be 47 per cent, larger than any other platform in the market.

Lazada, with the billion-US dollar investment from Alibaba, has never been out of the top five leading e-commerce platforms in Vietnam. Meanwhile, Tiki and Sendo, with their fragmented shareholder structure, have been calling for investment to maintain their performance.

At the end of 2019, 61.1 per cent of Sendo’s shares were held by overseas investors after getting $61 million capital in its Series C investment round. In addition to FPT, Sendo’s shares have been picked up by SBI, Beenext, Econtext Asia, and Daiwa.

Tiki also raised capital in June and December last year. The two main shareholders are VNG with 24.6 per cent and JD.com with 21 per cent of the shares. Others include Ubiquitous Traders Pte., Ltd. (nearly 9 per cent), CyberAgent, STIC, and Sumitomo.

As e-commerce platforms in the local market have been suffering tremendous losses, a merger may be a good fit for the two local companies. The step might not only eliminate one competitor but also create a new partnership with the stronger financial potential to beat foreign rivals.

Previously responding to VIR, Tran Hai Linh, CEO of Sen Do Technology JSC – operator of sendo.vn said, “We could turn a profit next year, but for that we would need to stop investing in the market, while there is plenty of room for development in the next 10 years.”

Regarding Tiki and Sendo co-operation, Nguyen Viet Hung, a key opinion leader in a local technology startup, said that the partnership may happen but there is a long way to go. “They have operated for 10 years and gained similar footholds in the market, so it is hard to tie things up overnight,” Hung explained. “However, Sendo’s strategy is rural-centric while Tiki has targeted the urban area. Thus, the combination will help the two companies focus on the market more comprehensively.”

Race projections

The forecast co-operation between Tiki and Sendo foresees a reform in the market that could be a battlefield of three giants – Tiki-Sendo, Lazada, and Shopee. As investment in e-commerce has yet to gain any profit, huge capital support and partnership to attain more financial power are inevitable.

Hung said that the e-commerce industry will be fiercer as the competition of the big four shifts to a big three instead. To be successful in the battle, companies will have to focus more on the core values of optimising revenue and operation costs, as well as improving financial planning to grab more profits.

In terms of e-commerce, companies may have to give more priority in narrowing the cash-on-delivery rate and goods-cancelling rate, as well as raise online payments by integrating e-wallets to shopping platforms, as in the case of Sendo’s Senpay and Shopee’s Airpay.