Simplus CEO on new retail and why TikTok can’t be ignored in ASEAN
Published on February 12, 2024
The direct-to-consumer (D2C) business model, which bypasses traditional intermediary supply chains to sell products directly to end customers, has gained traction in Southeast Asia in recent years. Several new players have emerged and recorded exponential growth, prompting investors to start paying attention.
According to a recent report from DSG Consumer Partners, Meta, and Bain & Company, new retail brands have been “stealing” market share from existing brands. The report noted that the market share for young consumer brands in Southeast Asia, which have operated for less than ten years, grew from 19% in 2013 to 23% in 2022. These fledgling brands generated US$52 billion in revenue last year.
Simplus, a small home appliances brand founded in 2021, is one of the most promising startups in Southeast Asia’s D2C space. It focuses on localizing household products, such as high-speed hair dryers, air fryers, vacuums, and more to meet the unique needs of ASEAN’s consumers. It offers high-quality yet affordable products, ranging from US$15 to US$50 per item, potentially making it the next “Philips of Southeast Asia.”
In 2023, Simplus was able to triple its sales while emerging as a top brand on TikTok, Shopee, and Lazada. During the ‘Double 11’ shopping festival, it achieved a record-breaking US$1 million in sales in a single day. To top it off, it also announced profitability; a rarity in today’s early-stage venture landscape.
In early 2023, Simplus received an investment from AC Ventures, which provided the company with additional resources and on-the-ground support as it began expanding in Indonesia. The young brand used the capital injection to upgrade its tech infrastructure and further propel product research and development.
Simplus co-founder and CEO Jack Zhang outlined key strategies for penetrating the Southeast Asian market during a MindShare episode of the Indonesia Digital Deconstructed podcast, speaking with Leighton Cosseboom of AC Ventures and Tiffany Danielle of Rosé All Day Cosmetics.
Get to the heart of customer needs
Jack is not an obscure figure in the region’s e-commerce game. He served as CEO of Lazada Thailand from 2019 to 2021. As such, he possesses a unique understanding of the buying behavior of Southeast Asia’s young consumers.
Jack explained that the region may appear to be one homogenous market from an outsider’s perspective, but in fact, each market is very different. Even in Indonesia, which has the largest population in ASEAN, consumer needs are highly diverse.
Jack explained, “There is a young generation with good salaries who prefer global brands, a middle class prioritizing cost-efficiency, and rural populations who are more price-sensitive. You have to be very focused on the type of customer you want to target.”
For Simplus, Jack decided to pay more attention to young people with three to six years of working experience. They are presumed to have a good sense of product quality and a drive to improve their quality of life.
“We hope we can serve these consumers well, grow with them, and become their top choice for home appliances,” said Jack.
Despite differences in buying behavior, Southeast Asian populations share some commonalities. For example, they are all now more concerned with service and quality, while still paying attention to value for money, mentioned Jack.
To reach customers, Simplus does not rely solely on e-commerce platforms. Instead, the team has combined the D2C model with various offline plays via partnerships with outlets like HomePro, one of the largest retailers in Thailand.
Live commerce cannot be ignored
Meanwhile, one of the fastest surging sales channels in Southeast Asia for new retail brands is short videos and live streaming, popularized by ByteDance’s TikTok Shop.
According to projections from a Singapore-based venture outfit Momentum Works, TikTok Shop may have covered 13.9% of the e-commerce market share in the region by the end of 2023, compared to a mere 4.4% in 2022.
Following a momentary ban on its shopping service by the Indonesian government in October 2023, TikTok announced a blockbuster deal to acquire a controlling stake in local e-commerce major Tokopedia. The former committed to invest over US$1.5 billion into the e-marketplace, which as a result now operates TikTok Shop’s business in the country.
Jack agreed that TikTok Shop is a platform that new retail brands in emerging markets like Indonesia cannot afford to overlook. The app has attracted large swathes of the region’s young consumers as its daily audience. For Simplus, Jack decided to create TikTok videos and live streams from Thailand, and then once the strategy is validated, roll them out to other countries, such as the Philippines, Malaysia, and Indonesia.
However, Simplus takes a specialized approach to TikTok. It focuses on pre-recorded short videos rather than live streaming. The brand is working with local influencers with fewer than 50,000 followers to conduct a variety of trials and gather feedback. The effort has begun to yield good results, Jack explained.
He added, “Normally, when you go to Instagram, Facebook, or Google, you either do branding or sales, right? TikTok is very interesting, as it is one of the very few platforms where you can do branding and sales together, at the same time.”