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Shopify-like drop shipper service eyes e-commerce expansion in Asia and beyond
Vietnam's OpenCommerce says it can help Chinese online vendors reach international customers. (Photo based on screenshots from OpenCommerce's website)
LIEN HOANG, Nikkei staff writerFebruary 24, 2022 13:16 JST
HO CHI MINH CITY -- Vietnam's online shopping startup OpenCommerce has raised $7 million from investors led by internet giant VNG, the country's first unicorn.
The company will use the fresh funds to expand operations in China and beyond despite fierce competition from Alibaba and other established players.
OpenCommerce serves direct and indirect cross-border merchants called drop shippers, similar to Canada-based Shopify, which sells web templates, payment and other services to internet merchants. It is also a rare example of a local startup going head to head in the highly competitive Chinese market.
The startup announced the Series A funding on Thursday after VNG required it to delay the announcement for "better timing." OpenCommerce said more than 80,000 merchants worldwide have used its services to make websites, find suppliers, and export goods. It told Nikkei Asia that about 30% of those merchants are in China, where it hopes to expand its Shenzhen office from five employees to at least 20.
But Chinese vendors have plenty of platforms from which to choose in one of the world's most developed e-commerce markets, including JD.com and Alibaba's Taobao.
So why would they turn to a young tech company from Hanoi?
"That's a tough question," said Quan Truong, co-founder and CEO of OpenCommerce Group. "One of the problems for Chinese merchants right now is there are too many of them."
He said as the sellers jostle for customers, they want to differentiate themselves via new channels, such as their own online shops.
We OpenCommerce is also useful for Chinese vendors who lack access to huge foreign networks like Facebook and Google and who face language barriers, Truong said.
The CEO gave few details about how the company plans to grow in China or spend the $7 million. VNG said it invested $5 million, while Do Ventures said it invested $2 million for undisclosed stakes.
Roughly 50% of OpenCommerce's merchants are in Vietnam, where Amazon and Alibaba already have large stakes.
Drop shippers act as middlemen between manufacturers and customers. Their role typically involves making a website, taking orders, and then delivering customer information to a producer, which ships the ordered goods directly to the shopper.
The low entry barrier to drop shipping has seen the business model skyrocket in popularity. But it also has come under fire.
Critics say there are risks for shoppers -- who do not realize they are buying from middlemen -- as well as for merchants. For example, the attorney general for the U.S. state of Michigan, Dana Nessel, warned that few drop shippers "actually make any profits."
"Scam artists promote drop shipping as a lucrative 'work from home' opportunity," she wrote in a fact sheet. They offer pricey seminars that "may encourage prospective sellers to trick buyers about where a product is coming from, or charge four to five times the wholesale price."
CEO Truong said that shoppers can face risks whether buying from direct or indirect sellers and that his priority is for consumers to receive quality goods quickly.
Middlemen aren't "guaranteed to make money" but persistence works, he said. "For the ones that keep pushing and keep trying, they will find a way."
He added that drop shippers have lower risks than physical retailers, as they do not have overhead like rent and inventory.
OpenCommerce is especially keen on inventory. It resembles Shopify, but the smaller Vietnamese newcomer focuses more on operations, working directly with vendors to create, source, warehouse and ship goods.
Truong said the company's vast network has helped it navigate supply chain logjams at various times during the COVID-19 pandemic, such as switching suppliers when lockdowns first struck China in 2020 and southern Vietnam in 2021.
VNG considers OpenCommerce "one of the few companies in Vietnam whose products can compete with major global competitors in the cross-border e-commerce space," according to the Thursday statement.
Reportedly backed by Tencent, VNG is a tech company that has been involved in gaming, chat platforms and online payments. It has invested in smaller Vietnamese startups, including e-commerce players Tiki and Telio, EcoTruck, and Got It, a loyalty rewards business. The business told Nikkei it is "committed to backing strong founders that are operating in fast-growing industries."
OpenCommerce said it wants to expand further into Asia and add to its European and U.S. business.
asia.nikkei.com
Vietnam's OpenCommerce says it can help Chinese online vendors reach international customers. (Photo based on screenshots from OpenCommerce's website)
LIEN HOANG, Nikkei staff writerFebruary 24, 2022 13:16 JST
HO CHI MINH CITY -- Vietnam's online shopping startup OpenCommerce has raised $7 million from investors led by internet giant VNG, the country's first unicorn.
The company will use the fresh funds to expand operations in China and beyond despite fierce competition from Alibaba and other established players.
OpenCommerce serves direct and indirect cross-border merchants called drop shippers, similar to Canada-based Shopify, which sells web templates, payment and other services to internet merchants. It is also a rare example of a local startup going head to head in the highly competitive Chinese market.
The startup announced the Series A funding on Thursday after VNG required it to delay the announcement for "better timing." OpenCommerce said more than 80,000 merchants worldwide have used its services to make websites, find suppliers, and export goods. It told Nikkei Asia that about 30% of those merchants are in China, where it hopes to expand its Shenzhen office from five employees to at least 20.
But Chinese vendors have plenty of platforms from which to choose in one of the world's most developed e-commerce markets, including JD.com and Alibaba's Taobao.
So why would they turn to a young tech company from Hanoi?
"That's a tough question," said Quan Truong, co-founder and CEO of OpenCommerce Group. "One of the problems for Chinese merchants right now is there are too many of them."
He said as the sellers jostle for customers, they want to differentiate themselves via new channels, such as their own online shops.
We OpenCommerce is also useful for Chinese vendors who lack access to huge foreign networks like Facebook and Google and who face language barriers, Truong said.
The CEO gave few details about how the company plans to grow in China or spend the $7 million. VNG said it invested $5 million, while Do Ventures said it invested $2 million for undisclosed stakes.
Roughly 50% of OpenCommerce's merchants are in Vietnam, where Amazon and Alibaba already have large stakes.
Drop shippers act as middlemen between manufacturers and customers. Their role typically involves making a website, taking orders, and then delivering customer information to a producer, which ships the ordered goods directly to the shopper.
The low entry barrier to drop shipping has seen the business model skyrocket in popularity. But it also has come under fire.
Critics say there are risks for shoppers -- who do not realize they are buying from middlemen -- as well as for merchants. For example, the attorney general for the U.S. state of Michigan, Dana Nessel, warned that few drop shippers "actually make any profits."
"Scam artists promote drop shipping as a lucrative 'work from home' opportunity," she wrote in a fact sheet. They offer pricey seminars that "may encourage prospective sellers to trick buyers about where a product is coming from, or charge four to five times the wholesale price."
CEO Truong said that shoppers can face risks whether buying from direct or indirect sellers and that his priority is for consumers to receive quality goods quickly.
Middlemen aren't "guaranteed to make money" but persistence works, he said. "For the ones that keep pushing and keep trying, they will find a way."
He added that drop shippers have lower risks than physical retailers, as they do not have overhead like rent and inventory.
OpenCommerce is especially keen on inventory. It resembles Shopify, but the smaller Vietnamese newcomer focuses more on operations, working directly with vendors to create, source, warehouse and ship goods.
Truong said the company's vast network has helped it navigate supply chain logjams at various times during the COVID-19 pandemic, such as switching suppliers when lockdowns first struck China in 2020 and southern Vietnam in 2021.
VNG considers OpenCommerce "one of the few companies in Vietnam whose products can compete with major global competitors in the cross-border e-commerce space," according to the Thursday statement.
Reportedly backed by Tencent, VNG is a tech company that has been involved in gaming, chat platforms and online payments. It has invested in smaller Vietnamese startups, including e-commerce players Tiki and Telio, EcoTruck, and Got It, a loyalty rewards business. The business told Nikkei it is "committed to backing strong founders that are operating in fast-growing industries."
OpenCommerce said it wants to expand further into Asia and add to its European and U.S. business.
Vietnam startup raises $7m in quest to challenge Alibaba in China
Shopify-like drop shipper service eyes e-commerce expansion in Asia and beyond
asia.nikkei.com
