Cross-border e-commerce: Delivering beauty from Korea
Cross-border e-commerce is increasingly becoming commonplace in Malaysia,
with consumers purchasing goods from foreign websites. Shopping online from the origin country allows consumers to enjoy better prices on their
purchases, and also order for products
available as soon as they are launched in the native country.
Besides that, consumers in Malaysia can take advantage of foreign purchase of less than RM500 per shipment, which will be exempted from import duty (read terms & conditions here).
It is our pleasure to have Frank Kang, CEO of Althea sharing his thoughts on cross-border e-commerce and his latest venture. Althea is a new online shopping site delivering Korean beauty products from Korea to Malaysia, and soon to other countries too.
|From left to right: Chris (COO), Frank (CEO), Jae (CFO)|
Can you share with us your background, and your co-founders?
I am a native Korean and I have been in Malaysia while working at LivingSocial Malaysia as the COO (read more about his previous background and experience here). Post LivingSocial Malaysia, I went back to Korea with Ticket Monster, leading global partnership initiatives with China and SEA, those cross-border experiences gave me a good springboard to start Althea in year 2015.
Our COO, Christopher Cynn, was the co-founder of Ticket Monster, an e-commerce platform in South Korea that is expected to exceed USD$2 billion sales this year.
Our CFO, Jae Kim, is an investment specialist, who has worked for top private equity firms in the United States earlier.
Three of you are guys, why Korean beauty products?
There was an 'a-ha moment' when I used to courier Korean cosmetics all the way to my friends in Malaysia. With my prior experience in cross-border e-commerce, so naturally we started a beauty shopping site.
Korean beauty products have made quite a splash in Malaysia, as Korean women are renown for their fair skin, coupled with the entrance of products that have quality products at fair prices, especially when compared to equivalent products from Europe.
What is your unique selling proposition?
Malaysian consumers can purchase Korean beauty products and cosmetics at bargain prices from Althea. Our USPs as below:
• Free Shipping directly from Korea (with minimum purchase threshold).
• 100% authentic products guaranteed with our reliable source.
• Special selections and latest products, as soon as it is launched in Korea.
• Very competitive prices, as reasonable as you buy in Korea.
• Unconditional refund on all products within 30 days.
Comparing to marketplaces, where as buyers and sellers gather to sell and purchase goods, we have full control on product selections (what's latest and hot-selling in Korea), to quality control, to making sure that customers are satisfied with the whole shopping experience.
Also, the product pricing and payment options will be localized according to the country of visiting users.
Why start with Malaysia? Is Southeast Asia next?
Malaysia has great Internet penetration in Southeast Asia and a strong desire for Korean beauty products. We want Malaysian consumers to be able to purchase products as if they are actually in Korea, at the same prices we pay at Korea!
One of the advantages of cross-border e-commerce like us is the scalability to global market. As opposed to local e-commerce sites, we can expand to many countries with international freight forwarding.
Now we are in Malaysia and Singapore, our plan is to solidify MY and SG operations by this year then penetrate Indonesia, Vietnam, Thailand, Philippines by next year. As long as we have enough resources, we would not hesitate to expand globally. Perhaps we can accelerate this with in-time funding and partnership which we are working on it now.
Why Southeast Asia is such a hotbed for e-commerce?
Many are placing their bets on the potential here as a region (or mainly Indonesia), as for ourselves we have solid data supporting our believe in this region.
Southeast Asia is the 3rd biggest destination for K-beauty export in the world at the moment, according to Ministry of Medical and Pharmaceutical Product Korea. In fact, Southeast Asia is growing faster than China in this aspect, soon to be as big as China with this growth rate.
|Source: Ministry of Medical and Pharmaceutical Product Korea|
If you refer to the graph above, officially it was USD$200 million in year 2014 to Southeast Asia. However if we consider other channels other than trading (like travel, blogshops, duty free etc) it can be a market size up to USD$400 million.
Is your main operation based in Korea?
Yes, we have 7 based in Korea, and 2 in Malaysia so far. We will expand the team to 15~20 by the end of this year. Korean team consists of mostly sales and logistics, all other functions will be localized.
With our sales team in Korea, we have a clear advantage on sourcing the latest and wide range of brands and products. For example, we have just launched 'Hot Summer in Korea' collection. which is the latest and unique items can't be easily found in Southeast Asia now.
Being based in Korea also translate into trust and reliability to the customers on authenticity, as we only deal with the official suppliers in Korea.
As for local fronts, we forge partnership with local logistic companies, making sure that all products are sent directly to the consumers from our warehouse.
Have you secured funding or investments so far?
We have received seed funding from one of the Korea's top venture capitals, BonAngels, to help accelerate our growth and hope to achieve their goal to deliver Korean beauty to everyone in Southeast Asia over the next two years.
Moving forward, we are looking forward to a Series A round within this year.
Do you invest heavily in marketing?
I think it depends on the business concept and size of business. If you start a e-marketplace, marketing and traffic would be the core capability to grow.
But if it is a specific vertical commerce like us, we can create small cycles to see whether this concept works for customers, evaluate and then we can scale up our marketing effort.
I believe that the fundamental is good deals, good selections and good service. Otherwise no matter how serious you try on marketing it is unlikely to work.
What are the biggest challenges of doing cross-border e-commerce?
Of course, the biggest challenge is logistics, like any other e-commerce business. Regardless of local 3PLs service level, we have to do our best from our side to attend customers.
I think there are 3 core capabilities to do cross-border:
• Experience: understanding of local markets, network and local partnerships.
• Localization: assortments, customer service, content have to be localized.
• Logistics: EMS charges minimum $20, we have developed much economical way to save 50~60% from EMS.
What do you envision for Althea?
Our goal is to be 1-stop destination for K-beauty in Southeast Asia region, everything the consumers need in terms of selections, pricing, authenticity and reliability.
Eventually we intend to capture 10% of the cross-border Korean beauty market, hopefully as soon as year 2016!