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 purchases of less than RM500 per shipment, which will be exempted from import duty.
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, Singapore and soon to other countries too.
Can you share with us your and your Co-founders’ background?
I am a native Korean and I have been in Malaysia while working at LivingSocial Malaysia as the COO. Post LivingSocial Malaysia, I went back to Korea to work at Ticket Monster, leading global partnership initiatives with China and SEA. These cross-border experiences gave me a good springboard to start Althea this year.
Our COO, Christopher Cynn, was the Co-founder of Ticket Monster, an e-commerce platform in South Korea that is expected to exceed US$2 billion sales this year.
Our CFO, Jae Kim, is an investment specialist, who has worked for top private equity firms in the US 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, naturally we started a beauty shopping site.
Korean beauty products have made quite a splash in Malaysia, as Korean women are known for their fair skin, coupled with the entrance of businesses that have quality products at fair prices, especially when compared to equivalent products from Europe.
What is your USP?
Malaysian consumers can purchase Korean beauty products and cosmetics at bargain prices from Althea. Our USP is as below:
• Free shipping directly from Korea (with minimum purchase threshold).
• 100 per cent authentic products guaranteed with our reliable source.
• Special selections and latest products, as soon as they are launched in Korea.
• Very competitive prices, as reasonable as what you buy in Korea.
• Unconditional refund on all products within 30 days.
Compared to marketplaces, where 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, product pricing and payment options will be localised 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!
One of the advantages of cross-border e-commerce sites such as Althea is the scalability to global market. As opposed to local e-commerce sites, we can expand to many countries with international freight forwarding.
Now that we are in Malaysia and Singapore, our plan is to solidify operations by this year then penetrate Indonesia, Vietnam, Thailand and 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 partnerships which we are working on now.
Why is Southeast Asia 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 belief in this region.
Southeast Asia is the third biggest destination for K-beauty export in the world at the moment, according to the 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 at this rate.
Officially it was US$200 million in 2014 for Southeast Asia. However, if we consider channels other than trading (like travel, blogshops, duty-free etc) it can be a market size up to US$400 million.
Is your main operation based in Korea?
Yes, we have seven people based in Korea and two in Malaysia so far. We will expand the team to 15-20 by the end of this year. The Korean team is mostly concerned sales and logistics, all other functions will be localised.
With our sales team in Korea, we have a clear advantage on sourcing the latest and widest range of brands and products. For example, we have just launched the ‘Hot Summer in Korea’ collection – unique items which can’t be easily found in Southeast Asia now.
Being based in Korea also translates to trust and reliability to the customers based on authenticity, as we only deal with official suppliers in Korea.
As for local fronts, we forge partnerships with local logistical 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 Korea’s top venture capitalists, 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 secure 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 an e-marketplace, marketing and traffic would be the core capability to grow.
But if it is a specific vertical commerce like Althea, 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 selection and good service. Otherwise no matter how serious you are with marketing it is unlikely to work.
What are the biggest challenges of cross-border e-commerce?
Of course, the biggest challenge is logistics, like any other e-commerce business. Regardless of local PLs service level, we have to do our best from our side to attend to customers.
I think there are three core capabilities at play here:
• Experience: understanding of local markets, network and local partnerships.
• Localisation: assortments, customer service, content has to be localised.
• Logistics: EMS charges minimum US$20, we have developed a much more economical way to save 50~60 per cent on deliveries.
What do you envision for Althea?
Our goal is to be the one-stop destination for K-beauty in Southeast Asia, everything the consumers need in terms of selection, pricing, authenticity and reliability.
Eventually we intend to capture 10 per cent of the cross-border Korean beauty market, hopefully as soon as 2016!
The article Cross-border e-commerce: Delivering beauty from Korea first appeared in eCommerceMILO.