Perspectives: D2C – Edition 5

TNB Aura’s latest investments into the D2C space have demonstrated our strong conviction that Southeast Asia is primed for D2C House-of-Brands champions to emerge.

Within this edition, we focus on the topic of D2C House of Brands, and ask ourselves the following questions:

i. Why now and how large is the opportunity in Southeast Asia?

ii. What will it take for a Southeast Asia champion to emerge?

Southeast Asia is primed for the emergence of D2C House of Brands

i. The SEA growth of E-Commerce and D2C have reached an inflection point

The overall e-commerce market has seen SEA outpacing global markets in terms of growth rates. Similarly, the D2C market displays similar growth trends with SEA outpacing the US1. Early signs of D2C success can be seen in the closing gap between SEA vs global e-commerce penetration rate.

 

 

ii. D2C offers favorable unit economics

D2C offers greater margins over traditional brands along with comparatively higher Customer Acquisition Costs (CAC) due to the use of online platforms and limited to no third party distribution channels and fees4.

With stronger customer relationships and service levels forged from cutting through the middlemen, the D2C model adds to a more personalized experience, enabling a higher customer lifetime value (LTV) to acquisition costs.

 

iii. Leveraging offline channels are key

Across Southeast Asia, Indonesia presents the most potential with the largest E-Commerce market (US$53B) followed by Thailand and Malaysia.

However, an often overlooked facet of D2C is the need to leverage offline channels – which offer over 6x the market size of eCommerce.

 

 

iv. House-of-Brands provide scale benefits

With the inflection of e-commerce, D2C businesses are expected to grow at an accelerated rate, transforming how users purchase. House-of-Brands (HOB) models demonstrate several advantages over standalone brands through centralization and integration.

 

 

View the full issue via TNB Aura Perspectives – D2C.