SHOPEE has morphed into a juggernaut in South-east Asia just a decade after it was founded, and its strong grip on sellers partly accounts for why the ecommerce platform has been profitable for the past four quarters.
With TikTok Shop and Lazada also hiking their fees, sellers’ margins are getting squeezed across the region. So where else can merchants run? They could go directly to consumers, but that is an expensive approach.
Some argue that niche marketplaces could be an alternative if they could attract tightly-knit communities and lure sellers by taking lower commissions. However, others warn that they will first have to survive.
If they get it right, though, niche platforms might give sellers some breathing room or even tempt shoppers away from the mass-market giants.
Tiny by default
South-east Asia’s pool of niche marketplaces has always been narrow. Over the past year, even big names such as classifieds platform Carousell and fashion-focused Zalora have resorted to layoffs.
The classic marketplace model is unforgiving, unless you have got billions to spare. Even US titan Amazon bled for nearly a decade before getting in the black.
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If even the likes of Amazon and Shopee need to branch out, niche marketplaces cannot afford to stick to just being marketplaces.
Since 2020, Singapore-based Zalora has been offering ecommerce-enabling services for fashion brands, while Indonesian beauty marketplace Sociolla is staking its future on brick-and-mortar stores.
Financially, Zalora and Sociolla claim to have already reached profitability. Carousell, meanwhile, saw a slight improvement in 2024, with revenue rising 2.9 per cent and losses narrowing 12.6 per cent year on year.
These numbers, however, are modest compared to Shopee’s scale and revenue.
Niche marketplaces are smaller by default. For one, they are more selective with merchants. Bidu CEO San Lee (Ly Hach San) points out that, unlike its larger counterparts, the Vietnamese fashion and beauty shopping app “doesn’t allow just anyone to sell”.
He added: “Most local fashion brands in Vietnam are now at risk of losing their identity when exposed to mass ecommerce platforms.”
Launched in 2021, Bidu now hosts over 500 local fashion brands alongside Korean sellers – a sliver of Shopee’s merchant base.
But Indonesia’s Preloved, a secondhand fashion marketplace launched in May 2024, took a different route. It allows almost anyone to buy and sell on the platform, catering to a growing interest in thrifting and pre-owned goods among local shoppers.
As at Aug 27, the Preloved app ranked No 24 in the shopping category of the country’s Apple App Store. Preloved’s user base has been growing 20 to 30 per cent per month and now stands at around 360,000.
New sellers have been flocking to Preloved in the past six months, said co-founder Farah Maulida Firdaus. While she does not have exact figures on how many shifted from Shopee, she noted that the timing coincided with fee increases on rival platforms.
She points to Preloved’s flat 5 per cent commission as a key draw for sellers. That’s roughly half of what Shopee earns from fashion vendors as commission, which can climb to 10 per cent.
“Sellers try to use our platform more because they know once they reach a certain sales threshold on Shopee, the fees will only go up,” Firdaus explained.
Survival first
Merchants might be complaining about Shopee’s fees, but switching platforms that do not have enough buyers makes little sense.
“Sellers are for sure not happy with rising fees, but most will absorb the cost,” said Christopher Beselin, chairman and co-founder of Intrepid Group and former CEO of Lazada Vietnam. “Shopee is still the platform with the most traffic, and sellers will follow traffic.”
Preloved, which has been entirely bootstrapped by its founders, said more than 90 per cent of its user acquisition has been organic, driven by social media content.
In Vietnam, Bidu wants to be similar to a boutique instead of a bazaar, allowing buyers to chase style, not just discounts.
Leaning on fashion and beauty communities to entice shoppers, Bidu said buyers spend an average of 1.3 million Vietnamese dong (S$64) per order – nearly 1.7x higher than Shopee for the fashion category. Bidu also has a double-your-money-back pledge if any item is found fake or below standard.
Acquiring shoppers does not come cheap, and that’s the steepest hurdle for niche marketplaces looking to scale, according to Intrepid’s Beselin.
In niche markets, platforms need both high-intent and high-frequency shoppers to make the economics work. This is “tough to achieve when you’re not top-of-mind like a major general marketplace”, he explained.
“Many niche marketplaces underestimate the cost of building actual transaction volumes on a platform. On top of traffic and tech, you also need logistics, assortment breath, consumer trust and ecommerce enablers,” Beselin added.
The current poor funding climate makes things worse: Not a single niche marketplace in South-east Asia has announced fresh capital in the past year, according to Tech in Asia’s data.
This is why many sellers are sticking with Shopee. Even though their margins are shrinking, sales volume continues to rise as Shopee reinvests fees into discounts and promotions that drive demand. The fees may be lower on niche marketplaces, but sales are often limited.
“It’s also far more expensive to build traffic today than it was back in the days when Lazada and Shopee were still building their consumer bases,” Beselin said.
General marketplaces are also able to outspend their smaller peers on customer acquisition. That’s because Shopee or Lazada users buy across multiple categories, giving these platforms a much higher lifetime value compared to a niche player that only monetises one vertical.
Still, niche marketplaces offer advantages: They bring in specific audience segments or communities and even foster higher trust in some cases, according to Akinori Kubo, managing director of global ecommerce at AnyMind Group.
But scale and reach remain decisive factors in South-east Asia, where platforms such as Shopee and Lazada continue to dominate, Kubo noted.
“Rather than [serve as] an alternative, niche marketplaces become more like an important inclusion, especially for sellers that want to connect with very targeted audiences,” Kubo told Tech in Asia.
Is GPT-based e-commerce coming?
Several players in South-east Asia are drawing inspiration from Europe, where the niche marketplace space is thriving. Some of the most notable European names include Zalando, Decathlon, and Vinted.
Preloved’s Firdaus, for example, said she was inspired by Lithuania-based Vinted when building her platform.
Founded in 2008 with a focus on pre-owned fashion, Vinted recorded a 330 per cent year-on-year jump in net profit in 2024. Its success has strengthened Firdaus’ belief that while niche markets in South-east Asia – especially Indonesia – are still developing, they could become far more relevant over the next five years.
Bidu’s Lee shares the same view. He pointed to South Korea, where there’sa robust interest in niche fashion. Musinsa, for instance, grew from a small streetwear community into a company generating nearly US$733 million in annual sales in 2023.
“That broader evolution in behaviour is exactly what’s beginning in Vietnam and South-east Asia,” Lee said.
Still, experts caution that niche marketplaces are unlikely to outdo Shopee’s scale in the next five years, given the massive infrastructure and capital required. Even in the best-case scenario, these smaller players are more likely to complement rather than compete with general marketplaces.
“In South-east Asia, shoppers overwhelmingly value convenience, price, and delivery speed – areas where Shopee has invested heavily and built dominance,” said Jacob Cooke, co-founder and CEO of WPIC Marketing + Technologies.
For niche marketplaces, the opportunity lies in providing the products and content their communities are looking for. AnyMind’s Kubo said brands should avoid depending too heavily on any single platform.
“Since user attributes differ between horizontal and niche marketplaces, brands should vary the SKUs and content deployed on each platform accordingly,” he explained.
For niche marketplaces in South-east Asia to scale “meaningfully”, they will need to provide a vastly better user experience or see a big change in consumer habits, said Intrepid’s Beselin.
He predicts that the real battle will be between Shopee and TikTok Shop, which collectively control 70 per cent of regional ecommerce. But there’s a wild card: GPT-driven or LLM commerce, which lets consumers make purchases directly through large language models or GPT features.
For example, users might ask an LLM for product recommendations, receive suggestions, and then purchase instantly. For now, however, no players appear to be doubling down on this space yet.
Still, Beselin believes there is “an angle where potentially the LLMs could prioritise guiding the shopper to the richer content of the niche players”. TECH IN ASIA
