Tiki.vn attracts investors despite $26 million in accumulated losses
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A prominent case in instance is that of Tiki.vn, a popular e-commerce platform in the country.
Tiki Jsc. (Tiki) started off as an online book store in 2010 before venturing into e-commerce. Just six years later, the firm was valued at $45 million, following domestic tech firm VNG injecting some $17 million in a 38 percent stake acquisition deal.
However, at the end of that year, 2016, Tiki’s financial statement showed accumulated losses of nearly VND308 billion ($13.39 million). Tiki had posted revenues of nearly VND62.4 billion ($2.71 million) in 2016, a six-fold increase over 2015. However, this was accompanied by a loss of around VND179 billion ($7.78 million) because of high operational costs.
In its annual report for 2017, VNG showed Tiki making a loss of VND282 billion ($12.26 million) for the year, raising its aggregate losses to VND590 billion ($25.65 million).
Despite its losses, Tiki has remained attractive to investors as a leading brand in the market. In mid-January this year, JD.com Inc., a giant retailer in China, injected an unspecified sum into Tiki. The Chinese firm had announced last November that it would pump $44 million into the Vietnamese e-commerce platform, making it Tiki’s largest shareholder.
Unlike other types of firms, startups like Tiki are not valued on the profit it makes, but on other key elements like market growth, market share, sales, average purchase value, and customer retention rates.
Tiki, which ships goods across the length and breadth of Vietnam, has annual sales of about $240 million, according to the Financial Times. And it is not the only e-commerce firm recording continual losses in Vietnam.
Ralf Matthes, managing director of market research company Infocus Mekong said that e-commerce platforms are in the red largely because of their fragmented logistics chains.
He said that with up to 80 percent of consumers paying cash on delivery, the logistics required in just collecting payment leads to losses.
E-commerce firms in the country were also drawn into a cash-burning battle as they spent on massive sales and marketing campaigns to promote their platforms, he said.
The Vietnam E-commerce Association (VECOM) said that the local e-commerce market grew 25 percent last year and that this growth is expected to continue through 2020.
Questions & Answers
Q.Why are e-commerce platforms in Vietnam, like Tiki, experiencing continuous losses?
Why are e-commerce platforms in Vietnam, like Tiki, experiencing continuous losses?
These platforms face high operational costs due to fragmented logistics chains, particularly as many consumers pay cash on delivery. They also spend heavily on sales and marketing campaigns, contributing to significant losses.
Q.What is the primary factor that makes Tiki attractive to investors, despite its financial losses?
What is the primary factor that makes Tiki attractive to investors, despite its financial losses?
Startups like Tiki are valued on elements such as market growth, market share, sales, average purchase value, and customer retention rates, rather than immediate profitability. Tiki is a leading brand with substantial annual sales.
Q.When did Tiki first start operating, and what was its original business model?
When did Tiki first start operating, and what was its original business model?
Tiki.vn began operating in 2010. It initially started as an online book store before expanding its operations to become a broader e-commerce platform.
Q.How much has Tiki's accumulated losses reached, and what were its sales figures for the past year?
How much has Tiki's accumulated losses reached, and what were its sales figures for the past year?
By the end of 2017, Tiki's aggregate losses had reached approximately $25.65 million. According to the Financial Times, the company has annual sales of about $240 million.
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