While some consider Singapore a market in miniature, online commodities shop Redmart has used it as a platform for tremendous growth. Its success depends on logistics and proper scaling; and while the company learned to walk in Singapore, it’s almost ready to run.
For folks in the Western Hemisphere who might not know, Redmart’s a Singaporean e-commerce portal where users shop for everyday goods of the nonperishable variety. They’ve partnered with monster brands like Coca-Cola, Unilever and L’Oreal to put 5,000 products on digital shelves; that number will grow to 7,000 soon. While not profitable yet, they draw 4,000 active monthly users and bring home around $500,000 SGD a month.
Redmart’s Series A funding last week saw a substantial (and undisclosed) investment by Garena founder and CEO Forrest Li. The round, now closed, brought total funding behind Redmart to $4.6 million USD.
For Singaporean companies, later funding rounds prove crucial to viability. Through grants and incubator programs, Singapore’s government goes out of its way to incentivize entrepreneurship. If a company’s idea is sound, getting seed money’s easy––but finding backers for later rounds is not. With the venture capital scene less developed and firms more risk-averse, fledgling companies turn instead to angel and individual investors for support.
“You get to Series A where you need a couple million dollars and that’s where it becomes difficult. I’d say roughly speaking they, the VCs in the immediate area aren’t as experienced,” says Roger Egan, CEO and founder of Redmart. “What we ended up doing is going to an entrepreneur because a lot of the VCs here lack operational experience with founding their own companies.”
Big names jump out from Redmart’s list of backers, including Skype co-founder Toivo Annus (who has invested three times) and Southeast Asian gaming giant Forrest Li. “[Annus] introduced us to Forrest Li [of Garena], which is the largest online gaming company––one of the largest Internet companies, period, in Southeast Asia,” Egan says. “He said, ‘Forrest, you should take a look at this deal.’”
For Redmart, though, big names don’t necessarily mean big numbers. Instead, Egan preaches financial restraint, which extends to his philosophy on fundraising. “We’re careful to raise only the capital we need in each round. While that may be a little risky––because what if the fundraising environment changes––we feel that when you have more money you spend more money,” he says. “We try to put ourselves under a little more pressure, which sounds insane. We think that helps us come up with the most efficient way of operating.”
Streamlining costs means perfecting logistics, which make or break e-commerce ventures. Redmart’s entire concept rides or dies on coordination. They offer free delivery on orders exceeding $75 SGD, and 95 percent do. To keep their market advantage and position as the convenient alternative to grocery shopping, their product deliveries much be cheap, quick, reliable, and accurate. To ensure this, Redmart must know its market, with its particular whims and obstacles, like the back of its hand––which takes a while.
“The last thing you want to do is, before you’ve developed your system and processes and your internal operations and technology, go and try to do that and build it from scratch again in another country, diverting your attention from getting it right here and possibly risking both,” says Egan.
Redmart’s business model practically demands they test and perfect it on small markets first. And while some would argue Redmart could take their platform and plant it in anywhere, there are particular reasons it’s succeeding in Singapore, making the island city the perfect place for Redmart to spend its early years. And right now, there’s no real rush to expand past its borders.
As an insulated market, Singapore’s ideal for application of what Egan calls the Blue Ocean Strategy. “We see Singapore as a blue ocean,” says Egan. “Because people think it’s small and they have bigger cities to go after, especially big guys, it actually creates an opportunity that’s pretty unique for a startup to develop.” Promoted by two INSEAD professors, the strategy sings the praises of open markets where businesses can grow undisputed by competitors.
Specifically, though, Singapore has a great reputation for being pro-business, as well as a population suited to Redmart’s goals. According to World Bank’s “Doing Business,” it’s 2013’s easiest place to do business (a title they’ve held for a few years now). “There’s a lot of reasons why this city is the perfect place to get started and test and get your service right,” says Egan. “It’s small, it’s densely populated, it has great infrastructure, it’s very business-friendly, very easy to start a company, [the] government supports startups in so many ways.”
Plus, small is a relative term. “For our market, it’s not that small,” Egan says. “We always tell people that groceries and everyday essentials, everyone’s a potential buyer. It’s a $5.2 billion market.”
“[You can build a] couple-hundred million dollar business pretty easily here, and you don’t have to face Amazon and people like Fresh Direct and Tesco. It’s much more of a wide open playing field,” he continues. “So thats why we think there’s plenty of potential here, another reason why we’re not so keen on going out too quickly.”
Soon, though, Redmart will expand. They’ll head to new cities where Egan says they’ll try to find leaders that double as locals. They’re also contemplating next frontier: fresh food delivery.
“[We believe] you’re only going to be as good as your greatest challenges,” Egan says. “Other product categories are one thing, and geographical expansion, for sure we see a lot of opportunity. It’s still kind of like the Wild West here in South Asia.”