If you're entering an already saturated market as a startup how do you differentiate yourself?

For example, Shoppee entered the e-commerce, food delivery and other industries after established market players were available. What strategy would they have used and how can other startups learn to do so.

Vrisha Phrabhakaran

21 Jan, 2022

2 Answers

Kenneth Ho

Director of BEAMSTART

Avoid entering a competitive / saturated market unless you have a very compelling 'edge' or different way of solving an on-going problem. 

Most of the time, fighting in a very competitive space requires heavy funding and lots of backing.

Shopee is a very unique case as the company was founded by Garena — an already profitable and very successful gaming company (they were doing hundreds of millions in turnover when Shopee was founded). Raising capital for a company at this stage is much easier.

Also, Shopee entered the market when there was no clear market leader. Amazon and Ebay weren't very established in Southeast Asia, and Lazada was just at its infancy stages. 

Find a niche first

For new startups, the key is to start with solving an on-going problem in a targeted niche, and slowly grow from there.

For example, instead of building an "e-commerce platform", perhaps start with "an e-commerce platform that solves expensive deliveries of hawker food in high density urban areas"

Start with a very simple solution (minimum viable product) that doesn't cost much money to build. That way you can experiment quickly and avoid losing too much if it fails.

Funding at this stage should be early investors / angels / friends / family.

Validate the market for traction

Once you start gaining some traction, keep measuring key data points that allow you to understand what it takes to replicate the results you have on a larger scale.

If you're able to get 10 orders a week, be very clear on what are the key drivers for business growth:

  • Who are these customers?
  • How much does it cost to get these customers? (Customer acquisition costs)
  • How many drop-off (churn rate)
  • What brings them back? and how much do they spend over the course of time (Lifetime value)
  • Is it a profitable business on the gross-margins level? Can it be profitable on the net-margins level at scale?
  • What does it take to scale the business to the next level to say... 50 orders a week, then 100 orders a week?

When you have these answered, then you can begin expanding / scaling the business to greater heights. This is typically the stage venture capital investors are keen on participating in.

Growing and Expanding

At the growth stage, your focus is to replicate success at large.

This is the stage where processes are far more important than ideas, and the key goal is to capture as much of the market as possible.

Companies at these stages generally go on a hiring spree, while opening new offices + offering their services in new areas / more languages.

The cycle repeats with more funding being raised until a point the company is large enough for a liquidity event (IPO, Sale, etc.)

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Not recommended unless you have lots of capital to burn.

Its easier to fight in a place where theres less competition and win there. You know like they say, better to be a big fish in a small pond than a small fish in a big pond.

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