Deal focus: Navegar dips its toe in e-commerce

Navegar has always concentrated on the brick-and-mortar plays that make the Philippines economy tick: food and beverage, logistics, and services, with some exposure to business outsourcing. Moving into the online sphere would necessarily be a step outside the firm’s comfort zone and therefore require an uncommonly convincing opportunity set.

That opportunity set is coming into focus as the country’s fledgling e-commerce space begins to professionalize. Navegar confirmed its first online shopping investment last week in the form of a $12 million growth round for Great Deals E-commerce, the local leader in supplying traditional retailers with product handling and delivery fulfillment services, as well as digital branding and customer engagement tools such as 24-hour chat support.

By no coincidence, this leap comes with expectations of inflection. The local private equity firm cites industry data that attributes only 2% of gross domestic product in the Philippines to e-commerce, compared to figures of 40% and 25% in China and the US, respectively. Infrastructure gaps, red tape, and currency risk notwithstanding, this upside has generated palpable excitement among early-movers, at times conjuring an almost biblical tone.

“No eye has seen, no ear has heard, no mind has conceived what is in store for e-commerce in the Philippines,” says Steve Sy, Great Deal’s founder and CEO. “It is definitely going to see hyper growth for the next 3-4 years and move away from being a cash-based society. Year on year, the cash-on-delivery percentage is going down and there’re more people using digital payments. Of course, it’s the young, tech-savvy generation spearheading the growth.”

Great Deals is itself a reflection of this momentum. Since being incorporated in 2017, the company claims to have grown more than 100% a year, hitting $20 million in revenue in 2019 on bootstrapping alone. It initially sought venture capital support but as a cash flow-positive company that sees itself more as tech-enabled than pure-play tech, private equity offered a better fit. Navegar is expected to facilitate a trade sale or IPO in five years. 

The fresh capital will go towards a tripling of the nine-strong tech team by the end of the year and a doubling of warehousing capacity to 30,000 square meters. This will include an expansion of the warehouse portfolio from two locations to eight across the archipelago country’s various hard-to-service regions.

The plan is to imitate China’s Alibaba Group and Baozun, which provide similar e-commerce enabling services. With this in mind, Sy participated last year in Alibaba’s eFounder Fellowship initiative, which focuses on e-commerce entrepreneur networking and facilitates first-hand exposure to best-in-class playbooks for rapidly modernizing markets.

“I learned a lot from that program about having the right mindset and looking at the Philippines in a crystal ball,” Sy says. “When you look at China, it’s just like the future of the Philippines, 8-10 years from now. We’re just learning from them and applying it here in our own digital economy.”

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• Topics
• Southeast Asia
• Expansion
• Technology
• Consumer
• Navegar
• Philippines
• Growth capital
• TMT