Once one of Vietnam’s e-commerce darlings, Leflair is making headlines for all the wrong reasons these days. Facing pushback by hundreds of unpaid suppliers, the company’s founders find themselves in the middle of a bad PR run while shepherding the startup through bankruptcy.
In a webinar and Q&A session hosted by our CEO Hao Tran, former CEO and founder of Leflair Loïc Gautier breaks down his journey as a 25-year old entrepreneur who went on to raise US$12 million during the four-year existence of his startup, the reasons for its surprise bankruptcy, and the overall growth prospects of Vietnam’s digital economy.
Since Leflair filed for bankruptcy in May 2020, the embattled e-commerce company allegedly owes US$2 million in unpaid goods. When asked about his decision to leave Vietnam for Paris during this trying time for his company, Gautier explains that he “did not leave the country because of these allegations,” but instead to “be closer to people who are important to him” during the outbreak of Covid-19. “I can’t come back because borders are closed. I’m staying in touch with the people who are helping us with the case.”
Gautier also shared that the company’s co-founder and former COO Pierre Antoine Brun is still in Vietnam with his family and is coordinating the wind-down of the business – Leflair recently got approval from the Ho Chi Minh City courts for their bankruptcy plan.
Even in the face of adversity in the local press and despite the downfall, Gautier stands firm by his characterization of Vietnam as a “formidable” economy: “If my view [on Vietnam’s economy has] changed, I would not be true to the pitch I’ve given for the past 7 years. I’m still a strong believer in Vietnam’s economy, but my views on how to do business in the economy has changed.” Gautier hopes to come back to Vietnam in the future, but wants “to be in a position where if something goes south in the company, I can put forth my own capital to save it.”
Despite the recent challenges, Gautier speaks proudly of the accomplishments he and his team have made during the start-up’s four years of operation, especially in regards to the number of people who “have been able to build their lives” because of Leflair. “You forget about revenue. You forget about profits. As an entrepreneur, you realize that the successes that really matter are the people who have been able to start a family, or have had careers in other areas because of this job.”
When asked why he thinks his employees chose Leflair over other technology and e-commerce companies, Gautier states Leflair’s company culture: “Leflair is an environment that promotes freedom and accountability and responsibility.” Leflair was able to draw in and retain employees because it stayed true to company values. After Leflair filed for bankruptcy, what caused Gautier the most pain was having to lay off people. “If you are a ‘go big or go home’ kind of guy, going home is painful, but it’s not so much that. It’s the people you bring down with you when it happens.”
Having built a company that once had as many as 700 staff go through its doors in just under four years, Gautier admits that e-commerce is a capital-intensive industry with high barriers of entry. So those hoping to emulate his early success would do well to consider lessons Gautier shared in his “Ask Me Anything” video filmed after his pre-recorded interview with Vietcetera attracted hundreds of follow-up questions from the webinar’s 1,200-plus attendees. Here are some of the most asked questions from that webinar.
1. “What caused the bankruptcy? What were the reasons, the real reasons, for the failure of the business?”
It was not the issue of attracting or managing customers that led to the company’s downfall. In fact, Leflair was still hiring new staff by the dozen just a few weeks before the bankruptcy. “We just ran out of cash before we could break even. There were decisions that were made that could have accelerated that outcome or not.” Gautier discloses that there were many issues that spun out of his control toward the last months of operation. “Companies are living beings that feed off momentum,” he says. “Sometimes they go down because of vicious cycles that are created when things are off. In between bankruptcy and massive success, you have plenty of outcomes and some of them are not much more pleasant than a swift death; a swift bankruptcy.”
2. “And if you could do everything differently again, what would you do this time?”
Upon reflection, Gautier says that he should not have waited so long before expanding his business to multiple countries. He admits that he wishes to have “started the company in Singapore instead” because there’s an existing customer base and infrastructure to build off of. This isn’t a reflection of Vietnam’s market potential, but rather his belief that Singapore may have been a better launchpad given Leflair’s unique business model and operation.
He also wishes to have raised more capital in the previous round, even if it meant dilution at a lower valuation. Eventually Gautier came to realize that with e-commerce, access to a large amount of capital is necessary and “if you don’t raise millions or if you don't have millions already, you don’t do e-commerce. That’s it. You need investment.” He goes on to say that he would have invested in a stronger tech team earlier. And given the circumstances of the Southeast Asian economy today, instead of e-commerce, he would have founded a company “with more margins” and selling “directly to consumers.”
3. “Who’s the biggest player in the Vietnamese e-commerce market? We got Lazada, we got Tiki, we got Shopee, we got Sendo. Can you share one quick comment about why you think each one succeeded to this day?”
Asked for his opinion on what are the most impressive characteristics of each player in Vietnam’s e-commerce market, Gautier describes Shopee as being the most impressive not only because of how quickly its parent company Sea was able to make a capital commitment to the business, but also because of “how creative they are at acquiring customers” in the region, not just Vietnam. “Will they manage to shift to a more profitable business? I don’t know, it’s not my place to say it,” he comments.
In terms of building a sustainable and profitable business, in the vein of the early-day Amazon or Alibaba, “Lazada is number one in the market” as they are “much more advanced simply because they have so many more assets.”
As for Tiki, a company which, according to Gautier, is different in its commitment to operating exclusively in Vietnam, Gautier gives the company’s entrepreneurial story a big thumbs up: “Tiki started really early on with nothing and grew into a really big business that customers love. I love what they do as a company and the entrepreneurs that started it are extremely inspiring.”
Commenting on the prospects of Sendo, Gautier admitted to knowing “a little less”. “We have always considered Sendo to be slightly different because it was a mass market player and the basket size was so much lower than for us. We didn’t see them as a direct competitor. It’s operating within such a different consumer segment that we didn’t spend that much time looking into its business model.”
That said, Gautier comments that Sendo is one of the success stories in the market for a reason and reckons that both homegrown players Sendo and Tiki are set to own significant market share for the years to come.