Sudden market changes are the true test of resilience for many companies. For new startups constantly competing for capital, these changes can be the difference between life and death. Everyone lives in abundance when the tide rises, but when the tide recedes, the consequences of past decisions become apparent. Did we build a foundation sturdy enough to withstand the test of time? The answer is only revealed after the foundation’s been subjected to the cruel forces of the market.
This rings especially true for Pinkoi, given the company’s past experiences.
Through the cultural and creative e-commerce platform it created, Pinkoi has focused on the sale of original design products to carve out its unique niche in the Asian market. Despite having fewer resources than large e-commerce companies, Pinkoi has been able to withstand several waves of industry changes by identifying a demand for non-standard products. Beginning as a small startup, Pinkoi has grown into a cross-border design e-commerce platform operating in several Asian markets.
“The cultural and creative industry in Asia is enormous. Compared to the overall size of the market, the company is still in its early stages, to be quite honest.” Although the company is actually an “old startup” founded 13 years ago, Pinkoi co-founder and CEO Peter Yen still speaks with confidence when talking about market potential and opportunities, while humbly admitting that “It isn’t easy to make further gains in this market; we have to continue to put in the effort.”
Asia’s cultural and creative industry has reached NT$4 trillion, giving rise to vertical e-commerce companies specializing in designed goods and handicrafts, such as Japan’s Creema, Minne, and iichi. Among these, Creema was successfully listed on the Tokyo Stock Exchange in 2020. Meanwhile, South Korea has e-commerce companies such as 29CM, which specializes in designer apparel and household products, and 10×10, which started off as a cultural and creative e-commerce company before expanding into brick-and-mortar. Pinkoi entered the industry during this particular wave in 2011, and has been riding it ever since.
While the market offers vast opportunities, it also poses significant challenges. Pinkoi has encountered three major problems in recent years. The first occurred when consumers returned to physical stores following the end of the pandemic, taking business away from the e-commerce industry. The second was the rise and proliferation of affordable goods from China. The third relates to how big players in the e-commerce industry are starting to exert dominance through their sheer size; after all, how can small companies compete against those with virtually unlimited capital? Being both a startup and a platform for selling non-essential goods, how can Pinkoi survive in a market dominated by e-commerce giants and intense competition? This is the question the company has been most desperate to answer in recent years.
Facing an uphill battle, Pinkoi employed two weapons to confront this challenge head on: a “commitment to differentiation” and the “courage to hustle.”
Staying focused and securing advantages through differentiation
Despite facing such fierce competition, Peter Yen clearly understands his position. “E-commerce companies that sell standard products are playing a game of capital, but that’s not our game. Pinkoi sells non-standard products. Our ability to differentiate ourselves stems from the distinctive products we provide to various markets across Asia.”
Above all, Pinkoi maintains its commitment to differentiation.
Take Etsy, for example. The American e-commerce platform for handicrafts and antiques was previously known as “grandma’s basement collection.” However, in recent years, the marketplace has been flooded with mass-produced, low-quality products leading to dissatisfaction among consumers and merchants. Such changes threaten the livelihood of designers who sell original products on Etsy, and the media have criticized Etsy for rampant fraud and not keeping its promise to provide a “soulful shopping experience.”
While Pinkoi shares many similarities with Etsy, what sets it apart is the review system it’s implemented from day one. Before a brand can be featured on Pinkoi, it must undergo a review process to ensure the quality of its products and that any designers are identifiable by Pinkoi users. “If we abandoned the review system, Pinkoi would lose its advantage.”
In recent years, Pinkoi has also differentiated itself through its integration of the Retail Media Network (RMN) solution.
When third-party cookies were phased out in 2023, brands lost a valuable method for understanding consumer preferences. It also meant that targeting ads to the “right people” would be more difficult and less efficient in the future. The RMN solution, launched by retailers, leverages their extensive membership data to target the consumers who are most likely to make purchases. This allows brands to focus their marketing budgets in areas that are more likely to result in actual purchases. For e-commerce companies and retailers, this solution opens avenues for exploring new revenue streams beyond product sales.
Since its inception, Pinkoi has amassed 6.25 million members, 7.2 billion behavioral data points, and more than 50,000 designer brands from around the world. The introduction of the RMN solution was built on this foundation. However, unlike other RMN approaches, Pinkoi prefers to focus on the consumer experience. “We use an internal scoring mechanism to determine which products are most suitable for which consumers,” Peter Yen explained. He went on to provide an example: “When a user visits the Pinkoi website to browse a certain product, if they stay on a page for a relatively long time or perform actions such as scrolling down, liking, saving, etc., the system assigns a higher score. We consider such interactions between the consumer and product to be favorable.”
Only high-scoring products are granted prime advertising space on the Pinkoi website. “Alternatively, we could just sell the best advertising space to the highest bidder, but is that really what consumers want?” Yen went on, “While the saying ‘money talks’ may be true in some places, at Pinkoi our decisions are primarily based on providing users with a good experience.”
AI and SaaS have become new revenue drivers for Pinkoi after eight years of hustling!
Successful entrepreneurs not only have to adhere to their core values, they also must have the courage to “hustle” and take the road less traveled at critical moments.
Such courage is exemplified by Pinkoi’s creation of its own AI model. Eight years of dedication have allowed Pinkoi to lay the foundation necessary to confront today’s challenges while opening up new opportunities for growth in the midst of intense competition.
In fact, Pinkoi started building their AI model as early as 2015. However, unlike e-commerce companies that sell standard products, Pinkoi is a vertical e-commerce company that focuses on supporting design brands, distinguishing itself in terms of product classification and consumer behavior. Due to Pinkoi’s unique position in the industry, existing solutions in the past were insufficient to meet its needs. Nevertheless, Pinkoi remained committed to achieving large-scale personalization, using highly targeted market segmentation to provide a unique shopping experience for each customer.
To reach this goal, Pinkoi made the difficult decision to reject all ready-made solutions and shortcuts, instead building a completely new model from scratch. The process began with data cleaning.
Peter Yen recalled how in the early days, simply extracting data from different sources like mobile phones, desktops, apps, and web pages for cleaning and analysis was a huge undertaking. It was like laying pipelines for the construction of a water treatment plant, with the initial infrastructure taking three years to establish. In addition, since Pinkoi was already operating across multiple Asian markets, data had to be managed in multiple languages including Chinese, Japanese, Thai, and Cantonese, adding to the complexity of the challenge.
“It was just like driving into the Hsuehshan Tunnel (the longest tunnel in Taiwan) for the first time; you don’t know when you’ll see the light of day again!” Yen stated. Meanwhile, different opinions began to emerge from within his team. He was tasked with the difficult job of boosting internal morale and maintaining external communication with markets while continuously overseeing optimizations and product adjustments.
Fortunately, the hard work has paid off in recent years. Pinkoi’s AI model has developed to the point where it can handle tens of thousands of labels and countless intricate details. “Today, anyone who visits Pinkoi will feel like they’re walking into a personalized department store. Every shelf features their favorite brands, and the recommended products cater to their specific needs at that point in time.”
While many retailers in Taiwan only began using RMN services over the past two years, Pinkoi started monetizing in 2019. Utilizing the RMN so early gave Pinkoi a head start that has resulted in subscriptions from nearly 10,000 brands, with a retention rate of 90%. Moreover, its advertising and SaaS service revenues have also grown year over year and now account for more than 30% of Pinkoi’s overall revenue, making them a distinct and significant revenue stream apart from e-commerce sales.
“The entrepreneurial journey has no mileage signs.” Play to your strengths and overcome each challenge.
E-commerce giants continue to grow, ensuring their dominance, while the pandemic-induced boost has subsided. Vertical e-commerce platforms and smaller players that fail to differentiate themselves or adapt their skillsets face the threat of being overtaken by rival competitors. Despite the endless challenges of starting a business, Pinkoi played to its strengths and took the initiative to build its datasets and AI models at an early stage. This strategy is why Pinkoi has the tools and confidence it needs to survive in today’s harsh business environment.
Starting a business is like driving into a long, winding tunnel that has no end in sight. Reflecting on a journey stretching back over a decade, Peter Yen smiles. “When I drove into the Hsuehshan Tunnel for the first time, I didn’t know how long it would last, but seeing the mileage signs along the way put me at ease. The entrepreneurial journey has no mileage signs; only God knows what will happen.”
Looking ahead, Peter Yen expresses confidence that Pinkoi will continue playing to its strengths and remain focused on overcoming the challenges that arise at each stage of its journey.
This article is part of a partnership with Cherubic Ventures. Founded in 2014, they are an early-stage venture capital firm that’s active in both the US and Asia, with a total AUM of 400 million USD. Focusing on seed stage investments, Cherubic aims to be the first institutional investor of the next iconic company and back founders who dare to dream big and change the world.