Investing Intelligently in an E-Commerce Company: Challenges & Potential Innovations

by Dentons


By 2027, Singapore’s e-commerce market is predicted to grow five-fold – to at least US$5.4 billion (S$7.5 billion), according to a study by Google and Temasek Holdings. E-commerce markets in other parts of Asia are also poised to grow significantly – with many Asian businesses venturing out into markets of developed nations with sophisticated data privacy and consumer laws.

Investors and entrepreneurs are faced with unprecedented opportunities – as well as challenges related to their e-commerce venture, including understanding:

  • Which factors may impact the value of an e-commerce company, especially when business models defy traditional valuation methods? 
  • How can e-commerce companies remain compliant with laws and regulations from each of the countries in which it operates? 
  • As more participants crowd the e-commerce market, how can e-commerce businesses innovate to continue to provide value and capture opportunities?

E-commerce remains a novel area – both in business and law – but with the right guidance, there is no limit to the creative solutions that may abound.

Factors Impacting the Value of an E-Commerce Venture

E-commerce businesses can have valuations which far exceed those of traditional companies within the same industry. For example, Uber, the online transportation network company founded in 2009 is currently valued at approximately US$68 billion – around US$20 billion higher than auto giant General Motors, which has been in existence since 1908. And Uber does not even manufacture cars!

Rather than traditional metrics such as historical profits and logistics costs – e-commerce companies are usually valued based on factors like sales, number of transactions, active users, “hits”, the future state of the industry, potential market size, expected growth, and sometimes an extremely optimistic revenue growth.

However, e-commerce ventures are complex businesses to run – generally capital-intensive, with low profit margins – and entail compliance with laws from various jurisdictions, the handling of sensitive consumer information, and a consideration of how the venture impacts market competition in the relevant country. An e-commerce venture may therefore quickly encounter compliance issues which may significantly decrease its value. 

Legal Compliance Needs of an E-Commerce Venture

Due to the global nature of many e-commerce ventures, compliance with laws in each of the countries it operates is crucial. For example, failing to comply with data privacy and consumer protection laws could not only impact a company’s valuation – but also lead to civil or criminal liability. Below, we highlight some salient compliance issues related to e-commerce– highlighting the importance of hiring legal counsel with a deep understanding of e-commerce compliance needs.

1. Data privacy

When transacting online, consumers almost always share personal data such as their name, contact details, home address and payment card details. Of 194 UNCTAD member states, a total of 107 countries (of which 66 are developing or transition economies) have in place legislation to secure the capture, transmission and use of personal data.   

E-commerce businesses are also generally required to implement security measures to prevent unauthorised access, use and disclosure of personal data. Furthermore, customers must be informed of the purposes for which their data is being collected, and consent to the collection, use or disclosure of their personal data. Finally, it is also crucial for any e-commerce venture to implement procedures to handle data breaches which enable the business to notify customers and relevant authorities promptly and investigate and contain the breach. 

Because compliance requirements may differ between countries, ventures may need to adopt tailored approaches for each jurisdiction

2. Consumer protection

Most countries have adopted laws and regulations to protect consumers who may be at the mercy of errant traders and unethical business practices. Common concerns include the truth of online product descriptions and reviews, fairness of merchant terms of sale, and availability of recourse for late or non-delivery, product defects, or other disputes. 

In Singapore, for example, consumer protection laws include: 

  • Unfair Contract Terms Act, which restricts the extent a merchant can limit or exclude liability owed to consumers; 
  • Consumer Protection (Fair Trading) Act, which prohibits unfair trade practices, including false claims about goods/services or having overly harsh or oppressive terms of sale; and 
  • Consumer Protection (Trade Descriptions and Safety Requirements) Act, which prohibits traders from using false trade descriptions, including in advertisements for goods

Of the 194 UNCTAD member states, 97 (of which 61 are developing or transition economies) have adopted consumer protection legislation that relates to e-commerce. Likewise, a tailored approach for each jurisdiction may be necessary. 

3. Competition laws

All ASEAN member countries have enacted some form of competition legislation and have a regulator to ensure the enforcement of such legislation. Behaviour by e-commerce ventures which may impact a competitiveness analysis may include: 

  • Price obfuscation, which may be seen as anti-competitive. This involves making it difficult for consumers to search and compare prices online, such as by advertising prices of low-quality products on a price comparison website but not making the price of higher-quality upgrades easily observable;  
  • Vertical restraints, on the other hand, may be seen as pro-competitive depending on the context. These are generally non-price-related restrictions imposed by parties on different levels of the distribution chain, and may include restrictions on selling online, submitting offers to price comparison websites, or cross-border sales.

Whether an act may be considered anti-competitive requires complex analysis and professional advice from a qualified legal team should be sought. 

Business Model Innovations

As players crowd the market, innovation is necessary for differentiation and value-capture. The “reverse auction” model may be a viable solution – where sellers compete to obtain business from the buyer in real time, often with added transparency around prices and the buyer’s requirements. 

This model may change the way firms behave with their suppliers worldwide, improving effectiveness of the sourcing process and facilitating access to new suppliers. It may also minimise anti-competitive behaviour among suppliers. This presents e-commerce portals with an interesting opportunity to offer reverse auction services, and for manufacturers to understand buyer needs more clearly.

Next Steps: Capturing Value

The e-commerce market in Asia is growing rapidly and it remains a challenge to accurately value emerging e-commerce businesses. Furthermore, many Asia-based e-commerce companies are venturing out into markets of developed nations with sophisticated competition, data privacy and consumer laws. In innovating and setting up a viable business model, e-commerce businesses would do well to seek appropriate legal advice in order to gain consumer confidence in their target markets.

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

© Dentons | Attorney Advertising

Written by:


Dentons on:

Readers' Choice 2017
Reporters on Deadline

"My best business intelligence, in one easy email…"

Your first step to building a free, personalized, morning email brief covering pertinent authors and topics on JD Supra:
Sign up using*

Already signed up? Log in here

*By using the service, you signify your acceptance of JD Supra's Privacy Policy.
Custom Email Digest
Privacy Policy (Updated: October 8, 2015):

JD Supra provides users with access to its legal industry publishing services (the "Service") through its website (the "Website") as well as through other sources. Our policies with regard to data collection and use of personal information of users of the Service, regardless of the manner in which users access the Service, and visitors to the Website are set forth in this statement ("Policy"). By using the Service, you signify your acceptance of this Policy.

Information Collection and Use by JD Supra

JD Supra collects users' names, companies, titles, e-mail address and industry. JD Supra also tracks the pages that users visit, logs IP addresses and aggregates non-personally identifiable user data and browser type. This data is gathered using cookies and other technologies.

The information and data collected is used to authenticate users and to send notifications relating to the Service, including email alerts to which users have subscribed; to manage the Service and Website, to improve the Service and to customize the user's experience. This information is also provided to the authors of the content to give them insight into their readership and help them to improve their content, so that it is most useful for our users.

JD Supra does not sell, rent or otherwise provide your details to third parties, other than to the authors of the content on JD Supra.

If you prefer not to enable cookies, you may change your browser settings to disable cookies; however, please note that rejecting cookies while visiting the Website may result in certain parts of the Website not operating correctly or as efficiently as if cookies were allowed.

Email Choice/Opt-out

Users who opt in to receive emails may choose to no longer receive e-mail updates and newsletters by selecting the "opt-out of future email" option in the email they receive from JD Supra or in their JD Supra account management screen.


JD Supra takes reasonable precautions to insure that user information is kept private. We restrict access to user information to those individuals who reasonably need access to perform their job functions, such as our third party email service, customer service personnel and technical staff. However, please note that no method of transmitting or storing data is completely secure and we cannot guarantee the security of user information. Unauthorized entry or use, hardware or software failure, and other factors may compromise the security of user information at any time.

If you have reason to believe that your interaction with us is no longer secure, you must immediately notify us of the problem by contacting us at In the unlikely event that we believe that the security of your user information in our possession or control may have been compromised, we may seek to notify you of that development and, if so, will endeavor to do so as promptly as practicable under the circumstances.

Sharing and Disclosure of Information JD Supra Collects

Except as otherwise described in this privacy statement, JD Supra will not disclose personal information to any third party unless we believe that disclosure is necessary to: (1) comply with applicable laws; (2) respond to governmental inquiries or requests; (3) comply with valid legal process; (4) protect the rights, privacy, safety or property of JD Supra, users of the Service, Website visitors or the public; (5) permit us to pursue available remedies or limit the damages that we may sustain; and (6) enforce our Terms & Conditions of Use.

In the event there is a change in the corporate structure of JD Supra such as, but not limited to, merger, consolidation, sale, liquidation or transfer of substantial assets, JD Supra may, in its sole discretion, transfer, sell or assign information collected on and through the Service to one or more affiliated or unaffiliated third parties.

Links to Other Websites

This Website and the Service may contain links to other websites. The operator of such other websites may collect information about you, including through cookies or other technologies. If you are using the Service through the Website and link to another site, you will leave the Website and this Policy will not apply to your use of and activity on those other sites. We encourage you to read the legal notices posted on those sites, including their privacy policies. We shall have no responsibility or liability for your visitation to, and the data collection and use practices of, such other sites. This Policy applies solely to the information collected in connection with your use of this Website and does not apply to any practices conducted offline or in connection with any other websites.

Changes in Our Privacy Policy

We reserve the right to change this Policy at any time. Please refer to the date at the top of this page to determine when this Policy was last revised. Any changes to our privacy policy will become effective upon posting of the revised policy on the Website. By continuing to use the Service or Website following such changes, you will be deemed to have agreed to such changes. If you do not agree with the terms of this Policy, as it may be amended from time to time, in whole or part, please do not continue using the Service or the Website.

Contacting JD Supra

If you have any questions about this privacy statement, the practices of this site, your dealings with this Web site, or if you would like to change any of the information you have provided to us, please contact us at:

- hide
*With LinkedIn, you don't need to create a separate login to manage your free JD Supra account, and we can make suggestions based on your needs and interests. We will not post anything on LinkedIn in your name. Or, sign up using your email address.