Southeast Asia, A New Battleground of Chinese Internet & E-Commerce Giants

摘要: What does the e-commerce market in Southeast Asia look like? What strategy did different Chinese e-commerce giants adopt to grab the new market? What are their goals, specifically?

(Chinese Version)

“What the e-commerce market looks like in Southeast Asia right now is what it looks like back in China five years ago,” Mr. Zhang, head of an HY E-Commerce department, said. His company entered Lazada.com three years ago, an well-known e-commerce platform in Thailand, Vietnam, Indonesia and Malaysia.

In his eyes, Lazada.com is more like a crude mimic of JD.com (mainly B2C model). The threshold is quite low, and competition isn’t fierce, either. “We simply registered a business license, a bank account and sat for a two-hour online training, and then we successfully opened an account on Lazada.com,” Zhang recalled. According to him, registering on Lazada.com is a lot easier than on other e-commerce platforms.

However, Rocket Internet, the mother company of Lazada.com, grabbed so much attention from global investors in Southeast Asia for the past few years. “Nevertheless, after Alibaba invested in Lazada.com, the competition seemed to grow fiercer,” Zhang observed.

“There used to be lots of e-commerce platforms in Southeast Asia, though none of them were mature and developed enough and the competition wasn’t fierce at all. Some of them emerged for a short while, while others were reported to be acquired by Chinese cross-border e-commerce platforms and disappeared. Lazada.com and Tokopedia.com,” Zhang said.

Since the beginning of 2016, Chinese e-commerce giants began to enter the e-commerce market in Southeast Asia, cooperate with local e-commerce platforms and directly compete with global e-commerce giants like Amazon.

“Singapore is not only where Lazada.com’s headquarter is located, but also the very starting place Alibaba began to grab the e-commerce market in Southeast Asia. Not long ago, Amazon also set up a dispatch center of its own in Singapore, the first one in Southeast Asia, and carried out Prime Now service, its “killer-weapon” two-hour delivery service.”

Obviously, the e-commerce battle in Southeast Asia is a lot more interesting than that back in China.

An entirely new battleground for Chinese e-commerce giants

How come? Well, this is the direct competition among not only Chinese e-commerce platforms, but also global e-commerce giants in five to six countries. At the same time, they’ve brought third-party payment service, logistics service and core technology to Southeast Asian countries. “This is far from a competition among e-commerce platforms, but rather among different ecosystems”

Indeed, the Southeast Asian e-commerce market will become a hot “battleground” for Chinese e-commerce giants.

After five years of development, the landscape of the Chinese e-commerce market has basically been settled. It seems that the market landscape won’t be changed in a short time. E-commerce giants such as Alibaba (Taobao and Tmall), JD and Suning have all reached their glass ceiling and been exploiting the residual market.

Other e-commerce platforms in segment markets, however, are busy exploiting these markets and developing in a peaceful manner.

Beneath the surface, however, Chinese e-commerce giants have gradually entered the Southeast Asia, whether through acquiring local e-commerce platforms or building their own ones.

Still, what does the market look like? What strategy did e-commerce giants adopt to grab the new market? What are their goals, specifically?

Alibaba: Grabbing the market through a prominent ally

There’s never short of business opportunities in Southeast Asia, a market with a population of 600 million. With the rising consumption level and spread of internet in Thailand, Indonesia, the Philippines, Vietnam and Malaysia, Southeast Asia has become one of the most promising rising e-commerce markets in Asia.

As the undisputed e-commerce leader in China, how could Alibaba ever miss the market?

Two months ago, Alibaba officially announced that it had invesed another $ 1 billion into Lazada. As a result, it would grab 83 per cent stake in Lazada.

“In terms of market coverage, AliExpress is a leading player in Asia, some European countries and the US, while Lazada takes the lead in Southeast Asia. Therefore, Lazada is a great complement to Alibaba, for sure,” Zhang Yong, CEO of Alibaba, once explained.

“We used to worry for a long time if the poor transportation and logistics service will block the development of e-commerce market in Southeast Asia,” Zhang added. In response, Alibaba took great effort in improving the logistics infrastructure in Southeast Asia.

According to an early report from CBN Daily, Cainiao Network has bscailly linked its logistics system with Lazada’s: 6 dispatch centers, 11 deliver centers, 84 last-mile delivery stations. Besides, Lazada has signed cooperation agreements with 75 third-party logistics service providers in Southeast Asia, among which 20 were from Indonesia.

Through optimizing the logistics network, Alibaba is gradually enabling rapid delivery service in Southeast Asia. In fact, what Lazada means to Alibaba in Southeast Asia is very much similar to what Cainiao Logistics Network means to Alibaba back in China. Through optimized logistics service, Alibaba could properly manage the cost of its logistics system.

“In central regions, we’ve already enabled three-day delivery service; in some islands, we’ve enabled senve-day delivery service. Although the logistics service remained poor in some regions, we’ve already made huge progress,” Zhang said.

As to online payment, since ordinary users in Southeasi Asian countries remain doubtful of online payment, Alibaba attempted to launch secured transaction service similar to Taobao.

“Lazada’s e-payment tool HelloPay is to be integrated to Alipay, since the latter has a better anti-phishing system,” Florian Holm, Co-CEO of Lazada, once revealed.

Obviously, Lazada has grown into something very similar to what Taobao is back in China. By importing its rich experience in e-commerce business to Lazada and optimizing the e-payment, logistics service based on local situations, Alibaba managed to adapt fully to the Southeast Asian market.

Instead of expanding AliExpress in Southeast Asia, Alibaba attempted to win the market through Lazada, a platform already quite popular in this region. Based on a prominent partner, rich relevant experience and an effective localization strategy, Alibaba is rapidly grabbding the Southeast Asian e-commerce market.

JD: Striking first, though gaining the initiative late

As another e-commerce giant in China, JD eyed for the Southeast Asian market for a long time.

As early as November 2015, JD already established its Indonesia subsidiary and managed the subsidiary through the B2C model. Besides, JD had storages in Jakarta, Surabaya and Pontianak and a logistics company called Jaya Ekspres Transindo. Compared with Alibaba, JD began to prepare for the Southeast Asian market a year earlier.

“The Southeast Asian market is bound to be a huge market. JD’s Indonesia subsidiary is, for sure, to help JD grab a share of the entire market,”, Richard Liu Qiangdong, founder and chairman of JD Group, once said in the press release of 2016 Q2 financial report.

However, it seemed JD didn’t have any new move since then. ID was caught in a quite awkward position in the Indonesian market, People might have heard about it, but seldom use it, Kang Man, a young Indonesia semi-conductor businessman, told us.

“In our impression, JD is simply a mobile e-commerce platform of 3C products,” he said. Although JD launched the Android APP in Indonesia in 2015, its popularity didn’t grow until it added clothes and nursery products to the platform.

“The Indonesians still prefer to use the website,” Kang explained, “most Indonesians prefer to buy daily electronics and household products on e-commerce platforms. Although they might follow the updates of latest electronic products, few of them ever buy them.”

On the whole, although JD entered the market quite early, it didn’t adapt to the market well. Lacking in proper understanding of the online consumption habits and demand of the ordinary Indonesians, JD was even once forbidden to sell Apple’s products by the Indonesian government for a while.

Aware of its problem, JD eyed on Tokopedia this May. Founded in 2009, Tokopedia developed rapidly in the past few years and have become the largest e-commerce platform in Indonesia. However, it failed in the competition with Alibaba over following investment into the platform.

Two weeks ago, Tokopedia announced that it had completed a $1.1 billion new series of financing led by Alibaba, instead of JD.

“After losing the opportunity to invest in Tokopedia, JD has turned to cooperate with Shopee, the e-commerce platform of Indonesian old-line unicorn brand SEA,” an industry insider told us. At present, JD is still busy looking for new partners. Therefore, nobody know the exact progress yet.

As we can see from the bidding competition over Southeast Asian e-commerce platforms, we can tell how fierce the competition has become among Chinese e-commerce giants. After some setbacks, JD has already realized its disadvantages in building its own platforms and logistics and started to consider the possibility to invest in or acquire promising local e-commerce platforms.

Nevertheless, JD was caught in a quite passive position for the past year, compared with Alibaba. If JD want to turn the table, then it will have to strike a good balance between its own business strategy and the consumption habit and market demand in respective regions.

Tencent & Baidu: Cutting the corners

Back in China, Tencent certainly failed in the e-commerce business. However, with the close cooperation with JD, it didn’t totally leave the market, in a certain degree. Although Baidu had huge traffic, it also didn’t nail the e-commerce business. Nevertheless, it didn’t lose hope in the Southeast Asian e-commerce market.

Against the hard fight between JD and Alibaba, Baidu and Tencent have also been eyeing on the pan e-commerce market in Southeast Asia.

Different from Alibaba and JD, Baiduu and Tencent adopted a quite different path. They didn’t directly get involved in the e-commerce market, but rather attempted to infiltrate in the pan e-commerce market.

For example, Tencent got involved in the Series A and D-round of financing in Garena, the biggest internet company in Southeast Asia. Compared as the Southeast Asia version of Tencent, Garena owned a variety of internet products, including mobile e-commerce platform Shopee, online payment platfprm AirPay and social networking app Beetalk.

Besides portals and e-payment business, Tencent has also been looking for opportunities in the entertainment sector. Up till now, it has invested in JOOX, the Southeast Asia version of QQ, Smule, the Southeast Asia version of ChangBa, and the Southeast Asia version of Tencent Game.

“Smule was so popular even before Tencent’s investment,” a Chinese businessman currently conducting business in Indonesia told us. Generally speaking, Tencent was looking for not only internet products built with mature product logic, but also promising internet products, attempting to trigger their further success through investment.

As to Baidu, it launched Baidu Wallet in Thailand as early as last year. Besides providing e-payment service for Chinese tourists, it has also been playing an active role in local business transaction.

“In large cities such as Bangkok and Pattaya, people can pay via Alipay, WeChat Wallet as well as Baidu Wallet,” a Chinese tourist who’d just come back from Thailand told us.

As a matter of fact, Baidu eyed on the consumption payment business when it started to launch Baidu Wallet in Thailand, in hopes of infiltrating in the e-payment business in Southeast Asian countries through a competitive product and a profitable currency rate gap.

While Alibaba and JD were caught in a hard fight, Baidu and Tencent have both been grabbing their own shares in the Southeast Asian market. Through mature product and expansion strategy, Baidu and Tencent managed to accumulate huge user base and traffic, through which they could lay a solid foundation for future development.

Undoubtedly, what Baidu and Tencent are trying to do is cut the corner amid this fierce market competition.

In this great competition among Chinese e-commerce and internet giants, Alibaba took the lead and attempted to dominate the market through rapid development, JD was still looking for a way out, while Tencent and baidu attempted to cur the corner through grabbing a huge user base and high user traffic and enter the fight when the time is right.

On the whole, Alibaba’s ecosystem has basically been established in Southeast Asia. Although Tencent and Baidu started late, their potential couldn’t be neglected. After all, the e-commerce battle is always a battle of traffic and user base. As to JD, whether it could find an appropriate entry point will determine whether it could continue to play a role in the market.

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[The article is published and edited with authorization from the author @Dong Note. Please note the source and hyperlink when reproduce.]       

 Translated by Levin Feng (Senior Translator at PAGE TO PAGE), working for TMTpost.  

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