Chinese Ecommerce Firms Forge Ahead into Southeast Asia

China-based ecommerce companies Alibaba and JD.com have committed billions of dollars to establish themselves in Southeast Asia. US firms, including Amazon, have remained largely on the sidelines.

JD.com and Alibaba serve as something close to an ecommerce duopoly in their home market. Analysys International Enfodesk reported that Tmall—Alibaba’s B2C platform—and JD.com together accounted for 84.2% of retail ecommerce sales in China during Q2 2017.

Retail Ecommerce Sales Share in China, by Site, Q2 2017 (% of total)

But both firms have ample reason for setting their sights on other areas of Asia-Pacific. eMarketer estimates that retail ecommerce sales across the region will reach $1.365 trillion by the end of this year, and total more than $3 trillion by 2021—with annual growth rates remaining in double digits during the forecast period.

JD.com and Alibaba have several advantages over Western competitors when it comes to expansion in Southeast Asia. First, they’re familiar with the unique challenges and needs of mobile-first shoppers through their experiences in China. They’re also familiar with some of the obstacles that come with expensive and difficult last-mile delivery in countries where infrastructure still trails that seen in more developed economies.

Both companies have not been shy about their attempts to corner various countries in Southeast Asia to gain first-mover advantages. Just last week, JD.com announced it had formed a partnership with Thailand-based retail giant Central Group, with the two companies pooling an investment of $500 million to create ecommerce and financial tech joint ventures in the country.

The companies plan to merge JD.com’s ecommerce expertise with Central Group’s footprint of physical stores in an attempt to push forward omnichannel marketing in Thailand. Central Group can also move its existing consumer data profiles into the digital age by drawing on JD.com’s experience dissecting similar data gathered on its online shoppers.

That expertise could give Central Group’s ecommerce venture the boost it needs. An analysis of monthly page views carried out by SimilarWeb in April found that Central Thailand, the company’s ecommerce platform, had garnered just 1.98 million page views for the month. That was well below market leader (and Alibaba-owned) Lazada Thailand’s 41.38 million page views.

Leading B2C Ecommerce Sites in Thailand, Ranked by Monthly Page Views, April 2017 (millions)

Competitor Alibaba has exerted similar efforts in Southeast Asia, most recently through a $1.1 billion investment in Indonesia-based ecommerce platform Tokopedia. Though the company had already counted Japan’s Softbank Group and venture capital firm Sequoia Capital among its backers, Alibaba’s investment could provide more practical advice along with its bankroll.

“The partnership with Alibaba will enhance the scale and quality of Tokopedia’s offerings to its customers, and make it easier for merchants and partners to do business across the archipelago and beyond,” Tokopedia said in a statement.

Alibaba’s investment comes on top of its well-established retail name among shoppers in Southeast Asia. And it’s clearly aimed at Indonesia’s large—and growing—pool of online shoppers. eMarketer estimates that there will be 36.2 million digital buyers in the country this year, with their ranks swelling to 73.9 million by 2021.

Meanwhile, Amazon has been caught relatively flat-footed in the face of such aggressive moves by its Chinese counterparts. Although Amazon appears to be making some progress with its efforts in India, the company has largely languished in the country.

Amazon made its first foray into Southeast Asia when it launched its Prime Now app in Singapore in late July. However, Singapore already has high internet penetration and an urban density that makes deliveries comparatively easy, compared with some other Southeast Asia countries.

Australia will be the next market in which Amazon will launch its ecommerce marketplace service (the company already sells a limited range of items such as digital media and books in the country). But, like Singapore, Australia is more similar to Western markets in which Amazon has already established itself compared to the emerging economies that characterize Southeast Asia.

In that sense, Amazon seems content to pluck the low-hanging fruit, while its Chinese rivals seem set on planting orchards.

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