China-based e-commerce companies Alibaba and JD.com have committed billions of dollars to establish themselves in Southeast Asia. U.S. firms, including Amazon, have remained largely on the sidelines, according to a recent report by Analysis International Enfodesk.
The report noted that JD.com and Alibaba serve as something close to an e-commerce duopoly in their home market with Tmall - Alibaba’s
B2C platform - and JD.com together accounting for 84.2% of retail e-commerce sales in China during Q2 2017.
But both firms have ample reason for setting their sights on other areas of Asia-Pacific with eMarketer estimating that retail e-commerce sales across the region will reach US$1.4 trillion by the end of this year, and total more than US$3 trillion by 2021 - with annual growth rates remaining in double digits during the forecast period.
Familiarized with markets in their backyard
eMarketer also noted that 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.
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 US$500 million to create e-commerce and financial tech joint ventures in the country.
The companies plan to merge JD.com’s e-commerce expertise with Central Group’s footprint of physical stores in an attempt to push forward omni-channel 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.
Alibaba pushes forward in SE Asia
An analysis of monthly page views carried out by SimilarWeb in April found that Central Thailand, the company’s e-commerce platform, had garnered just 1.98 million page views for the month. That was well below market leader (and Alibaba-owned) Lazada Thailand’s site with 41.38 million page views.
Meanwhile, competitor Alibaba has exerted similar efforts in Southeast Asia, most recently through a US$1.1 billion investment in Indonesia-based e-commerce 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.
How does Amazon react?
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.
Compared with the aggressive expansion activities of the two Chinese e-commerce platforms, Amazon made its first foray into Southeast Asia when it launched its prime Now app in Singapore in late July. However, e-Marketer pointed out in its report that 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 full e-commerce marketplace service. But, like Singapore, Australia is more similar to Western markets in which Amazon has already established itself compared to the emerging economies that characterise Southeast Asia.
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