Amazon, Alibaba, and the e-commerce rush to SE Asia

iPrice, a 18 months old Malaysian startup, has just finalized a Series A round of investment of $4 million. Not bad for such a young company, trying to become a one-step destination in the SEA countries e-commerce market, providing aggregation services like price comparison, product scouting and discovery, and special deals information, involving an increasing user community.


iPrice a 18 months old startup based in Malaysia, providing e-commerce aggregation services in the SE Asia area

Big players are not freezed: Amazon has just invested huge resources in Asia, quietly introducing its Prime service in China, and putting more thant $3 billion into its India business. Many well informed commentators are also writing about Amazon covertly acquir


Steven Scrive – head of Amazon ASEAN

ing assets and managing local operations for a huge operation in Singapore with a relevant launch of a hub service for the whole SEA area, even with evolved services like Amazon Fresh, led by the young head of Amazon ASEAN Steven Scrive.

Alibaba has also made a strategic move, investing $1 bln in Lazada (50% fresh capital – 50% stock), which is practically the biggest e-commerce platform in the SE Asia area serving 6 countries. The company is a good bridgehead and was suffering a relevant cash shortage unless succeeding in the last seed investments rounds. Good news for Rocket Internet, which founded Lazada four years ago, that achieved a 15x ROI compared to the initial $ 18 millions investment to kick the business off in 2012.


Amazon Fresh

The heating competition isn’t driven (only) by the bright GDP growth forecast for the SEA area. It’s due to specific drivers that are really strategic in these countries, like the young population share (70% compared to the 57% share in China), and the huge problem of retail store access. Stores are one third of evolved markets, and people are consequently more sensitive to e-commerce advantages in less served areas.

According to the last Google + Temasek research (here the complete slideshow) the overall SEA area (including Philippines, Thailand, Vietnam, Singapore, Malaysia, Indonesia) will experience a 16x growth within 2025 in the e-commerce market volume. The share of e-commerce on the overall retail market volume, will increase from the current 0,8% to 6,4% in 2025. An impressive trend led by the growing internet penetration, the consumer sentiment and the evolution in the general availability of products and purchase capacity. Within the next 10 years every single SEA market will account for more than $5 bln value, with a major boost in Indonesia which will face a $46 bln market volume.


Overall e-commerce spend in the SEA countries will experience a 16x growth in 10 years

Important challenges and threats are also looming: big logistic issues and the uncertain output of the current competitive rush are contributing to a confuse context, while the structural issues are not easy. Internet penetration is still very low in specific insular areas (especially in Indonesia and Philippines) together with the fact that every single market experience serious issues in connectivity and a generally low bandwidth and internet speed (not in Singapore, of course).

A serious challenge will be also the payment mechanism: over 70% of the population is basically unbanked: no credit cards nor bank accounts and there will be a strong dependence on cash on delivery systems. A big issue especially in Indonesia, Vietnam, Philippines, without any structural solution in the short run. Alternative options like Alipay or Tencent payment (WeChat) offer e-payment systems with an impressive performance in China, and could be a good solution to the unbanked customer base issue.

Travel and plane + rail industries will be among the top drivers in the e-commerce transactions evolution and players will face a big issue in the consumer trust level, considered the high number of frauds and security problems in the SEA area, threatening the average customer confidence. A common issue that could have a negative impact on every sector, and could be faced with a good investment in the online/offline integration. A brick-and-mortar + online omnichannel strategy that many players are adopting globally. A move that could be really important in building the consumer trust and a loyal user community.


Let’s have a look at the e-commerce growth in the single SEA markets: Indonesia, Vietnam, Philippines will experience the best increase trends


Lazada homepage: Alibaba has just invested $1 bln in this company

[header pic by Andy Beales – via Unsplash]

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