In 2017, the Malaysian government launched, together with Alibaba, a digital free-trade area with a logistics center in Kuala Lumpur and a specific focus on cross-border e-commerce development for micro, small and medium-sized enterprises. An important step, especially considering the acquisition by the Chinese colossus of the Lazada e-commerce platform that records exciting numbers in the entire region. In April of this year, Alibaba announced the creation of a smart digital hub in Thailand to support the country’s eastern economic corridor in government developments. A move followed a month later by the opening of a new data center in Indonesia in order to support local government plans that aim to create at least 1.000 technology startups by 2020.
Major moves among big players, include JD.com and the US giants who are investing in a vibrant area in the midst of huge business opportunities due to the growing middle class, the unstoppable increase in penetration of smartphones and the internet, with the effect of widening the audience of digital consumers.
This an area that, however, offers major challenges as well: online payment methods still subject to fraud, the lack of efficient logistics infrastructure and in line with the high standards of e-commerce, and the tax and customs complications that slow the possibility of doing business in an integrated way. Yet the positive drivers are not missing: the expected digital free trade zone and the further cooperation that invests the ASEAN economies, for example, is expected to provide a considerable boost to trade in the area (in above mentioned paper is estimated at + 60%) thanks to the reduction of trade barriers.
A recent joint report by Temasek Holdings + Google revealed that Southeast Asia’s internet economy could be worth more than $ 240 billion by 2025, much more than previous estimates of $ 200 billion, and the main driver is e-commerce thanks to the dynamism that in the last three years has recorded a value of GMV (gross merchandise value) of almost 11 billion dollars destined to increase to 23 billion dollars by the end of this year. If we compare the numbers in 2015, we are up over four times, with an impressive growth rate.
The big players are the three major e-commerce companies in the region: Lazada, Shopee and Tokopedia. Collectively, they have grown more than seven times since 2015, eclipsing others in the industry, thanks to the breadth of the catalog, the frequency of promotions and the continuous improvement of the user experience. In the physiognomy of consumers, the report highlights how key areas are crucial among millennials as young females or fashionistas for an important leadership among the fashion and cosmetics categories. Alibaba is well aware, considering that, in addition to the acquisition of Lazada, it has invested 1.1 billion dollars in the main operator of Indonesian rival e-commerce: Tokopedia.
[Header pic by Saketh Garuda on Unsplash]