TL;DR – When Alibaba spearheaded its way into the Southeast Asian Ecommerce sector, it solidified what many entrepreneurs and businesses had long believed; that Ecommerce within the ASEAN region was no longer a nascent concept that needed nurturing, but rather a full-fledged force that we could no longer afford to ignore.
As we cross over into the New Year, the Southeast Asian market is ever more likely to serve as an economic catalyst for marketplaces and small businesses; propelling them to transcend beyond traditional borders by integrating themselves into areas such as private label brands and offline distribution. It is highly likely that many brands are likely going to feel trapped by this, thus forcing them to adapt or be left behind.
Whilst our economy begins to emulate that of China in 2007, Southeast Asia’s economic climate has evolved to become surprisingly conducive to Chinese Internet behemoths who seek to seek to expand beyond Mainland China. Indeed, it was Alibaba’s incredible acquisition of Lazada that set off a chain reaction that ultimately forced local Chinese companies to choose between Alibaba and its primary rival, TenCent. With its 1.1 Billion USD investment in Tokopedia, Alibaba remains incessant on placing its biggest bets in the ecommerce sector. To combat this monopoly, TenCent has skilfully utilized a three-pronged formula by foraying into gaming, mobile, and payments.
With Alibaba and TenCent engaged in an economic bloodbath, last year saw Amazon drizzling through the cracks into the Southeast Asian market with its introduction of Amazon Prime Now, debuting in Singapore. Paltry when compared to its competitors, Amazon Prime Now offered just one million items and daily essentials. This did, however, make perfect economic sense when one considers that Singaporeans enjoy free international shipping from Amazon for orders above 125 USD.
As the economic paradigm shifts to a market which favours Ecommerce over traditional business models, some entrepreneurs are set to move in moving the opposite direction by bringing their businesses offline. We first witnessed this when Thailand’s Central as well as Indonesia’s Matahari announced their plans to redistribute their products through more physical mediums such as stores and wholesalers. Pomelo Fashion’s CEO David Jou explained that “a mix of offline and online is the optimal strategy for fashion retail going forward.”
With large internet business seemingly unabated by their competitors, 2017 saw smaller businesses being pushed to the brink of online extinction. To combat the inevitable, they turned to Initial Coin Offerings (ICO) as a means of financial resuscitation. ICO’s functioned as a formidable form of crowd sourcing using cryptocurrencies as its primary financial source. Omise, a startup based in Thailand, became proof of the validity of ICO’s when they successfully raised 25 Million USD in just a few hours.
The vanishing of many more online retailers are likely to continue through 2018 as made apparent when Indonesia’s second largest telco Indosat Ooredo was forced to terminate its ecommerce website Cipika.
Zalora’s penetrative force in the SEA region has finally given in to the turbulent environment set up by its competitors, and will likely be replaced by mobile fashion and beauty apps. Many attribute Zalora’s downfall to (1) price and product variety, as well as (2) unrelenting competition by brands such as Central and MAP.
With blue-chip brands still managing high profit turnovers, these companies will soon be mandated to resolve the growing entity that is the ‘grey market’. Dishing out counterfeit goods through illegitimate businesses, the grey market will ultimately require far stronger regulations if luxury brands are to remain successful.
If there is an economic dark cloud looming over Southeast Asia, one could point out with a fair degree of certainty, the immense potential of Business to business Ecommerce. B2B is set to amalgamate the gap between offline and online businesses by providing a sales platform for other retailers and undercutting their opponents with wholesale prices.