Brawl looms

US ma­jor set to chal­lenge Chi­nese be­he­moth’s Lazada plat­form in re­gional on­line shop­ping

China Daily (Hong Kong) - - FRONT PAGE - By BLOOMBERG

Alibaba, Ama­zon set to com­pete in South­east Asia.

Alibaba Group Hold­ing Ltd and Ama­zon.com Inc are about to clash in South­east Asia.

And Sin­ga­pore-based on­line mar­ket­place Lazada Group SA, which Alibaba bought in April for $1 bil­lion, will be right at the heart of that con­flict.

Lazada, South­east Asia’s largest e-com­merce site, is rolling out a se­ries of ini­tia­tives in an­tic­i­pa­tion of the US gi­ant’s en­try next year.

It’s ex­pand­ing its de­liv­ery net­work within the re­gion and be­yond, via part­ners in China and South Korea.

It’s on the prowl for in­vest­ments and ac­qui­si­tions to shore up its sup­ply chain. And it in­tends to delve deeper into on­line gro­ceries in 2017, a no­to­ri­ously dif­fi­cult mar­ket it got into by buy­ing RedMart.

That’s be­cause Lazada’s home turf — South­east Asia — is shap­ing up to be the next bat­tle­ground for Alibaba co-founder Jack Ma and Ama­zon Chief Ex­ec­u­tive Of­fi­cer Jeff Be­zos.

Lazada cov­ers six coun­tries — In­done­sia, Malaysia, the Philip­pines, Sin­ga­pore, Thai­land and Viet­nam — and runs 12 ware­houses and 92 dis­tri­bu­tion cen­ters from which it con­veys goods di­rectly to buy­ers.

While still lack­ing the trans­port and pay­ments in­fra­struc­ture cru­cial to the wide­spread adop­tion of e-com­merce, the re­gion has be­come the world’s fastest-grow­ing in­ter­net arena, with a com­bined pop­u­lace of 620 mil­lion peo­ple get­ting more com­fort­able with on­line shop­ping.

Asked about the an­tic­i­pated im­mi­nent in­cur­sion by the world’s largest on­line re­tailer, Lazada CEO Max­i­m­il­ian Bit­tner said: “It’s a jun­gle out here. We’re look­ing for­ward to see­ing how they (Ama­zon) will dif­fer­en­ti­ate them­selves.”

Now that Alibaba has es­tab­lished its dom­i­nance in China and Ama­zon has taken the lead in the US, both are look­ing to make their mark over­seas. The US com­pany in par­tic­u­lar has made huge strides in In­dia.

Alibaba took con­trol of Lazada from Rocket In­ter­net in what re­mains its largest over­seas move to date. The com­pany Bit­tner started in 2012 is now piv­otal to quick­en­ing the Chi­nese e-com­merce gi­ant’s so-far ten­ta­tive steps abroad, and ful­fill­ing Ma’s am­bi­tions of be­com­ing a truly global busi­ness.

Ama­zon mean­while hasn’t yet voiced its in­ten­tions for South­east Asia, but the in­dus­try ex­pec­ta­tion is that its con­stant quest for growth will lead it there by 2017.

Techcrunch re­ported in Novem­ber the com­pany is likely to bring its Prime de­liv­ery ser­vice and Ama­zon Fresh to Sin­ga­pore in the first quar­ter, us­ing the wealthy, cy­ber­savvy city state as a spring­board to the rest of the re­gion.

It has demon­strated a will­ing­ness to spend on build­ing a lo­cal pres­ence, and an abil­ity to thrive in the dif­fi­cult, frag­mented mar­ket con­di­tions that char­ac­ter­ize South­east Asia.

In­deed, the US com­pany was among the in­vestors with whom RedMart ne­go­ti­ated to sell its busi­ness, said the start- up’s co-founder and CEO Roger Egan. He wouldn’t elab­o­rate and Ama­zon rep­re­sen­ta­tives didn’t re­spond to re­quests for com­ment.

“Both of them will want to dom­i­nate South­east Asia,” said Thomp­son Teo, an as­so­ciate pro­fes­sor at NUS Busi­ness School in Sin­ga­pore. “Alibaba has ac­quired com­pa­nies to shorten the learn­ing curve and grow faster. It’s go­ing to give Ama­zon a good fight.”

Alibaba’s ex­pe­ri­ence quash­ing Ama­zon in China may yet prove in­dis­pens­able. Cen­tral to Lazada’s ef­fort is build­ing a sys­tem that can de­liver goods into South­east Asia from mer­chants in other coun­tries, a cross-bor­der model akin to Alibaba’s.

The re­gion is now split be­tween a mere hand­ful of op­er­a­tors dom­i­nant in cer­tain ar­eas, in­clud­ing Mata­har­iMall and Toko­pe­dia in In­done­sia and uni­corn startup Garena.

Lazada counts Kerry Lo­gis­tics Net­work Ltd, DHL in Thai­land and JNE Ex­press in In­done­sia among its more than 100 lo­gis­tics part­ners. In re­cent months, it’s also teamed up with China’s State­backed postal ser­vice and CJ Korea Ex­press Corp. In Septem­ber, Lazada’s vol­ume in In­done­sia grew 2.5 times from a year ago, Bit­tner said.

“We see our­selves as a lo­gis­tics con­trol tower in South­east Asia,” he said. “We are look­ing at build­ing a bet­ter, more so­phis­ti­cated lo­gis­tics ca­pa­bil­ity. The world is shift­ing to­ward bor­der­less e-com­merce sys­tem and that’s very much the vi­sion of Alibaba and us.”

Now that RedMart’s given it a foothold in Sin­ga­pore, Lazada also plans to be­gin sell­ing gro­ceries on­line in one of the cap­i­tal cities of Malaysia, In­done­sia or Thai­land as early as the sec­ond half of 2017, he said.

RedMart has more than 150 trucks fer­ry­ing an av­er­age of 22 food items from choco­late to frozen dumplings per or­der. It plans to cut de­liv­ery times to four to six hours (from mostly next-day) by the end of the first half of 2017, Egan said. By the sec­ond half, the com­pany will of­fer an ex­press ser­vice, ship­ping gro­ceries within an hour or two of or­der­ing on­line, he said.

“Gro­cery is seen as no­to­ri­ously dif­fi­cult one to do on­line, but it’s the largest mar­ket rep­re­sent­ing 60 per­cent of over­all South­east Asian re­tail,” Egan said. “Cus­tomers are much more en­gaged. They visit twice a week so the fre­quency al­lows you to de­velop a deep re­la­tion­ship with cus­tomers.”

HUANG ZONGZHI /XINHUA

Jack Ma, chair­man of Alibaba Group Hold­ing Ltd, briefs a Thai del­e­ga­tion headed by Deputy Prime Min­is­ter Somkid Ja­tus­rip­i­tak (left) about the e-com­merce group’s busi­nesses.

LI MANGMANG / XINHUA

A Thai ven­dor scans the Ali­pay bar­code on a Chi­nese buyer’s smart­phone for pay­ment in Bangkok.

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