By Roger Lu, Senior Vice President, Head of Southeast Asia Research
Southeast Asia is in the midst of an e-commerce revolution. This is supported by Alibaba’s recent acquisition of Lazada, the Chinese internet giant’s biggest overseas acquisition to date. But despite the rapid growth and gaining traction of the online market in the last three years, it remains populated by a fragmented mix of regional and local players struggling to strike the right chord with consumers and establish a dominant position.
This month, GLG hosted an event with Claude Donato, GLG expert and former Regional Director, Head of Mobile Asia-Pacific of eBay to hear his views on the region’s growth outlook. His takeaways include:
- Opportunities in this region are only just beginning to gain momentum. Donato sees evidence of this in South Korea and China significantly more retail is captured online than in Southeast Asia, where ecommerce represents a very small fraction total retail market in the last five years.
- Vertical market players are experiencing a shift in power and amassing market share in a space traditionally dominated by global players.
- Over the next 18 months, Donato believes many new players will fail. He says, we will ultimately see an e-commerce market evolve to be dominated by two to three key regional players as seen in markets such as the US with Amazon and eBay and China with Alibaba and JD.com.
- By 2019, we can expect to see a few healthy e-commerce IPOs and at least one major international player that will either launch or relaunch their brand.
Donato shared insights on the types of untapped opportunities this growth could deliver:
- First, the infrastructure required to power e-commerce businesses will mature along with the industry, most notably in logistics.
- As local players gain bargaining power and seek scale, expect more strategic alliances and consolidations.
- Incorporating e-commerce models into old economy businesses will create new purchasing patterns and open the doors for a raft of mobile payment and FinTech platforms.
Donato also weighed-in on how e-commerce startups might succeed in such a nascent market:
- It’s all about growth. Priority for a young e-commerce company should lie in rapid growth and not focus too much on operations or fundraising too soon.
- A fragmented market presents more potential for businesses to unify and disrupt. Businesses should look for strategic alliances with competitors.
- For larger countries within the region, such as Indonesia, businesses should stay focused on a vertical market. The opposite applies for smaller countries.
The event painted an optimistic view of the e-commerce upside in Southeast Asia. Donato concluded by pointing out that prospects for the industry are further boosted by recent regulatory developments. Grassroots innovation corroborated by a supportive business climate looks to have set the stage for an emerging generation of Southeast Asian e-commerce giants.