Venturing into Southeast Asia

Wang Xiang

Chinese e-commerce giants vie for a share of the lucrative Southeast Asian market.

Over the last few years， Southeast Asia has become one of the globes most promising emerging e-commerce markets. A recent report released by the market survey firm Research&Market shows that e-commerce businesses account for only 1 percent of the retail market in Southeast Asia， far lower than the figure in China – 10 percent. Yet beginning in 2015， an increasing number of Chinese e-commerce businesses – including e-commerce leaders Alibaba and JD.com – have dipped their toes into the Southeast Asian market， which has promoted the development of e-commerce in the region.

Joint Ventures in Thailand

On Nov. 2， 2017， Chinas leading online retailer JD and one of Thailands largest retailers Central Group jointly announced the launch of a new online retail platform providing financial technology （“fintech”） services for consumers in Thailand and other Southeast Asian countries. Under the brand “JD Central”， this platform introduces both Chinese and Thai specialty products to the global market while bringing JDs advanced logistics technology to Thailand.

“As early as March 2016， JD had already begun its cooperation with the Thai government by signing an agreement to launch a subsidiary in Thailand to introduce Thai products to Chinese consumers via e-commerce channels，” said Wang Wenfeng， CEO of Jingpaidang.com， an authorized contractor of JD. “As our cooperation deepens， we can share Chinese experiences in e-commerce with our partners in Thailand and other Southeast Asian countries， which will be conducive to the local development of e-commerce. However， due to extremely fierce competition among cross-border e-commerce businesses， its difficult for a single player to achieve supreme dominance in this market.”

The newly established joint venture allows JD， on the basis of its experience in fintech services and the state-of-the-art technologies it has accumulated through its operations in the Chinese market， to provide AI， cloud computing and other technological support for the management and logistics of the e-commerce businesses involved. After obtaining related licenses， the joint venture will provide e-wallet， consumer finance and other financial services and products. Based on its diverse offline marketplaces， Central Group will provide all-channel services including an impressive network of brick-and-mortar stores， abundant brand connections and business resources， as well as keen market insight and customer loyalty accumulated over the years in the business.

JD is not alone among Chinese firms in eyeing the untapped potentials of the ASEAN markets. According to Fan Chunyan， vice president of the retail giant Suning.com， ever since the China-ASEAN Cross-border E-commerce Platform was established in December 2016 by the China Council for the Promotion of International Trade （CCPIT） and ASEANs numerous industrial and commercial associations， Suning.com has already attracted nine ASEAN countries to market on the site thousands of products， from vegetables and fruits to food， beverage， health products and commodities for daily use. According to Tao Yu， vice president of the China-based cross-border e-commerce site DHGate.com， ASEAN， with a high mobile phone penetration rate among its population of 600 million， is set to become the worlds third largest e-commerce market.

Opportunities and Challenges

While entering the ASEAN e-commerce market is certainly tempting， Chinese e-commerce giants have found it to be anything but easy.

According to Zhang Shiwei， deputy general manager of the Information Center of CCPIT， the China-ASEAN Cross-border E-commerce Platform is still in its fledgling stage and multiple challenges remain to be addressed， including less fame in China and ASEAN countries and a small number of registered ASEAN companies selling a limited range of commodities.

“Though JDs Thai subsidiary was set up after a long period of preparation， it still has a long way to go，” said Liang Zhu， manager of the Brand Center of Jingpaidang.com. Standardization is the first issue which needs to be tackled， Liang explained. Each country or region has its own quality standard systems； both the United States and EU apply strict access criteria， suggesting possible difficulties in export access due to different quality inspection standards. Thorough study of targeted countries relevant laws and regulations on imports and exports is a necessary precondition for successful market entry.

Second， when selecting products to be marketed， in-depth investigation on the consumption habits and preferences of foreign customers is necessary in order to work out more targeted product-selection plans.

“Additionally， customs management， information protection and protection of the rights of cross-border e-commerce customers remain deficient in Thailand， along with a lack of related measures，” Liang added. “As a matter of fact， a well-developed set of supervision and management models for cross-border e-commerce has yet to be established in both China and Thailand.”

In response， Chinese firms have taken cautious steps towards adopting different policies when expanding into Southeast Asias e-commerce market. By grabbing stakes in both Lazada， one of the largest online shopping sites in Southeast Asia， and Redmark， a Singaporean online grocery store， and accompanied by the simultaneous initiation of their online payment service， Alibaba will soon realize its goal of all-region coverage， though further efforts are needed for increased market share. However， JD has been caught in an awkward position in the Indonesian market， where it has failed to acclimatize itself to the market. In comparison， Tencent and Baidu have been more prudent and have simply expanded their internet businesses to attract more users， while waiting for new opportunities to test the waters of the e-commerce market to present themselves.

According to Chinese Vice Minister of Commerce Qian Keming， in other Southeast Asian markets， despite the dominant presence of Alibaba and Amazon， the prospects for small businesses and startups will still be bright if they adopt a niche market orientation.