The stage is set for the Amazon vs Alibaba battle in Southeast Asia

Jack Ma and Jeff Bezos. Photo montage by Tech in Asia. Photos by Steve Jurvetson and UNclimatechange.

A momentous battle over Southeast Asia’s online shoppers looms. On one side, there’s US-based Amazon, the granddaddy of internet shopping sites, and in the opposite corner is Chinese heavyweight Alibaba. Both are formidable in their home markets and are looking for fresh ground to conquer.

Alibaba, owned by billionaire Jack Ma, has been making aggressive moves in Southeast Asia, while Amazon is reportedly planning a debut early next year.

This is not the first time the two will encounter each other – Alibaba has begun to wage a battle with Amazon in the US, just like Amazon has with Alibaba in China, and the two giants are running after India.

How do they stack up?

Different strokes

While the two companies are the most notable players in the ecommerce space, their business models differ.

Amazon, started by Jeff Bezos, sells goods direct to consumers with a markup and keeps inventory in its network of warehouses.

The giants slug it out for new territories.

Alibaba’s business, on the other hand, is online marketplaces. Its largest site, Taobao, provides a platform for sellers and buyers to trade goods – akin to eBay. It doesn’t take a commission out of the sales but charges sellers for higher ranking on site searches. The company also has Tmall for larger retailers where it generates commissions, and AliExpress, a global-facing ecommerce site where consumers from around the world can buy from Chinese merchants. Alibaba doesn’t own inventory, making its business easier to scale.

Over the past few years, Amazon has been shifting toward an open marketplace where it takes a cut of sales. Many sellers can store goods in Amazon warehouses, allowing for quick shipping to buyers.

With the two accounting for a huge chunk of ecommerce in their home markets – Alibaba is 80 percent of China’s online shopping sales; Amazon, 60 percent of the US’ – the next logical step was international expansion.

Which is why they’re slugging it out for new territories, including each other’s home base. Alibaba rolled out its cloud computing service, Aliyun, to compete with Amazon Web Services (AWS) in the US and invested in a number of US-based companies. Amazon, for its part, launched its delivery service Amazon Prime in China this week. Then there’s India, where Amazon competes fiercely with Alibaba-backed Paytm and Snapdeal, and another major player, Flipkart.

The big face-off

The rivals might soon be clashing in Southeast Asia, where there’s over 600 million consumers. While internet shopping accounts for less than 5 percent of all retail in this region, it’s expected to multiply on the back of surging smartphone use and a rising middle class.

Buy your way in or start from scratch.

But it won’t be an easy battlefield. Southeast Asia is diverse and fragmented, with each country having its nuances. That means a lot of adjusting to suit local cultures and employing a variety of marketing strategies. Import rules also differ across countries; corruption is rampant; and poor infrastructure makes shipping and delivery slow and expensive. Delivery gets even more sluggish across the thousands of islands that make up Indonesia and the Philippines, which are home to a lot of the region’s population.

Yet Alibaba is unfazed. Jack Ma’s tech titan knows the perfect way into Southeast Asia: acquisitions.

Ma’s Ant Financial, which runs mobile wallet app Alipay, invested in Singapore’s M-Daq, which debuted a forex product for ecommerce that’s supposed to make cross-border transactions less costly for merchants. Just this week, it invested in a Thailand-based called Ascend Money, which, apart from Thailand, operates in Indonesia, the Philippines, Vietnam, Myanmar, and Cambodia.

It has snapped up a stake in Singpost for the obvious reason that the Singapore giant is experienced in delivering parcels across Asia. On the shopping side, Alibaba has built a quiet empire by acquiring control of Rocket internet’s Lazada and online grocery store Redmart.

Photo credit: Pexels.

Lazada, dubbed an Amazon clone for Southeast Asia, is the leader in the six markets it’s operating in, while Redmart has robust warehousing and delivery capabilities of its own.

Amazon supposedly tried to buy its way into Southeast Asia with an offer for Redmart earlier this year, but talks between the parties reportedly collapsed.

It was this week that TechCrunch reported that Amazon is finally launching in the region via Singapore in the first quarter of 2017. Citing sources, TechCrunch said Amazon has been quietly acquiring assets, including refrigerated trucks, and making new hires. If that’s the case, it seems the US e-tailer’s starting from scratch.

Those trucks suggest Amazon would initially offer AmazonFresh – which makes groceries the first round of its Southeast Asian battle with Alibaba.

Deep pockets

Both companies are profitable, but Amazon only as of late.

While Amazon only makes money from its store, Prime, and AWS, Alibaba has strength through diversity, pulling in cash from ads, some commission, and gains from its many investments.

That reduces Alibaba’s risk from economic swings and gives it more muscle for a fight in Southeast Asia.

Overall, Alibaba already has the upper hand in Southeast Asia thanks to its connections and investments, but Amazon isn’t a contender you’d take for granted. With both possessing expertise in ecommerce and logistics, massive economies of scale, and deep pockets – it’s going to be a bloodbath.

This post The stage is set for the Amazon vs Alibaba battle in Southeast Asia appeared first on Tech in Asia.

from Tech in Asia https://www.techinasia.com/amazon-alibaba-battle-southeast-asia
via IFTTT