Alibaba, Amazon to face off in region as both continue international expansion plans

Updated 2016-12-27 10:03:54 Global Times
A 7-Eleven convenience store in Phuket, Thailand, that accepts Alipay, on Saturday. (Photo: Zhang Ye/GT)

A 7-Eleven convenience store in Phuket, Thailand, that accepts Alipay, on Saturday. (Photo: Zhang Ye/GT)

Out to SEA

After securing dominance in its home market, China's Alibaba Group Holding is racing to conquer the still nascent e-commerce market in Southeast Asia. Although the size of the market in Southeast Asia pales in comparison with China's, it is expected to grow 32 percent on average each year through 2025, according to one industry executive. U.S.-based Inc also has its sights set on the region, making a face-off with Alibaba all but certain. Alibaba got to the Southeast Asian market first, but its victory is far from assured. Experts said there is no silver bullet for success, especially in an evolving e-commerce market facing difficulties of its own.

Among the glossy, green trees in Phuket, the largest island in Thailand, the landscape is dotted by many 7-Eleven convenience stores that accept Alibaba Group Holding's mobile payment application Alipay.

"Alipay is available in almost all 7-Eleven convenience stores here, and people are encouraged to use it with random discounts," an employee at a 7-Eleven store on Thanon Patak Road in Phuket, who declined to be identified, told the Global Times on Saturday.

7-Eleven has added Alipay to its payment options at more than 9,000 outlets across Thailand since April.

Alibaba's move to get Alipay into Thailand is widely perceived as a way to attract Thai smartphone users and technology-savvy consumers as it expands into Southeast Asia in 2016.

In April, the Chinese e-commerce giant acquired a controlling stake in Lazada, considered the Amazon of Southeast Asia, for billion.

In November, Alibaba furthered its expansion by taking over the Singaporean online grocer RedMart via Lazada.

Alibaba's CEO Zhang Yong said several times at press conferences in 2016 that the company's next major goal is to help merchants on its platform enter the Southeast Asian e-commerce market.

However, expanding into Southeast Asia might be easier said than done. In the region, many people are familiar with the concept of e-commerce by name only and don't have much of an inclination to try it.

A new frontier

A 20-something resident in Phuket surnamed Kung was surprised when she heard that Chinese shoppers spent 120.7 billion yuan (.4 billion) on online purchases via Alibaba's bazaars on November 11 alone.

"My friends and I seldom shop online and do not really intend to do so because we can get whatever we need in the market or at nearby convenience stores," Kung told the Global Times on Friday.

The woman's biggest concern is quality. She dislikes that she can't feel the texture of clothing sold online and worries about unwittingly buying knockoffs.

The poor reception for online shopping is reflected on the streets of Phuket, where few express deliverymen can been seen - unlike in China, where they are commonplace.

Lazada Thailand CEO Alessandro Piscini acknowledged on Thursday that Southeast Asia has a small e-commerce industry.

At a press conference with about 200 Chinese reporters in Phuket on Thursday, Piscini cited the region's 3 percent online retail penetration rate (as of November 2015), which represented about billion in sales. By comparison, China had an online retail penetration rate of 14 percent and online sales totaling 3 billion during the same period.

Still, Piscini was optimistic, saying that the small penetration rate shows that Southeast Asia has a large untapped market for e-commerce. He predicted that the region's e-commerce market will grow by 32 percent annually to more than 0 billion by 2025, thanks to local government encouragement for the digital economy and urbanization, as well as the region's rapidly growing middle class.

By 2020, Southeast Asia's GDP is expected to grow by an average rate of 5.5 percent a year, Piscini said. Middle-class consumers around 35 years old will account for 60 percent of the region's overall population, which will grow to 668 million from the current 644 million, according to latest estimates by the global statistical information provider Worldometers.

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