Clash of e-commerce titans in South-east Asia

Lazada CEO Maximilian Bittner says the company is looking forward to seeing how Amazon will differentiate itself, when asked about an incursion by the world's largest online retailer. Lazada, South-east Asia's largest e-commerce site, intends to delv
Lazada CEO Maximilian Bittner says the company is looking forward to seeing how Amazon will differentiate itself, when asked about an incursion by the world's largest online retailer. Lazada, South-east Asia's largest e-commerce site, intends to delve deeper into online groceries next year with the acquisition of RedMart, which gives it a foothold in Singapore.PHOTO: BLOOMBERG

Alibaba Group Holding and Amazon.com are about to clash in Southeast Asia. And Lazada Group, which Alibaba bought this year for US$1 billion (S$1.4 billion), will be right at the heart of that conflict.

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

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

FIGHT FOR DOMINATION

Both of them will want to dominate South-east Asia. Alibaba has acquired companies to shorten the learning curve and grow faster. It's going to give Amazon a good fight.

ASSOCIATE PROFESSOR THOMPSON TEO of the NUS Business School.

Now, with the acquisition of RedMart, it also has a foothold in Singapore, from where it plans to delve deeper into online groceries next year. The company is on the prowl for investments and acquisitions to shore up its supply chain.

Lazada's home turf is shaping up to be the next battleground for Alibaba co-founder Jack Ma and Amazon chief executive Jeff Bezos.

The region, while still lacking the transport and payments infrastructure crucial to e-commerce, has become the world's fastest-growing Internet arena, with a combined populace of 620 million.

"It's a jungle out here," Lazada CEO Maximilian Bittner said when asked about an incursion by the world's largest online retailer. "We are looking forward to seeing how they will differentiate themselves."

Now that Alibaba has established its dominance of China and Amazon has taken the lead in the United States, both are looking to make their mark overseas.

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

Amazon, meanwhile, has not yet voiced its intentions for South-east Asia, but the industry expectation is that its constant quest for growth will lead it there by next year.

TechCrunch reported last month that the company is likely to bring its Prime delivery service and Amazon Fresh to Singapore in the first quarter, using the wealthy, cyber-savvy nation as a springboard to the rest of the region. 

"Both of them will want to dominate South-east Asia," said Associate Professor Thompson Teo of the NUS Business School. "Alibaba has acquired companies to shorten the learning curve and grow faster. It's going to give Amazon a good fight."

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

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

"We see ourselves as a logistics control tower in South-east Asia," Mr Bittner said. "The world is shifting towards a borderless e-commerce system and that's very much the vision of Alibaba and us."

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 next year, he said.

BLOOMBERG

A version of this article appeared in the print edition of The Straits Times on December 16, 2016, with the headline 'Clash of e-commerce titans in South-east Asia'. Print Edition | Subscribe