Forget China, There’s An E-Commerce Gold Rush In Southeast AsiaJuly 17 2015
There’s a myopia blinding e-commerce players to the reality of opportunities in Southeast Asia. Everyone is looking at Asian economies from under the shadow China casts on the economic landscape, which can’t help but obscure the picture.
China is one of the most developed markets in e-commerce today and with mobile commerce via WeChat, the dominance of Alipay and the entrenched online shopping behavior it is arguably more developed than Western markets.
However, businesses are, in fact, wasting their time and resources expanding into China and Southeast Asia will be the next gold rush.
It’s Too Late For China
The Chinese b2c e-commerce market is saturated. Only the deepest pocketed players have a chance
In the Chinese e-commerce race the market giants have taken too large a lead for too long in China.
With Alibaba’s Tmall and JD dominating the business-to-consumer (B2C) space (51 percent and 23 percent of total B2C sales in China respectively) and Taobao owning over 95 percent of the consumer-to-consumer (C2C) space, only those with the long term vision (i.e. the deepest pockets) have any chance of surviving, because they can out compete anyone.
This is largely because B2C e-commerce, unlike pure tech companies, still benefits from economies of scale.
With Tmall and JD owning close to three quarters of the Chinese B2C e-commerce market, there just isn’t much room for both “smaller” global and local players like Yihaodian, Suning, Amazon and VIPShop to compete.
The sheer scale and volume that these players wield from their first mover advantage in the world’s most populous country means they enjoy efficiencies in branding and marketing through lower media costs and through word-of-mouth marketing, as well as logistics and sourcing through preferred rates and stronger bargaining power for warehousing and shipping goods nationwide.
“Smaller” players such as Amazon, Rakuten, and Neiman Marcus entering the market struggle to compete because of fewer domestic resources, a lack of understanding of the Chinese market, as well as slower execution. Recent examples include Macys and Neiman Marcus shutting down their China e-commerce initiatives and Amazon throwing in the towel and opening a store on Tmall, China’s largest B2C marketplace.