Alibaba is not backing down over its plans for Asian e-commerce dominance. Recent reports suggest that the Chinese behemoth just purchased Reliance Capital’s stake in Paytm, worth $42 million, and this just after Alibaba invested a sizeable $177 million in the Indian payment and commerce platform. It’s all too evident that China has its sights firmly set on the lucrative Indian market to add to its portfolio of client nations in the Asian region.
As I wrote in December last year, it’s evident that Alibaba and Amazon are entering a proxy e-commerce Cold War in Southeast Asia. With a population closing in on 1 billion people, it makes sense for Southeast Asia to be increasing in importance as it presents the final frontier of Asian societies and markets. Southeast Asia, unlike East and North Asia, where birth rates are slowing, is still booming. This battle threatens to transmogrify the geopolitical and socioeconomic landscape of the region.
Today, e-commerce enthusiasts in Southeast Asia wait with bated breath for Amazon to bring Prime to Singapore and warehouses to Indonesia. They watch intently as Amazon slowly eats away at India (with Alibaba slowly making stabs at Amazon’s plans with a $3 billion investment into India). While at the same time, Alibaba is ratcheting up its investments in the region. Indeed, Amazon’s presence in the Southeast Asian region is close to nil, minimal. At present, it resembles the fight between an octopus and an eel, hiding in coral reef. The octopus, Alibaba, slowly wraps all its arms around Southeast Asia, while the eel, Amazon, lies in wait, wondering when and where to strike. But it may be too late for the eel.
Alibaba’s latest investments into Paytm is a clear signal of its growing investment presence. Fintech is one of Alibaba’s domineering tentacles into the region. Then there’s Lazada with its recent investment (worth $1 billion) in Redmart (undisclosed). But Alibaba’s tech investments and acquisitions are not the only parts of the whole. With Jack Ma personally advising Malaysia’s digital economy, it’s hard not to see how Alibaba can potentially become a regional champion. As Alibaba heads into an ecosystem play, propping up and sustaining a select handful of e-commerce players, it also becomes the poster child for Chinese interests in the region. It shows China’s commitment to Southeast Asia as a winner.
This is in stark contrast to a potential for Amazon to be seen as a foreign force entering the region. Indeed, we need to see Alibaba in the context of Chinese investors’ overarching trend of divestment from the mainland and heightened interest in the global economy. Xi Jinping’s speech at Davos is no joke. Globalization is on the table for China. But we also need to see why Southeast Asia is so important to China. Don’t forget, of the 50 million Chinese people living abroad, 32.7 million are in Southeast Asia. Alibaba is merely the visible tech arm of a larger ecosystem of Chinese investment. People are over-indexing on China’s investments into Africa and totally missing the much more important Southeast Asian pivotal position. To Alibaba, Southeast Asia is what Europe is to Amazon, a natural extension of its culturally and economically contiguous market. Alibaba’s base in China naturally extends to Southeast Asia just like Amazon’s base in the USA naturally extends to Europe. Alibaba has much more at stake than Amazon does.
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Seen in the above context, we can see why Alibaba has so much more at stake than Amazon. Indeed, it’s even possible to speculate that Amazon’s e-commerce interests in Southeast Asia are lower priority than Europe, etc. where basket size is much smaller than they’re used to.
And frankly, Amazon’s business model does not suit Southeast Asia yet. Even as it dominates marketshare in India, it is still a high end e-commerce business, which costs a massive amount of money for overhead, infrastructure, etc. The kind of e-commerce enjoyed by Americans and Europeans today (not to mention the gadgets that come along with it: Dash, Echo, Kindle, etc.) is decades away from domination in Southeast Asia. Alibaba’s emphasis and grassroots strategy give it short-term and long-term staying power.
Of course, India is a no brainer. It’s the world’s second most populous market after China, which is virtually inaccessible to Amazon. JD and Alibaba simply dominate. So the question is, does Amazon care enough about Southeast Asia, after India, to strike? But enough if it does, is it too little too late? Whatever the rationale at Amazon headquarters may be, Amazon is undoubtedly caught on the backfoot in Southeast Asia, and this will present rippling effects for regions intimately or indirectly connected, like the Middle East and Eastern Europe. If India costs $3 billion to win, how much more would Southeast Asia cost, with its many islands, governments, and cultures? Indeed, it’s possible Amazon has already lost.