The global battle for eCommerce dominance shifted East again in recent weeks, with Amazon launching its Prime Now service in Singapore - just as Walmart unveiled plans to deepen its partnership with JD.com in China, as it gears up for its August 8 shopping festival. Meanwhile, the regional eCommerce powerhouse Alibaba said it would invest $1 billion to increase its stake in Southeast Asian online retailer Lazada.
eCommerce Success in China
The moves come at a time when eCommerce continues to grow at an impressive rate in the region. China, where online sales represent 18 percent of the overall retail market, is well established as the world’s largest eCommerce market. eCommerce sales in the country grew by 33.4 percent in the first six months of 2017 to 3,107.3 billion yuan ($461 billion), according to China Internet Watch. Southeast Asia and the Indian subcontinent are heading in the same direction. A 2016 Google study predicted Southeast Asia’s internet economy would grow to $200 billion by 2025.
To-date however, Asia has delivered mixed results for US retailers and online pure plays. Amazon is relatively successful in Japan, where it is the second-largest eCommerce site after Rakuten, with about 12 percent market share. However, despite 13 years of effort, and a lot of investment, it struggles to scrape into the eCommerce Top 10 in China, where its online market share is less than one percent.
Walmart has been a bit more successful in Asia’s largest market. Rather than relying entirely on eCommerce, it has taken an omni-channel approach to expansion. It has over 450 physical stores in nearly 200 cities in China, and a partnership with JD.com for eCommerce and click and collect. It seems happy to fulfil its eCommerce goals in the country as an investor rather than a direct player, having increased its stake in JD.com from five percent just over a year ago to more than 12 percent today.
The approach is likely to continue to pay-off. JD.com reported 41 percent year-on-year growth in Q1 2017, and recent figures from industry analyst IGD, pointed to big box grocery retailer sales in China, continuing to grow on average 3.5 percent a year up to 2021.
As it stands, however Alibaba is streets ahead of all comers in China, and it continues to diversify to maintain its leadership. The one-time online purest has stepped up its efforts to combine physical retail with online in the supermarket space. In recent months, it opened three new supermarkets, under the Hema banner. Since 2015, Alibaba has opened 13 Hema stores, with ten in Shanghai, two in Beijing, and one in Ningbo.
As the campaign for regional eCommerce dominance spreads beyond China, Southeast Asia and India are now firmly in the crosshairs of the eCommerce and retail giants. Amazon has explicitly said its Prime Now launch in Singapore is a play for the wider Southeast Asia market and in parallel, it is investing heavily in India.
If Amazon is not careful, India is another massive market where it is at risk of coming off second best to local competition. Flipkart, which has emerged as Amazon’s primary rival in the world’s second most populous country, was recently rumored to be close to acquiring another national player, Snapdeal – although recent reports confirm the deal is dead. According to Techcrunch, Snapdeal has raised over $1.5 billion from investors that include Alibaba.
Alibaba has no intention of giving the US giant free rein in India or elsewhere. The recent Lazada investment gives Jack Ma’s company significant beachheads in fast growing eCommerce markets such as Indonesia, Malaysia, the Philippines, Thailand, Vietnam, and Singapore, as it aims to get ahead of Amazon’s regional push.
For brands who want to succeed in Asia, the battles between the big online retailers means there will be many opportunities to use the online channel as a route to growing sales in the region.