Investors outside of Asia may be familiar with major China Tech firms – the famous BAT: Baidu, Alibaba and Tencent – and their business operations in China (Baidu = search/ Alibaba = e-commerce/ Tencent = chat).
But, not many may know what these companies are doing to grow their business. Well, here’s one growth story from Southeast Asia, and specifically, Singapore.
Southeast Asia is a region that tends to be ignored by western world, due to its location.
Singapore has been in the news lately for attracting some big Chinese investments, thanks to geopolitical tensions between China and superpower rival, the US, as well as neighbour, India. Chinese companies hoping to avoid the cross-hairs are moving resources to safe haven, Singapore.
Zoom is looking to build a data centre here and ByteDance is reportedly planning to make Singapore the regional beachhead. Tencent, too, is making Singapore its regional hub.
A 2018 study by Temasek and Google on e-commerce in Southeast Asia reported that there are around 350 million mobile-first internet users in Southeast Asia. These Southeast Asian users are said to be the most engaged mobile users globally.
These numbers are driving e-commerce and related industries:
- The online food delivery business has hit $2B in sales and it is projected to exceed $8B by 2025
- E-commerce deliveries have grown from 0.8M to 3M (pictured below)
Increase in e-commerce delivery volume (Source: Google/ Temasek)
A brief history growth of China Tech’s grip on e-commerce in Singapore
Prior to foreign investment in this sector, the e-commerce scene was led by blog shops, according to PaySpace Magazine. The magazine cited figures from blog platform, LiveJournal, stating “that it had over 50,000 Blog Shops and 1.2 million users in Singapore; pulling in more than US$72 million in transactions for that year.”
Since then, several key e-retailers have set up shop in Singapore:
- Online grocer, RedMart, was set up in March 2011 by Vikram Rupani, Rajesh Lingappa, and Roger Egan. It offered “a wide range of groceries and household essentials with the convenience of online ordering and home delivery 7 days a week”. The company was backed investors as Forrest Li (CEO of Garena), Toivo Annus (Skype co-founder), Golden Gate Ventures and others. TechCrunch reported that Alibaba-owned Lazada acquired RedMart in 2016 for around $30-40 million.
- Online retail store, Lazada, was set up in 2014. The company was backed by German parent Rocket Internet, and a CNBC report noted that the e-commerce business had grand plans to become the “Amazon of Southeast Asia”. Rocket Internet is behind companies like Zalora and Easy Taxi; it is known to emulate business models of popular tech business. Lazada was acquired by Alibaba in 2016 for a cool $4B.
- E-commerce website, Shopee, was launched in 2015 and it has grown to be a giant in the regional e-commerce scene. It is the retail arm of Sea Ltd, a company that started out as a gaming publisher under the name, Garena. Backed by Chinese giant Tencent, Sea Ltd was listed on the New York Stock Exchange in 2017.
As seen above, the competition in the e-commerce space is shaping up to become a race between the China Tech giants – one of Tencent-backed Shopee versus Alibaba’s Lazada (which includes Taobao & Redmart) – to win over the large number of Southeast Asian customers.
Alibaba is listed in both the New York Stock Exchange as BABA, and in the Hong Kong Exchange (HKEX) as 9988. Tencent is listed in HKEX as 0700. I don’t think ByteDance is listed yet, but with it’s ongoing problems in the US and India, investors may want to look at investing in social media giant: Facebook (FB). Facebook may be the main beneficiary in ByteDance’s ongoing challenges.
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