Image source @ Visual China
Text | List of market capitalizations, author | Ling Wang, Editor, | Zhang Zerui
In 1405, the mighty Ming Dynasty ordered Zheng He to take more than 240 sea ships and more than 27,000 officers and soldiers from the Yangtze River port to the vast Atlantic Ocean. Over the next twenty-eight years, Zheng He went to sea six more times, helping the Ming Dynasty build a large tributary trading system.
History is always strikingly similar.
More than 600 years later, the Internet giants that have flourished in the domestic market have also set their sights on overseas. With the advantages of technology, talents, funds and resources accumulated over the years, they have expanded their territory to overseas markets.
To paraphrase Son's time machine theory, the attempts of Chinese Internet companies to go to sea in the past few years have been a process of finding unbalanced zones and achieving scale expansion through unbalanced development.
Emerging markets, represented by Southeast Asia, Africa and South America, have become several important destinations for Chinese enterprises to go to sea.
Among them, Southeast Asia is one of the three most populous regions in the world, with more than 600 million people, the median age of this region is 29 years old, and the working-age population is still growing, and in several important markets - Singapore, Indonesia, Thailand, Vietnam, Malaysia and the Philippines, the trend of economic growth and the rise of middle-class consumption is obvious.
The region is also home to the world's most active Internet users, and a report by Google and Temasek shows that Internet users in Southeast Asia spend an average of 3.6 hours a day on mobile terminals.
There is a demographic dividend, there is consumption upgrades, there is user stickiness, which means that there is market potential, so Southeast Asia was once called "China's market hot land ten years ago", and some people called it a "sinking version" of China.
In this article, the market capitalization list focuses on the Southeast Asian e-commerce market, trying to discuss the gains and losses of Internet giants from the three appearances of "how to do, how to compete, and how to do".
01 Copy and paste: Ali and Tencent wrench wrists
In Southeast Asia, the most successful areas for Chinese Internet companies to go overseas are e-commerce, and the most successful companies are Alibaba and Tencent.
In terms of GMV, the top two e-commerce platforms in Southeast Asia are Shopee and Lazada, with their GMV of $62.5 billion and $21 billion respectively in fiscal 2021.
Ali and Tencent entered the Southeast Asian market and chose the same route: find the right target to invest in, and then gain control by continuously increasing holdings.
In 2012, Rocket Internet, known as a plagiarism company, took a fancy to Southeast Asia's demographic dividend and recreated the Taobao model to create Lazada. With its advertising in Indonesia, southeast Asia's largest market, Lazada's GMV exceeded US$1.3 billion by the end of 2015, surpassing the local e-commerce platform Tokopedia to become the largest e-commerce platform in Southeast Asia.
Lazada's sudden rise attracted Ali's attention. After becoming the first month of the industry, Ali agreed to invest $2 billion in two years to reach a controlling stake.
Earlier, on Singles' Day in 2014, Ma Yun put forward the goal of "half of the income from overseas customers in 10 years", and Lazada became a shortcut to achieve this goal.
A company that relied on "copying" Ali to become bigger and stronger, and finally bought by Ali, this story is extremely smooth here:
The founding team gained the freedom of wealth, Ali obtained the entrance to the Southeast Asian market, and if it continues to develop in this way, Ali, which has been very successful in the Chinese e-commerce market, will only be a matter of time before it eats the Southeast Asian market.
"This is Alibaba, with money and technology." At that time, Lazada's management agreed that Ali's arrival was a major benefit to the company's future development, and Lazada seemed to be going to the next level in all aspects.
But the realistic script is not written like this.
Almost at the same time that Alibaba took a stake in Lazada, an e-commerce platform called Shopee was first launched in Taiwan and soon entered Southeast Asia through markets such as Indonesia, the Philippines and Vietnam.
Shopee was founded by Tianjin-born Li Xiaodong, who founded the game company Garena (the predecessor of Shopee's parent company Sea Ltd) in 2009. The central figure is Feng Zhiyu, the former head of Lazada's cross-border business, who joined Garena in 2014 due to "bad work" at Lazada.
Tencent was already an important shareholder of Sea long before it entered the e-commerce field, and in 2010, Tencent began to invest in Sea and continued to increase its holdings, holding 39.8% of the shares at its peak.
Later, it was Tencent's shopee, who entered later and was not on Lazada's threat list at the beginning, who became Lazada's biggest rival.
Since 2017, Lazada began to lose the competition with Shopee, and Southeast Asian e-commerce aggregation platform Irice previously showed that Shopee surpassed Lazada in the third quarter of that year to become the most trafficked e-commerce platform in Vietnam. Then around 2018, Shopee began to overtake Lazada across the board on GMV.
When Ali and Tencent fought, another Chinese e-commerce giant, JD.com, also quietly entered the market, but JD.com did not fully adopt the investment route of Ali and Tencent, it first did it itself, and then it invested on a small scale.
In October 2015, JD.com set up an e-commerce platform in Indonesia JD.ID, and in August 2018, JD.com and Shangtai Group, Thailand's largest retail company, launched a joint venture, ID CENTRAL.
Another Southeast Asian market that JD.com values is Vietnam, and since 2017, JD.com has repeatedly invested in a Vietnamese B2C e-commerce platform called TIKI, which is the second most visited e-commerce platform in Vietnam, and now JD.com is the largest shareholder of TIKI.
However, if the giant wants to go to sea, he must do a good job, which is not a simple copy and paste process.
This is also why the most successful in the Southeast Asian e-commerce market is Tencent, which has not done anything in China, while Ali and JD.com, which have been moving forward in China, have not been so smooth.
02 Battles and conflicts
For Lazada, Alibaba's investments have brought much-needed technology, resources and capital.
From fiscal 2013 to fiscal 2015, while Lazada's net income soared to $75.5 million, $154 million and $275 million, its operating profit continued to lose money, at -$67.9 million, -$150 million and -$329 million, respectively.
Ali also brought the habitual tough style. Like Ele.me, UC Browser and other acquired companies, Ali immediately dispatched executives to settle in after investing in enterprises, eliminating the original business underlying system and repositioning and integrating the organizational structure.
For example, after 2018, a group of local talents and executives who understood the Southeast Asian market and spilled their blood during lazada's early rise have fled. Their positions in Singapore, Indonesia and Thailand were immediately filled by Alibaba's career managers, who didn't even speak English fluently and couldn't deal with locals.
The contradiction between the old Ali people who think they are more experienced on the one hand and the old Lazada people who think they know the local market better are almost irreconcilable because both sides have seemingly correct reasons.
Unlike Ali's discretionary control, Shopee embodies Tencent-style stocking culture, and decision-making is relatively free.
In the early rise of Shopee, a very important reason is the large-scale heavy investment, that is, burning money for growth, the specific approach can be divided into three points:
First, use the method of commission-free to win long-tail sellers to make up for the richness of the platform SKU.
From 2015 to 2016, Shopee adopted a 0-commission strategy, and it was not until 2017 that it began to charge 3% commission on the except For Indonesia (which continued to increase thereafter), which was lower than the 5%-7% common rate of other competitors.
This is also why the company's e-commerce business had no revenue in 2016 and non-gaap EBITDA lost $170 million, and it was not until 2018 that the revenue increased significantly, indicating that In the early days, Shopee took a small amount of monetization measures to ensure the expansion of the category.
Second, subsidies are provided to buyers by means of free shipping.
Also in 2016, Shopee and Southeast Asian third-party logistics providers launched a "free shipping cooperation project", e-commerce logistics costs are borne by the seller and the buyer, of which the seller bears the forwarding and cross-border logistics costs, the buyer bears the terminal delivery costs, and Shopee subsidizes the buyer's terminal delivery costs.
Third, fight the advertising war.
Beginning in late 2017, Shopee began advertising on a large scale in Southeast Asia, and the following year, Shopee invited spokespeople in various countries and regions with greater efforts, including Pacquiao, a national treasure boxer in the Philippines, and Sitti Noharisa, a Malaysian national singer.
During this time, Lazada slowed down.
LatePost pointed out in a report that after the former Ant Financial CEO Peng Lei took over as Lazada CEO in March 2018, he did not immediately meet the new opponent, but began to clean up the accounts and suspend the promotion.
An advertising supplier in Lazada said: "It's almost wholly owned, so you have to sort out the accounts of so many countries, right?" Until it is sorted out, the money spent is suspended. ”
Coupled with the near-pixel replication of Taobao at that time to upgrade Lazada products, as well as personnel adjustments, Lazada's work once fell into a standstill for half a year, and even the investment work was suspended.
Wait until it reacts to find that it is no longer Shopee's opponent.
03 Tik Tok entered the game, and live e-commerce boomed
Lazada and Shopee also had to guard against another formidable adversary: Tik Tok.
Since February 2021, TikTok Shop has been launched in Indonesia, Thailand, Vietnam, Malaysia, the Philippines and other places. Shi Cheng Douyin, approaching the direction of live e-commerce.
In terms of gameplay, TikTok Shop copied the layout of Douyin when it first entered the field of live e-commerce in 2019, forming a content matrix of short videos, e-commerce live broadcasts, brand official numbers, and commodity windows. Products, logistics, and payments are all the responsibility of third-party partners such as Shopify, Square, ecwid, and so on.
Relying on the platform's own traffic advantages, TikTok does not need to buy like Lazada and Shopee, but directly obtains traffic in the form of short videos and live broadcasts to attract customers to place orders.
Like Shopee, the first step of Tik Tok e-commerce in Southeast Asia is also low-cost drainage. Attract consumers by selling affordable 3C and daily necessities, which not only come from platform merchants, but also from Tik Tok's own prepared pallets.
Similarly, Tik Tok offers consumers a free shipping subsidy, skewing traffic to streamers.
This reproduces the way Douyin e-commerce plays in China, but because live e-commerce is the first model in China, to the Southeast Asian market, the dividends of the mobile Internet are booming, Tik Tok can easily rely on the first-mover advantage to obtain scale in the short term, while achieving localization.
It seems that TikTok is not in a hurry to implant too many Chinese elements into its Southeast Asian business map. Now the TikTok Shops in the Southeast Asian market are open to local merchants, cross-border e-commerce is not in the scope of consideration, TikTok is also recruiting local e-commerce and management teams in Vietnam, Thailand and Malaysia.
Now no one can ignore Tik Tok as a competitor.
In February 2022, Apple's mobile phone agency Agus opened a live streaming in its Jakarta office, with a steady monthly income of about $400,000.
Almost all Chinese merchants who do e-commerce will try to open a store on TikTok. "I didn't expect TikTok to pick up so quickly," began to become most people's reaction to TIkTok e-commerce.
Tik Tok also has a traffic advantage that neither Lazada nor Shopee has, with 240 million monthly active users in Southeast Asia.
According to data, TikTok e-commerce has a maximum GMV of nearly 6 billion in 2021, of which 70% comes from Indonesia, a populous country in Southeast Asia. The data is indeed insignificant, but who knows how much turmoil TikTok, the giant crocodile, can bring to the waves of Southeast Asia.
After all, in China, the same story TikTok has been staged once.
04 Uncertain Future: Victory or defeat is unpredictable
Neither Lazada nor Shopee has been able to make the difference in China as Alibaba and Tencent.
Lazada did not help Alibaba meet its goal of half of its overseas revenue. According to Alibaba's disclosed financial report, from fiscal 2018 to fiscal 2021, its cross-border and global retail business revenue was 14.216 billion yuan, 19.558 billion yuan, 24.343 billion yuan and 34.455 billion yuan, accounting for about 5% of the total revenue, which is far from Ma Yun's rhetoric.
Shopee, which currently looks like a leader, has not yet made money.
Shopee, which has always been known as "Shrimp Duoduo", invested a lot of marketing expenses in order to maintain the low-price strategy, which also caused Shopee to fall into a loss situation.
Shopee's GMV grew from $4.112 billion in 2017 to $62.5 billion in 2021, but during that period, its adjusted EBITDA was -$444 million, -$860 million, -$1.043 billion, -$1.3 billion, and -$2.6 billion, respectively.
In 2021, Shopee's sales and marketing expenses were $2.63 billion, equivalent to the money it lost that year.
For a long time, relying on marketing to drive growth and exchanging losses for scale is the most conventional way for Chinese Internet companies to play, which is also the way to win most Internet giants, but this style of play may not be so easy to work in southeast Asian markets.
Liu Jiannan, founder of SCI, an e-commerce operation service agency, once said that each country in Southeast Asia has its own platform and is fiercely competing, and the larger the plate, the more complex the business environment.
Although Lazada and Shopee are currently the well-deserved kings of Southeast Asian e-commerce, in this blue ocean, in addition to TikTok, which may pose a threat, there are also local e-commerce companies such as PG Mall, Blibli, Flipakart and other local e-commerce companies.
According to The Ken data, Southeast Asian social e-commerce startups completed at least 10 rounds of financing in 2021 alone, much higher than the 4 rounds in 2020. Michael Lints, a partner at Golden Gate Investments, also commented: "In 2020, Southeast Asia's social e-commerce industry has shown strong resilience, and in 2021, it has attracted a considerable amount of investment. ”
That is to say, in the Southeast Asian market, Chinese Internet companies entered earlier and also gained a certain first-mover advantage, but now they will face challenges from players in the local market together.
Their past rivalry with each other, the one they have encountered in China, is likely to repeat itself in Southeast Asia, and in a more intense manner – with the exception of Singapore, southeast Asian retail e-commerce penetration is now below 5%, compared to 24.9% in China.
From the perspective of market penetration, Southeast Asia is now like the Chinese market in 2012 and 2013.
During the same period, the most fierce price war occurred in China's e-commerce market, the war first provoked by JD.com from April 2012 to the end of the year, the participants spread from JD.com and Suning to almost all e-commerce platforms such as Dangdang, Gome, Amazon, and Vanke.
Along with the price war, it is also a knockout match, a round of rearrangement.
05 Conclusion
At present, Shopee and Lazada have won the first stage of victory, which is an important node in the process of Chinese Internet companies going to sea, which to some extent means that the Chinese Internet has long been rid of the impression of early imitation and even plagiarism of Silicon Valley.
When China's business model, technology and experience begin to be copied and verified in more and more overseas markets, China's Internet journey to the sea will only go further and further.
But the next competition may be the most important.
Over the past few years, on a global scale, a giant company has wanted to gain a foothold in the market outside the home country, but there are many stories of being surpassed by local players due to dissatisfaction.
In China, the failures of Google, eBay, and Microsoft MSN are all the same.
Whether it's Shopee, Lazada or Tik Tok, they need to be wary of such regrets happening in Southeast Asia.
Bibliography:
[1] Alibaba's War in Southeast Asia: Another Pinduoduo-style Surprise Attack, Late Post;
[2] "When E-Commerce: Shopee's Winning Formula", Changjiang Securities;
[3]《e-Conomy SEA2021》，Google TEMASEK BAIN&COMPANY