China Internet Corporations Spreads to Southeast Asia: The War Is Near at Hand
Source: View: 226 Date: 2015-11-18

More and more China Internet Corporations begin to realize the development potential of Southeast Asia area.

Long before 2012, Southeast Asia has not been able to get overseas attention, even if the Internet Corporates are willing to explore the overseas market, they are usually more willing to pay their attention on the more practical market. This is because the Southeast Asian market has about 600 million people, but the Internet and mobile Internet are not as popular as the United States or Europe, compared with the Southeast Asian market, the development potential and target users of other markets are more obvious.

However, in recent years, benefit from the development of low-cost smart phones and mobile networks, the Internet penetration rate of Southeast Asia area has exceeded the expectations of industrial insiders, and now it is still in rapid growth. Compared with many mature markets, it is obvious that there are more opportunities remaining to be searched here.

The field of e-commerce is especially regarded. With the rapid rise of utilization rate of mobile phone in Southeast Asia in recent years——According to the data, the 27% online sales amount of the first half of 2015 has completed by the mobile phones——Compared with the amount of the world's 35%, this development can be described as very fast. So, the mobile e-commerce rises abruptly, the Southeast Asian market begins to become the overseas important layout market of China E-commerce Companies.

Of course, opportunities coexist with challenges, although the development potential is huge, the Internet corporations which try to enter Southeast Asia also face the problems of talents, technology, payment.

War of BAT and Mobile Phone Manufacturer Is Near at Hand

In recent years, the development of e-commerce market in Southeast Asia is rapid. The data shows that the volume of retail sales of e-commerce only accounts for 2% of the total volume of retail sales in the six main countries of Southeast Asia such as Indonesia, Malaysia, Singapore, Vietnam, Thailand and Philippines; the Swiss bank thinks that this figure should be even lower, only 0.2%.

This means that the e-commerce has huge development potential in Southeast Asia. According to the prediction of Frost&Sullivan, a global business growth consulting company, the annual growth rate of e-commerce of Southeast Asia will reach 37.6%, the Internet sales amount will increase from 700 million USD in 2013 to 3.45 billion USD in 2018. Of course, compared to China, this is still a negligible figure.

Chinese e-commerce companies which constantly explore the overseas market certainly will not ignore Southeast Asia, which is a virgin land not fully excavated.

In May 2014, Alibaba made a big move on the Southeast Asian market, to invest 250 million USD to Singapore Post, in order to together build the logistics platform of cross-border e-commerce. Another news announces that JD has set up its Indonesian subdomain website, stays low-key to carry out e-commerce business in Indonesia, and also launches a local Android client side.

The local e-commerce companies in Southeast Asia also begin to be especially regarded by the outside world. Tokopedia, founded in 2009, is a C2C e-commerce website in Indonesia (Similar to China's Taobao). This website received 100 million USD of E round financing from two investment institutions which are Softbank and Sequoia Capital in October 2014.

Some analysts point out that Tokopedia is likely to be acquired by companies such as Flipkart, Amazon or Alibaba, to expand the market share of network retail in Southeast Asia.

Bukalapak is an Indonesian local e-commerce supplier similar to Tokopedia, CEO of this company, Achmad Zaky indicates in as interview with Tencent Technology that they have been in contact with Alibaba.

In addition to the field of e-commerce, some China's Internet giants also take the Southeast Asian market as an important strategic position to expand overseas markets.

For example, Tencent Wechat focuses on the Southeast Asian market, and hopes to develop their user group here; Baidu has released many new products to explore the market potential of Thailand and Vietnam. The insiders of Baidu have said that they will provide a series of tool-type applications such as Hao123, Baidu Tieba, Baidu Zhidao, Baidu Antivirus in Vietnam, Thailand, Indonesia, Malaysia and other countries, at the same time Baidu also sets up Center of Singapore Studies for language development in order to develop the local services of Southeast Asian market; in September 2015, UC Browser under Alibaba also sets up Southeast Asian headquarter in Jakarta, plans to further expand the investment and layout of the Southeast Asian market in the future.

The General Manager of Indonesian branch company of Alibaba Mobile Business Group, Zhong Wei expresses to Tencent Technology that UC began to develop and launch overseas first version in the beginning of 2010, the first overseas office position was located in India at that time, and then taken India as core to radiate to the entire South Asia area, intervene in the Indonesian market as well as the entire Southeast Asian market.

And for China's mobile phone manufacturers, the Southeast Asian market is experiencing the process of turning from 2G to 3G, and the development of mobile Internet is very rapid, therefore, Southeast Asia naturally becomes the "Sweet pastry" competed to get by China's smartphone makers.

President & CEO of Vivo, Shen Wei indicated at the end of 2013 that, in the next five years, the international market will focus on four countries which are India, Indonesia, Thailand and Malaysia. The reason why Vivo chooses the Southeast Asian market to first enter because it is related to Chinese culture, the Southeast Asian market is also the market influenced by the Confucian cultural circle.

The General Manager of MI in Southeast Asia area, Steve Vicks also believes that Southeast Asia area will play an important role in the scramble of global smartphone. Vicks says, "Southeast Asia is a huge market for us, it has more than 600 miilion people. Up to now, we market in this area has developed to Singapore, Malaysia, Indonesia and Philippines. We strive to expand our business to other countries in the near future."

Besides, some China Internet corporations also indirectly spread to the Southeast Asian market by the way of investment.

As everyone knows, travelling in Southeast Asia is one of the first batch of travelling destinations when "Travelling abroad" is just popular in China, the features such as rich and colorful exoticism, not too high level of consumption and geographical location with relatively close distance to China attract a large batch of tourists who want to go abroad. For a time, travelling in Southeast Asia becomes a popular route of travel agency, "Singapore, Malaysia, Thailand" are known as the golden triangle of the tourism market in Southeast Asia.

However, the language barrier is an obstacle leading to the inconvenience of communication, the facilitation of businessman and traveller has a brilliant future. In May 2014, announced that it had invested Grabtaxi, a mobile  taxi booking application company of Southeast Asia. This taxi booking app, be on line in Malaysia in 2012, has carried out business in 26 cities of 6 Southeast Asian countries and regions, this company also indicates that it will constantly expand the Southeast Asian market.

The shared economy begins to yield good results in the Southeast Asian market, which attracts the attention of China Internet companies. In August 2015, Grabtaxi announced that it had completed a new round of 350 million USD financing, CoatueManagement, China Investment Corporation and Kuaidi & Didi Group are the investors of this round.

Didi appears as the role of investor, just as the President of Didi Liu Qing said, Didi is willing to communicate and share their own accumulation of big data algorithm and diversified business operation experience with them. What's more, Grabtaxi will help Didi to enhance the understanding of Chinese market in Southeast Asia, meanwhile it also shows its ambition of global expansion.

Exploration of Chinese Entrepreneurs

While the domestic big Internet Corporations aim at the emerging markets of Southeast Asia, some entrepreneurs from China also begin to seek new opportunity here.

WOOK, a B2B e-commerce platform, is a mobile Internet product incubated by the inside of Indonesia VIVAN TELECOM CO.,LTD, this company has worked on the Indonesian market for four years. The founder of WOOK, Xu Longhua once had worked at TCL for seven years, by a casual chance, he travelled to Indonesia and found the local business opportunity.

Xu Longhua expresses to Tencent Technology that Indonesia has a large population, and the consumption concept is forward-looking, the demand for products is also comparatively active, but due to the backward development of Indonesian manufacturing industry, there are a lot of opportunities to be searched here. So, he chooses to cut from the smart phones and accessories, matches domestic supply chain, matches China's huge manufacturing resources with the Indonesian market, to do electronic business-orientation in the field of circulation.

In Indonesia, traditional product flow direction is from manufacturers to distributors, and then to the retailers, this flow link is a one-way link. WOOK integrates a large numbers of retailers, they can make group-buying with large scale and customize products at the upstream manufacturers, and obtain a certain bargaining power. Xu Longhua believes that this point must rely on the mobile e-commerce supplier to achieve. It needs to use the way of mobile terminal to connect Chinese products and Indonesian retailers, but not simply do the information connection, "Only when shortening the origin chains and subtracting the price difference, providing higher value for the retailers, integrating the integration of supply chain, can the value be indeed created."

Doing B2B mode is decided by the local logistics conditions of Indonesia.

Indonesia is an island country, the logistics base is poor, the distribution cost is high. If doing B2C, the more dispersed and uncertain orders will further promote the distribution cost. Besides, the penetration of local online payment in Indonesia is very low, the traditional retail channels are still the mainstream of local sales products in the long time of future.

The Director of International Business Department of UCWEB Technologies Ltd., Ye Zhicong expresses his analysis of market opportunity to Tencent Technology. Take Indonesia as as example, the fields that Chinese companies can enter are divided into three categories: First, the kind of tools, the windows of opportunity of light operation, strong productization are smaller and smaller such as UC, cheetahmobile, 360; Second, the products of moderate operation are needed, not global universal, the local features needed to be integrated, and the fields which don't need so strong offline support will obtain more opportunities; Third, some projects of severe operation will appear, that is to say the ones need to land in local.

Besides, the games also are the blue sea which Chinese entrepreneurs pay attention to.

Newzoo, a Dutch market research company, launches a data report aiming at the game market of Southeast Asia in 2015. This report says that Southeast Asia is the game market with the fastest increase in the world. In Southeast Asia area of 2014, the game income of six countries which are Vietnam, Singapore, Philippines, Malaysia, Thailand and Indonesia accounts for 99% of the total income of market, it is expected to be doubled by 2017, up to 2.2 billion USD.

Southeast Asia's economic growth prospects, huge population base, and the rapid growth of mobile Internet, all these ensure that, in the next few years, the game market scale of this area will remain increase by double-digit percentage. The growth rate of game market in Southeast Asia exceeds Latin America and other similar regions. Some angecies predict that, by 2017, 85% of the growth rate of global game industry comes from Asia.

Lots of Challenges Coexist with Opportunities

Although there are lots of opportunities, China's Internet corporations still face many challenges in Southeast Asia.

First, the Technical Personnel Are Scarce

From Singapore which is the friendliest to enterprises, to Thailand which strictly issues visa or work permit, the opening extents for market of various countries in Southeast Asia are different to the overseas investors, many start-ups have found that it is a tough problem of recruiting new persons and retaining well-qualified local personnel.

A number of Chinese entrepreneus in Indonesia expresses to Tencent Technology that it is hard to recruit qualified technological personnel. Their solutions are recruiting technical positions at domestic, putting the development work to be carried out in China, and Indonesian local teams are mainly responsible for the operation.

Second, the Local Operation

The profound local reform is the key of overseas development. The Director of International Business Department of UCWEB Technologies Ltd., Ye Zhicong expresses to Tencent Technology that, in the overseas market, UC cooperates with many different websites, operators, makes local updates in the contents, "According to the needs in different regions, targetedly make profound vertical".

Effectively utilizing local social media also can help these companies to make effective promotion. Some data shows that the users of active social media in Southeast Asia currently exceeds 200 million people, equivalent to the 1/3 Southeast Asian people using the social media. A number of Indonesian local Chinese entrepreneurs express to Tencent Technology that, due to the expensive offline promotion fees, they usually make promotion on the social platforms such as Facebook, Twitter.

Third, Lack of Trust, the Penetration of Mobile Payment Is Low

In Southeast Asia, the trust between the business suppliers and consumers is in fact not high, so the local consumers are more willing to accept the payment way of "Cash on Delivery", some data shows that this rate accounts for 67% of the entire payment ways; and choosing the payment way of credit card is the second choice of the local people, with the ratio accounts for 21% of the entire payment ways.

Bhinneka is a B2C e-commerce company in Indonesia, the founder Hendrik Tio expresses to Tencent Technology that the payment ways of users in this platform are 40% of Cash on Delivery, 30% of bank transfer, the other is paid by credit card.

Although the global e-commerce companies such sa eBay, Groupon have began to enter the Southeast Asian market, in Thailand, it also appears mobile payment company such as 2C2P, the penetration of mobile payment is still not optimistic compared with the penetration of mobile phones in the Southeast Asian market.

Zhong Wei says, Indonesia doesn't have good mobile payment tools. "Especially for the game company, its main challenge is not to cultivate the payment habit of users, but to solve the problems of payment ways and inconvenient channels."

Just as the above, the mobile Internet with rapid development, the open consumption concept of consumers, not fully developed development opportunities, all these make Southeast Asia area start to get more and more attention, but it still remains to be seen if it want to become the focus of China and the world.

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