- Southeast Asia's youthful population and high internet usage rates make it an attractive market for e-commerce giants, particularly those with Chinese backing.
- Chinese companies like Temu, TikTok, Lazada, Shopee, and Shein are reshaping the Southeast Asian e-commerce landscape, intensifying local competition and driving global expansion.
- Southeast Asia has become a strategic imperative for Chinese companies, serving as a vital stepping stone for their global aspirations due to its vibrant economies and growing internet penetration.
In the realm of Southeast Asian e-commerce, one player has been making significant strides – Temu. Founded in 2018, Temu quickly gained popularity as a social-oriented e-commerce platform, drawing attention from shoppers across the region. Notably, Temu's journey into Southeast Asia is more than just a success story. This expansion further highlights a broader pattern where Chinese enterprises venture into the Southeast Asian market. In this exploration, we'll dive into Temu's journey, offering insights into why Southeast Asia's e-commerce scene is so appealing and how Chinese investments are shaping the region.
Tapping into Southeast Asia's E-commerce Potential
Southeast Asia is swarming with young people. Countries like Indonesia, Malaysia, the Philippines, and Vietnam have over half their population under 35. According to statistics from the United Nations, as of the end of 2022, the population of Southeast Asia has surged to nearly 680 million. Among them, around 33 million are ethnic Chinese, bringing cultural diversity and strong business connections. This mix sets the stage and exceptional potential for massive e-commerce growth in Southeast Asia.
The youth in Southeast Asia are tech-savvy and open to online shopping, driving high internet usage rates. This provides fertile ground for e-commerce giants, especially those with Chinese backers. According to the Southeast Asia Internet Economy Report, Southeast Asia had a whopping 460 million internet users in 2022, with a 76% usage rate, surpassing the global average of 59.5%. Notably, countries like Indonesia, Vietnam, the Philippines, and Thailand ranked among the top 20 globally for mobile app downloads, distinguishing them in the world of emerging markets.
Southeast Asian economies are on the rise, with data from the International Monetary Fund (IMF) indicating that countries like Vietnam, the Philippines, Indonesia, and Malaysia are set to outpace the global average in real GDP growth from 2022 to 2024. These nations are expected to grow faster than even economic giants like China and the United States, making them attractive for businesses seeking rapid expansion. This highlights their distinctive characteristics as high-growth, incremental markets.
The Chinese Capital Fueling SEA's E-Commerce Boom
In the dynamic realm of Southeast Asian online commerce, Chinese firms or companies backed by significant Chinese capital, are reshaping the digital marketplace in the region. This influx intensifies local competition and offers a gateway for Chinese brands to expand globally. Clearly, Chinese companies are making this move because they recognize Southeast Asia with untapped potential and a crucial steppingstone to their global aspirations.
The following Southeast Asia e-commerce companies with significant backing from Chinese capital, including:
- Temu: Temu operates as a global online marketplace under the umbrella of the international e-commerce company Pinduoduo (PDD) Holdings Inc., headquartered in Shanghai. Temu's journey into the global market began with its debut in the United States in September 2022. Within less than a year, it extended its reach to 40 international sites, spanning countries such as the United States, Germany, Japan, and South Korea.
On the other hand, Pinduoduo (PDD), founded in 2015 by Colin Huang, a former Google engineer, has emerged as a powerhouse in China's e-commerce landscape. Pinduoduo's unique group-buying model encourages users to team up for discounts on a wide range of products, from electronics to clothing and groceries. This approach has resonated particularly well with price-conscious consumers, propelling Pinduoduo's impressive growth.
By the end of 2021, Temu had already gathered a user base exceeding 100 million, a testament to its remarkable growth trajectory. Temu boasts several distinct advantages, including a robust logistics infrastructure, a strong e-commerce presence, and promising opportunities in the budget-friendly market segment. Recently, Temu made significant strides by expanding its operations into the Philippines and Malaysia, raising the possibility of further expansion into additional Southeast Asian countries. Locally, it will face competition from major e-commerce platforms like Lazada, Shopee, and TikTok Shop. This move reflects the company's ambition to tap into the region's rising e-commerce potential.
- TikTok: TikTok, the international version of the popular short video app known as Douyin in China, was launched in May 2017 under the umbrella of ByteDance, a Chinese tech company that has been a pioneer in applying AI to the mobile internet. ByteDance, established in March 2012, has a global presence with TikTok operating in over 200 countries and regions. Besides Tiktok, Lemon8 and CapCut are also part of ByteDance's portfolio and are actively expanding in Southeast Asia.
As one of China's most internationally influential social media apps, TikTok has thrived in Southeast Asia, particularly in Indonesia, where it boasts approximately 99.79 million users as of July 2023, according to Statista data. Additionally, it has garnered substantial user bases in other Southeast Asian countries, including Vietnam with 44.85 million users, the Philippines with 36.46 million users, and Malaysia with 22.55 million users. Notably, TikTok's operational strategy is characterized by its localization efforts tailored to meet the specific needs of different markets. TikTok not only attracted over 100 million users in the region but also launched TikTok Shop in 2021, entering the e-commerce realm and becoming a multifunctional platform that combines social media and online shopping.
- Lazada: Founded in 2012, Lazada has become a major player in the Southeast Asian market. Since Alibaba's substantial $2 billion acquisition of Lazada in 2016, it has continued to invest in the company, with current investments from Alibaba totaling over $6.83 billion. Indeed, for Alibaba, globalization is a critical future strategy, particularly as the Chinese market approaches saturation.
Recent data from Measurable AI, a company specializing in emerging markets, reveals that Lazada boasts an impressive customer retention rate of over 60% in key Southeast Asian countries, including Thailand, the Philippines, Malaysia, and Singapore. Being part of the Alibaba Group, Lazada enjoys the backing of Alibaba's technological prowess, financial support, and operational expertise, which sustains its competitiveness in the e-commerce sector. Lazada's commitment to localized operations, aligning strategies with specific local market needs, further cements its competitive edge in Southeast Asia. Nevertheless, amid escalating competition and changing consumer preferences, Lazada must persist in recruiting new sellers and improving user retention to maintain its success.
- Shopee: Founded in 2015, Shopee stands as a prominent e-commerce platform in Southeast Asia and operates as a subsidiary of Sea Limited, with Tencent holding a 39.7% ownership stake. Initially launched in Singapore, Shopee swiftly expanded its operations to encompass markets like Malaysia, Thailand, Indonesia, Vietnam, and the Philippines. Impressively, in the third quarter of 2022, the platform processed a staggering 1.7 billion orders.
With Tencent's substantial support, Shopee had the financial resources to provide buyers with cost-effective or complimentary courier services, enhancing its competitive edge. This, coupled with Alibaba's ownership of Lazada, underscores the significant influence of Chinese companies in the Southeast Asian e-commerce landscape. As a result, the fierce competition between these two industry giants is set to persist, further highlighting the region's potential as an e-commerce hub.
- Shein: Apart from the prominent players like Alibaba, JD.com, and Pinduoduo, there's a relatively discreet yet influential contender in the international B2C fast fashion e-commerce arena - Shein. Established in 2012, Shein is one of China's less publicized unicorn companies, led by its founder, Xu Yangtian, hailing from Shandong province. Despite rumors of Xu Yangtian obtaining permanent residency in Singapore, it hasn't dampened the spirit of the Chinese fashion e-commerce giant. Shein has set its sights on Southeast Asia, offering trendy and budget-friendly clothing and accessories that have swiftly captured the attention of youthful consumers. The company has rapidly expanded across the Southeast Asian region, solidifying its status as a go-to fashion destination for many young individuals.
Moreover, Shein, the formidable player in the fast-fashion domain, is ambitiously targeting a revenue of $60 billion by 2025. This goal is part of its strategy to bolster investor confidence in the lead-up to a potential IPO later this year. According to information from a Shein management presentation, the company is striving to attain an annual revenue of $58.5 billion by 2025, effectively doubling its 2022 revenue figure of $22.7 billion.
In summary, these Chinese companies have not only intensified local competition but have also created opportunities for Chinese brands to expand globally. By embracing localization and gaining an in-depth understanding of local markets, these companies are achieving significant success and will continue to open doors for the overseas expansion of Chinese brands.
Furthermore, it's essential to emphasize how significant the Southeast Asian market is for Chinese companies. With its vibrant economies, youthful population, and increasing internet penetration, Southeast Asia is no longer just a regional market; it's a global player. Chinese capital is flowing into the region because it represents a vital steppingstone for these companies to achieve their global aspirations. In this bustling e-commerce arena, success in Southeast Asia is not just an option; it's a strategic imperative.
