The main challenge for Chinese tech companies entering Southeast Asia is overcoming market fragmentation, said Charles Debonneuil, CEO of Intrepid Group, in a fireside chat with TechNode Editor-in-Chief John Artman at TechCrunch Shenzhen 2019.
Debonneuil is a co-founder and former chief marketing officer at Lazada Group, one of SEA’s largest new retail platforms. Alibaba invested $1 billion to take a controlling stake in Lazada in 2016, four years after its inception. Debonneuil called the deal a “kick-off” moment for the inflow of Chinese capital into the region. His new venture, Intrepid Group, aims to help sellers “leverage media trends around e-commerce.”
The region is home to 600 million people and is growing fast. The population is young and tech-savvy, which makes it “very attractive from a macro perspective.” But the market is “much more fragmented than it looks from the outside,” the plethora of different languages and cultures make seizing opportunities far “trickier” than it seems and a practical approach to localization is necessary for success, Debonneuil said.
Foreign players are also facing stiff regional competition. “The entrepreneurial mindset is very impressive,” he said, bringing up the example of Grab, a Singapore-based ride-hailer that took over Uber’s SEA unit early last year.
Because the individual countries are small in size, companies must expand beyond national borders to compete with more prominent players in the region. Localization is key to this expansion, he said. Back in 2012, Lazada launched operations simultaneously in five countries—Indonesia, Thailand, Malaysia, Singapore, and Vietnam.
Because of these unique challenges, “the winners will be those who can form strong local teams and adapt to local cultures,” he said. Companies looking to expand into Southeast Asia face a similar dilemma that US companies deal with when expanding into China, “do they do it on their own, or do they partner with local companies?” he said.
Offline retail limited is in the region as stores are few and far apart, so e-commerce services have a lot of room to develop, he said. “Platforms have adopted the Taobao shopping experience, but they have stronger control of their logistics to ensure consistent delivery,” he said.
Unlike in China, the adoption rate for online payments remains low, and many transactions rely on cash on delivery, he said. Also, more online payment platforms vie for market share in SEA countries.
SEA sees similar trends to China in terms of platform gamification, and livestreaming is becoming increasingly popular, Debonneuil said. “Thailand and the Philippines have the highest use of Instagram hashtags per square meter. Vietnam and Thailand have the highest number of gigabytes used per month and the highest number of videos consumed per capita,” he said.
All local e-commerce apps have either launched livestreaming platforms already or are preparing to do so, he said, adding that they are also pursuing gamified features, such as leveling up to acquire coupons for purchasing goods.
Note: This article has been updated to clarify the value of Alibaba’s investment in Lazada.