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Friday, 11 August 2017

(The Star) Amazon leaps into the regional online space

It's been two weeks since the world’s largest online retailer Amazon arrived in Singapore.

While many expected “everything” to be offered online, synonymous with its “the everything store” tag line, some were left “less than satisfied” after visiting the virtual store.

They found the product range “limited” although others liked the “two-hour delivery” promise, unrivalled in the republic for now.

We can’t fault anyone for expecting too much because Amazon has built a reputation for itself – that it can provide “everything”.

Amazon has evolved from a book delivery company into the world’s largest online retailer, taking advantage of technology to sell almost everything online.

It has in place all that is required to make its business work – merchants, warehouses, logistics and financing methods in the markets it is in.

Its sales from April to June this year amounted to US$38bil. South-East Asia is a growing market still in its infancy. Amazon is using Singapore as its gateway to the region.

However, it is a latecomer compared to China’s Alibaba and Tencent. Lazada has also established a strong foothold here in six countries in South-East Asia.

Alibaba paid US$1bil in June to increase its stake in Lazada while Tencent invested in Tokopedia (the largest e-commerce platform in Indonesia) and bought Thailand’s Sanook. The presence of Alibaba and Tencent in the region explains why Amazon is here.

South-East Asia has its own unique issues, from regulation and language barriers to logistics, given the many islands around, especially in the Philippines, as well as traffic jams.

Also not to be forgotten is that broadband connectivity is not the same in every country – some are fast while others are at a snail’s pace.

Logistics, delivery issues and payment methods are things Amazon has to iron out before it ventures into other countries in South-East Asia.

There are also several other online sites that it will have to contend with both in the region and in Malaysia. The competing sites include Zalora, 11street Malaysia, lelong.my, eBay Malaysia, Fave and EZBuy Malaysia.

The attraction is the market of 640 million people in the region, of which 70% are below the age of 40, middle class and with huge purchasing power. There are over 260 million Internet users and the figure is expected to grow to over 480 million by 2020.

Frost & Sullivan has forecast online product sales to grow to US$71bil by 2021 from US$16bil in 2016, which explains why Amazon is here.

China is the biggest online retail market with sales reaching US$752bil in 2016, and this is expected to grow to US$1.089 trillion in 2021, while India’s online market is estimated to be at US$64bil by then.

Amazon’s entry certainly sets a new dimension in online sales in South-East Asia from product range to quality and pricing, and may accelerate the maturing of the regional e-commerce market.

It could also force industry consolidation, where the bigger players buy or merge with smaller ones, creating bigger giants in this region.

More importantly, it is an opportunity for our merchants to explore all these sites to sell online, which is the way forward.