As Amazon celebrates 25 years of online business, its progress in Southeast Asia appears to have stalled. Why have they not made much impression in the region?
Amazon was a late arrival to Southeast Asia, its launch in Singapore in 2017 coming 22 years after it first started selling products in the US. Since then, it has not captured the imagination of the region as it might have hoped.
An October 2019 report by iPrice Group naming the most-used e-commerce portals in Singapore had Amazon way down in 12th place. Their report for the first quarter of 2020 saw Amazon in fourth place. For now, however, Lazada, Qoo10 and Shopee lead the way.
Amazon’s plans for Southeast Asia have not materialised
Late last year, Amazon tried to make further inroads into Southeast Asia’s projected US$240 billion e-commerce market, only to miss out on buying a stake in Gojek. Instead, the Indonesian-based ride-hailing app turned to Facebook and PayPal for investment.
That denied Amazon a foothold in Indonesia, Thailand and Vietnam, where Gojek also operates. Amazon has made progress in Vietnam already, entering the market in March 2018. Traders there are now being encouraged to establish marketplaces on Amazon to make up for falling sales amid the coronavirus pandemic.
Elsewhere, its presence is minimal or non-existent. Cambodians wanting to buy from Amazon must find someone to buy on their behalf, for which they pay commission and transportation fees. Young entrepreneurs are developing their own e-commerce platforms, including Buyloy and Smile Shop, to fill the gap in the market.
Another example is Sea Group’s Shopee platform, which launched in 2015. It now brings in revenues in excess of US$270 million and is a growing presence in the region. Its online gaming arm makes it a direct competitor with Amazon’s Twitch offering.
This will not have come as a surprise to Amazon. In its 2019 end-of-year report, it warned, “The Internet facilitates competitive entry and comparison shopping, which enhances the ability of new, smaller, or lesser-known businesses to compete against us.”
Big or small, competitors in the region have swallowed Amazon up. It faces significant challenges to establish its business model in a region with a wide diversity of cultures, geographical features and regulatory frameworks.
Furthermore, its approach may be part of the reason it is not delivering results. Others, including Lazada and Shopee, focus on “shoppertainment”, understanding that their consumers are happy to spend time enjoying the shopping process. “Consumers want a mobile-centric and highly social shopping experience,” explained Zhou Junjie, Shopee’s chief commercial officer.
The more time they spend on the companies’ sites, the more money they spend. Amazon, meanwhile, makes the buying process as fast as possible. While this generates results in the US, Europe and Japan, the same is not the case in Southeast Asia.
Amazon is making gains in other areas
In some areas, particularly those where it can draw on its substantial experience elsewhere, Amazon is making progress. It has recently moved into the food delivery market in India, taking on established players who are currently struggling. If it works, this could prove the catalyst for further expansion into Southeast Asia.
It also plans to open an Amazon Web Services (AWS) data centre in Indonesia in 2022, building on its presence in Singapore. In this sector, it is competing with the likes of Google, Microsoft and Huawei rather than small local firms—a more familiar environment for them. Jakarta is a good fit because the country has a high adoption rate for cloud computing.
In the Philippines, software developers plan to rely heavily on AWS features to help the country build advanced smart cities. “As technology enablers, we need powerful allies like AWS, who we can work with to attain our vision of a smarter Philippines,” said Multisys founder David Almirol Jr. “We are more effective and efficient because of them.”
Amazon has met with controversies in the region
At the same time, Amazon finds itself firefighting in fields far from home. Small businesses protested in India, accusing the company of threatening to put them out of business. Amazon responded by pledging to invest heavily in local firms.
It is also investigating claims that workers in a call centre in the Philippines were forced to work in “subhuman” conditions. These problems do little to further Amazon’s reputation in the region and divert resources away from its expansion plans.
Right now, the picture for Amazon in Southeast Asia is one of slow progress. It has made little impression on its local competitors, who admittedly had significant head starts. It would be unwise to count on the market staying that way.
The company has shown a willingness to experiment, make mistakes, and take what it has learnt forward. Amazon “should develop a distinct strategy and act locally,” advised Gervasius Samosir, a partner at YCD Solidiance, a consultancy firm.
Deridian Nurhalim from iPrice Group, referring to their latest reserach on e-commerce data in Singapore, told ASEAN Today that this is already reaping rewards. “We believe that one of the many initiatives that led to a higher number of visitors was the localisation strategy to tailor their products to Singaporeans,” he said. Meanwhile, Aparna Baradwaj, a partner at Boston Consulting Group, predicted that Amazon’s financial muscle would help it overcome certain challenges.
Tipped to be the most important company of this decade, for now, Amazon’s lack of penetration and success in Southeast Asia is an anomaly. While its growth in Singapore suggests better times ahead, it is still early days for Amazon in the region
Southeast Asia is not yet ready for the innovations that Amazon is currently focused on, such as cashierless supermarkets, drones delivering grocery and AI-powered robots. Perhaps the question to ask is not when Amazon will crack Southeast Asia but when will the region be in a position to benefit from Amazon’s next generation of cashless innovations and automated technology?