The tense rivalry between China’s largest tech juggernauts Alibaba and Tencent is also shaping the e-commerce landscape across Southeast Asia.
While Alibaba is still unrivaled by other online marketplaces at home, it is losing its primacy in the sprawling and fast-growing Southeast Asian markets.
More deals are being made on the Tencent-backed Shopee than on Lazada, a subsidiary of Alibaba after its US$2 billion acquisition in 2018.
Shopee’s gross merchandise volume in 2020 hit $35.4 billion, piggybacking on the exponential adoption of online shopping when Covid-19 forced the region’s millennials and middle class indoors.
Shopee, the upstart e-commerce operator founded merely five years ago, claims in its latest financial report that about 57% of ASEAN’s goods sold online and related transactions last year flew through its platform and courier networks.
Headquartered in Singapore and under Sea Group, 39.7% owned by Tencent, Shopee was first launched in the Lion City and later expanded its reach across fledging hubs including Malaysia, Thailand, Indonesia, Vietnam and the Philippines.
Its stellar growth in the past three years is helping Tencent chip away at Alibaba’s base in the pair’s largest overseas market, where the 600 million combined population in a unified ASEAN market means massive opportunities are still waiting to be tapped.
Cultural conflict and boardroom tussles at Lazada and the lengthy takeover by the bloated management team from Alibaba gave Shopee an opening to catch up and eventually pull ahead.
China’s state-backed Caijing magazine reported in 2018 that Jack Ma appointed Ant Financial CEO Lucy Peng to lead Lazada’s further expansion in Southeast Asia, but the latter reportedly decided to put on hold Lazada’s new marketing initiatives for a full internal review of operations and books.
Hundreds of middle-level managerial employees and technicians from Alibaba also parachuted in that year, eviscerating Lazada’s own IT and vendor management systems for a hastened transition to almost exact replicas of Taobao’s platforms from China.
Opposition from longtime vendors were brushed aside when self-assured Ma and Peng thought what proved to be workable in China would also do the magic in Southeast Asia given the geographical and cultural proximity.
An exodus of talent and executives who knew Southeast Asia and nurtured Lazada’s rise in its early days soon followed. Their positions in Singapore, Indonesia and Thailand were instantly filled by Alibaba managers not even fluent in English and who could not mingle with locals.
Lazada’s growth and expansion came to a grinding halt as Peng and her team took about six months in 2018 to staff vacancies and take charge, during which time Shopee went on the offensive to lure vendors and buyers to its side.
Shopee’s Chinese CEO Chris Feng told Tencent’s news portal qq.com that he decided back then to abandon the Singapore-focused strategy to pivot to emerging, populous markets in the region and double down on its foray into Indonesia, the most populous nation in Southeast Asia.
Shopee pitched its cheap electronic gadgets and daily consumer goods, mostly sourced from China, at Indonesian’s young netizens aged below 30. Facial masks and mobile power banks as cheap as 999 rupiahs (6 US cents) stirred much online chatter, and most young Indonesians, who make about US$229 per month according to United Nations figures, were lured to place orders.
With Tencent’s backing, Shopee also had the financial wherewithal to burn through funding to offer free or cheap courier services to buyers.
The Jakarta Times reported last year that amid the nation’s sweeping shelter-in-place order, Shopee was still offering 50,000-rupiah postage and courier waiver for every purchase of 90,000 rupiahs or above.
The broadsheet also noted that Tencent and Shopee also teamed up with the nation’s leading couriers like JNE and J&T for speedy deliveries to major islands across the nation.
By contrast, Peng’s main strategy for Lazada, used to be known for its bargain goods, was to upgrade offerings and introduce more high-street brands, replicating Alibaba’s push back home to transform its Taobao online marketplace into a posh visual mall.
But it took Alibaba two years to realize what the large swaths of consumers in Southeast Asia really needed, even though Alibaba CEO Daniel Zhang used to fly to Singapore each month and spend days hopping around the region to coordinate operations at Lazada.
One example of how Alibaba’s management became so out of touch with local pulses was an incident in 2019 when Lazada’s Vietnam CEO, a senior Alibaba executive, was eased out by his Vietnamese subordinates threatening a strike during an extraordinary boardroom meeting chaired by Zhang.
China Business News reported that since 2018, Alibaba had appointed no less than 12 regional heads to lead Lazada’s operations in four Southeast Asian countries when teams underachieved and the managerial merry-go-round started anew.
Lazada and Shopee’s different response to the coronavirus pandemic ravaging the region, in particular Indonesia, also explains their diverging fortunes.
The Caijing magazine revealed that Alibaba decided to pull all Chinese employees working at Lazada out of Indonesia in March 2020, the first Chinese company to have airlifted its staff, when Shopee was seeing a spike in new orders when brick-and-mortar shops and markets were shut amid sweeping lockdowns.
Some of the key managers at Lazada are still yet to return to Indonesia as they opt to work from China, more than a year after the start of the contagion in the region.