A Closer Look At Alibaba’s Southeast Asian Ambitions

Alibaba (NYSE:BABA) is slowly expanding its operations in four Southeast Asian countries – Singapore, Thailand, Indonesia and Malaysia. After entering into a cooperation agreement with the Government of Thailand to help develop the country’s e-commerce landscape, the company announced a partnership with the government of Malaysia to develop an e-hub termed the Electronic World Trade Platform.  This hub will facilitate cross-border trade with a fulfillment hub based near the Kuala Lumpur Airport and an online cross-border trading services platform, linking this hub to the original one in Hangzhou. With this partnership, Alibaba will build a cloud computing platform in Malaysia to support small and medium enterprises and also offer financial support for business to business (B2B) trade between Malaysia and China.

Alibaba has now partnered with Lazada (an online shopping platform) to bring Taobao – its online marketplace – to Singapore. This partnership is aimed at solving the difficulties Singaporeans have faced transacting on Taobao, when they generally relied on agents such as ezbuy to shop on the Chinese website. This partnership will create a dedicated online store linked directly to Taobao, which will be translated to English, and order management will be done by Lazda. This initiative should enable Alibaba to generate higher revenues from Singapore. Last year, Alibaba invested $1 billion into Lazada, making it the controlling shareholder of the company.

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Developing Infrastructure In Growing Markets 

As it looks at growth opportunities outside of China, Alibaba is slowly expanding in several regions including India and Southeast Asia. E-commerce is still in relatively nascent stages in some of these economies, such as Thailand, but is likely to grow rapidly in the coming years. A study conducted by Google and Temasek estimated the size of the Southeast Asia e-commerce market at $5.5 billion in 2015 and projected that this market will grow to nearly $90 billion by 2025. However, the relative lack of infrastructure, online payments ecosystem and cross-border e-commerce have prevented significant growth to an extent. With its partnerships in these Southeast Asian countries, Alibaba is looking to provide solutions for these issues and, once the requisite infrastructure is in place, drive significant growth.

As Alibaba looks to expand outside of China, the company is looking to develop e-commerce in markets where e-commerce is in its earlier stages, rather than competing with established players such as Amazon in the U.S. Southeast Asia holds strong promise, and Alibaba has a strategy in place to establish itself in the region, which could become a long-term growth driver for the company.

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