Angela Kapp
Dec 2, 2014

Five reasons Southeast Asia may be China's younger sister

Brands expecting Indonesia to follow China's online retail development curve should look at some key differences between the two, writes e-commerce and marketing expert Angela Kapp.


For many years now, the world has been a bit obsessed with China—its 1.4 billion people, its single party system and the allure of that emerging middle class. For many global brands and retailers, China has irresistible appeal. Recently, however investments and attention have turned toward Southeast Asia and Indonesia in particular. Is it really what is next, or will it always be the not-so-successful younger sister?

Having just recently joined the aCommerce board of directors, I can’t pretend to have the same hands-on knowledge of Southeast Asia as I do of China (where I have been a senior advisor for Baozun Commerce since 2011 and was actively involved in Estee Lauder and other businesses there for many years). But in my visits to these regions I was struck by the vast difference in these two emerging markets’ retail spheres.

So, for those of you considering entering or growing your retail and/or online businesses there, here are my top five differences to note (because who has time to read and digest any more than five?).

1. Country versus a region

This is perhaps the most important difference. China, is one country, and while there are some significant in-country regional differences (such as level of sophistication and dialect), there is one governing party and one focus. While no one will tell you it’s easy doing business in China, it’s at least one set of challenges, versus trying to navigate the entire SEA region, from mature, English-speaking markets like Singapore to small but sophisticated countries like Thailand and the vast archipelago of Indonesia. My advice: pick one country, then gradually expand, using local partners to help you navigate the challenges.

2. The e-commerce landscape and your partners online

China’s colossal e-commerce market is now the biggest in the world, dominated by C2C, which is still 65 per cent of the total e-commerce market. The stars of this show are Alibaba (Taobao, TMall, Alipay, Ali Express and Ali logistics) and its ecosystem of service providers, Tencent (WeChat, QQ) and

While Amazon is present, it does not dominate. No Facebook, Google or eBay. On the other hand, SEA online is such a mixed bag. In Singapore, cross-border reigns as the English-speaking citizen/expats happily order from abroad to get the best prices, or they just walk down Orchard street where thousands of foreign brands have set up shop. In Indonesia, consumers are still learning about retail, so e-commerce remains nascent.

How will SEA grow up? As part of the Alibaba/Tencent family or more aligned with the global market dominated by Google, Amazon, Apple and Facebook? One thing is for sure: The marketplaces are here to stay. So if you don’t have a channel-management strategy, get one soon because whether you like it or not, your brand will be present in the region's various marketplaces.

3. Infrastructure

China is at least five years ahead of Southeast Asia in terms of the infrastructure necessary for retail and online commerce. In China, most retailers/etailers guarantee delivery of 1-2 days in Shanghai and Beijing, and 2-3 days in most Tier 2 and 3 cities. Once outside of Singapore and Malaysia, there is a lack of quality providers. I’ve recently joined the board of a full-service e-commerce solutions provider, aCommerce, and I’m constantly surprised by how much investment they’ve made in being a trusted fulfillment and delivery service. This is particularly true when it comes to e-commerce. While second- and third-tier cities hold some of the greatest potential for e-commerce, getting a package to its destination outside of major cities can be a major challenge.

4. Local competition

Here, China and SEA have some similarities. Don't underestimate your local competition in either country! Here are just two examples. In China, Ochirly (pictured above), a young woman's fashion brand, was invested by L Capital (the venture arm of LVMH), which paid $200 million for 10 per cent of the company. Yes, that's right, a company you've probably never heard of has 400 stores in China and a valuation of more than $2 billon. Your competition in China could be a multinational corporation or a guy in a one-room apartment in Shenzhen who is happy to make RMB 10 more this week.

In Indonesia, local marketplace Tokopedia just recently raised a whopping $100 million from SoftBank and Sequoia to become the dominant C2C platform. Across SEA, Line—although not a “local” company—dominates the messaging space over WhatsApp or Viber, with over 60 million users in the region and Thailand being its biggest market outside of Japan. Line partnered with local e-commerce enablers to ramp up its e-commerce and mobile commerce initiatives. This is also why local full service e-commerce companies such as VelaAsia, SingPost and aCommerce have popped up to help service the market with better local knowledge and resources. 

5. Last and most Important: The cost-conscious consumer

Every consumer is value-conscious, but the Chinese take it to a whole new level. Many people take delight in negotiating (or shall I say haggling) the price down. Consumers in SEA are very similar in terms of price sensitivity. A small move, such as a 10 per cent increase in price, can tank orders by 100X in a matter of few days, as an agency discovered under a client’s request.

E-commerce in this region was accelerated by the daily deals wave spearheaded by companies such as Groupon and Ensogo that catered to customers’ need for great value. The increasing popularity of price-comparison sites like Priceza or Rocket Internet’s PricePanda testify to this as well. Recently, Lazada ran it’s Singles’ Day promotions and was able to achieve record sales by offering steep discounts.

Southeast Asia has potential, but one must remember it is a long way from being the massive consumer market China is. Plus, it's a region with different cultures, regulations, retailer market infrastructure and dynamics. Brands and retailers interested in the region should pick one country and invest, working with local or regional partners that can help them learn. If it works, we may just see this little sister become the belle of the ball.

Angela Kapp is president of advisory and investment company Kappcorp and a member of the boards of aCommerce and Baozun Commerce. She is a former longtime marketing executive with Estee Lauder and now works with select fashion and beauty premium brands in the US and China on consumer marketing and global expansion.



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