Komodo commerce: e-tailers battle in Southeast Asia

Fri Apr 15, 2016 6:52am EDT
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By Aradhana Aravindan and Eveline Danubrata

SINGAPORE/JAKARTA (Reuters) - With its $1 billion buy of online retailer Lazada, Alibaba (BABA.N: Quote) has signaled Southeast Asia as a regional e-commerce battleground - with 600 million people, and no shortage of logistical headaches.

The region has the potential to help global retailers offset slowing growth momentum in their core markets, but it comes with complex regulatory, logistical and language barriers. Internet connections can be slow and the vast archipelago landscape can prove daunting to even hardened logistics experts.

In an interview in October, Lazada's chief operating officer Pierre Poignant highlighted some of the hurdles in delivering packages in the Philippines, for example.

"In some places, there's just no address. It's like 'take the house on the left'. And in many places you have to take a boat to get there... It can be several days or even weeks to reach some very remote island," he told Reuters.

A study by CLSA last year showed that almost a quarter of the online orders it placed in the Philippines failed to arrive, and multiple delivery delays were reported.

Such obstacles mean the market is highly fragmented, with no dominant force. Start-up funds say international companies wanting to get in are likely to follow Alibaba's route by buying existing operators rather than trying to go it alone.

"The strategy of coming in, looking for a local player who has shown traction and buying them in order to get a foothold is a very good one, and we will see more of that," said Vinnie Lauria, a founding partner at Golden Gate Ventures which is invested in marketplace Carousell and online grocer Redmart.

"Lazada has done a very good job of operating in multiple countries. That's not something Alibaba is familiar with."   Continued...

Employees at online retailer Lazada fill orders at the company's warehouse in Jakarta, Indonesia April 15, 2016. REUTERS/Darren Whiteside