SHEIN wins 5 games in a row! What is the charm of this market?

Southeast Asia is widely considered to be the next potential market for cross-border e-commerce.

The Southeast Asian market is not a barren land, but it is a fact that the average customer spending is extremely low. Because of the low profit, it has always been looked down upon. However, although the average customer spending in Europe and the United States is high, the market is mature, the entry threshold is high, and the competition has entered a white-hot stage. Southeast Asia, which is close to China and has seen rapid development of the e-commerce economy in recent years, is more likely to become the next hot spot for cross-border e-commerce.

The Southeast Asia Internet Economy Report 2021 jointly released by Google, Temasek and Bain shows that the scale of Southeast Asia's e-commerce economy will reach US$120 billion in 2021, with an average annual compound growth rate of more than 60%. It is expected that by 2025, the scale of Southeast Asia's e-commerce economy is expected to exceed US$230 billion.

Many people say that the current Southeast Asian e-commerce market is in a period of rapid growth, similar to the European and American markets 10 years ago. As the saying goes, "A duck knows first when the river water warms up in spring." The first to see the business opportunities hidden behind the Southeast Asian market were the Internet giants, among which Alibaba and Tencent were the pioneers, and ByteDance was the latecomer. Currently, Lazada (Alibaba) and Shopee (Tencent) are the two cross-border e-commerce platforms active in Southeast Asia. Unlike the former two, ByteDance opened up the e-commerce market with the social media TikTok.

The manufacturing industry in Southeast Asia is not well developed, and many supply chains are still in China. Most consumer goods in many Southeast Asian countries still need to be imported from China. Therefore, there are still great opportunities in the Southeast Asian market for Chinese sellers. At the same time, the RCEP was implemented on January 1 this year, which will also stimulate the expansion of the scale of the Southeast Asian cross-border e-commerce market.

In July last year , foreign media reported that unicorn SHEIN had expanded its business to many countries in Southeast Asia and made Singapore the center of its Southeast Asian business. This year, news broke that SHEIN had moved its headquarters to Singapore. The series of big moves by the super-selling brand just reflects that this market is profitable.

Farm women and big sellers all sell goods to Southeast Asia to make money

"There are more than twelve computers lined up in a row in the room, and there is a woman sitting in front of each computer. They are typing on the keyboard, busy working." This is a scene that happens every day in Dongzhang Village, Changjia Town, Qingyun County, Shandong Province.

These women are all local farmers. Many of them have never been further than Shandong, but they rely on Facebook to sell local small products such as dried sweet potatoes to Southeast Asia.

Their management is very keen on judging hot products. Once consumers show crazy interest in a product in a short period of time, they realize that a new wealth code has come and can quickly seize this opportunity. Therefore, the income generated is also considerable. "Hedgehog Commune" reported that in this remote mountain village, more than 300 peasant women created more than 30 million yuan in profit in 2020. The income of employees ranges from 1,500 yuan to 15,000 yuan.

When rural cross-border e-commerce was in full swing in Qingyun County, Shandong, Xiaohui, who graduated from the Hong Kong Polytechnic University, also started her cross-border e-commerce journey in Southeast Asia. In just two years, she completed the transformation from a novice platform to the TOP1 seller on a single site, and easily earned her first pot of gold by selling accessories.

Xiaohui is a seller that Lazada has just launched. It is reported that in the first month after joining Lazada, she achieved a leap from 0 orders to 1,000 orders. According to the news of "Lazada Southeast Asia E-commerce", with strong execution and platform cooperation, Xiaohui's cross-border Southeast Asian cross-border e-commerce business is very smooth. Not only did she exceed 1,000 orders in the first month, but she also maintained a 380% order growth in the next three months.

Xiaohui , now only 24 years old, is busy selling products to Southeast Asia, just like the Shandong peasant women mentioned above. The difference is that the peasant women are in the remote rural areas of Shandong, while she is in Shenzhen, a gathering place for cross-border e-commerce sellers. But one thing is the same, that is, they are all optimistic about the cross-border e-commerce market in Southeast Asia.

Investor Shi Lulei once said: "If a company wants to go overseas, it must go to Southeast Asia. It has nothing to do with whether you are a giant or a small or medium-sized entrepreneur. If you can't take over the Southeast Asian market, it will be difficult for a company to become a large company with a global vision, especially in the field of e-commerce."

As a cross-border e-commerce unicorn, SHEIN is clearly well aware of this. Having already opened up markets in Europe, America and the Middle East, SHEIN began to vigorously expand into Southeast Asia in June last year, and has successively opened independent brand websites in Singapore, Indonesia (which ceased operations on July 29 last year), Thailand, Vietnam and the Philippines. It also plans to create an independent website in Malaysia in the future.

In February this year , Reuters reported that Chinese cross-border fast fashion e-commerce SHEIN may have changed its controlling entity to a Singaporean company, and the main body of its website and app has become a Singaporean company called Roadget Business Pte. LTD. At the same time, on the workplace social software LinkedIn, SHEIN has changed the address of its headquarters to Singapore.

According to marketing information platform Marketing Inactive, SHEIN plans to increase its headcount in Singapore by four times to about 200 employees by the end of this year. Marketing Inactive observed that positions such as e-commerce marketing, influencer marketing, social media marketing, and public relations are currently being recruited.

This series of actions proves that SHEIN is planning to radiate the entire Southeast Asian market with Singapore as the center.

While SHEIN is accelerating its entry into the Southeast Asian market and using Southeast Asia as a springboard to promote its global layout, another listed company and leading independent website seller has been doing well in Southeast Asia: Xiamen Jihong Technology Co., Ltd.

In response to investors' questions in March, Jihong Co., Ltd. stated that its main sales areas for cross-border e-commerce business in Southeast Asia currently include Thailand, Malaysia, Singapore, the Philippines and other countries. On April 26, the 2021 financial report released by Jihong Co., Ltd. showed that last year the company achieved operating income of 5.178 billion yuan, a year-on-year increase of 17.40%, and realized a net profit of 227 million yuan attributable to shareholders of listed companies. In addition, on April 28, the first quarter financial report of 2022 released by Jihong Co., Ltd. showed that in the first quarter, the company achieved operating income of 1.203 billion yuan, a year-on-year increase of 2.08%, and realized a net profit of 42.87 million yuan attributable to shareholders of listed companies.

Shopee and Lazada compete with each other, and the competition landscape stabilizes

Unlike independent website sellers such as SHEIN and Jihong Holdings, most sellers enter the Southeast Asian cross-border e-commerce market through two platforms: Shopee and Lazada.

Shopee , backed by Tencent , and Lazada, backed by Alibaba, are representatives of cross-border e-commerce platforms in Southeast Asia, occupying most of the e-commerce market in Southeast Asia.

In terms of traffic, the two platforms are evenly matched. Relevant data show that Shopee tops the list with 198 million visits per month, followed by Lazada with 162 million visits per month.

However, from the perspective of brand strategy, Shopee tends to adopt the personal store model, which emphasizes the price advantage of products, while Lazada tends to take the high-end image route, focusing more on guiding sellers to highlight their own brands and emphasizing the professional standards of pictures. Therefore, people also compare Shopee to "Taobao" and Lazada to "JD.com".

Now the competition between the two giants Shopee and Lazada in the Southeast Asian e-commerce market has begun.

Launched in 2012, Lazada can be said to be a pioneer in Southeast Asian e-commerce. It has been developing rapidly over the years. According to Alibaba's Investor Day event in 2021, Lazada has more than 130 million annual active consumers in six Southeast Asian countries, and its monthly active users (MAU) have exceeded 159 million. In the two hours before Double 12 last year, Southeast Asian consumers spent 22 times more on the Lazada platform than the daily average.

In recent years, Lazada's quarterly order volume has maintained about triple-digit growth for several consecutive quarters. According to Alibaba's latest financial report data, Lazada's revenue in 2021 increased by 82% compared with the same period in 2020, and GMV reached US$21 billion.

As livestreaming is gaining popularity, Lazada has also taken the lead in introducing livestreaming to Southeast Asia’s e-commerce platforms. During last year’s Double 11, Lazada’s livestreaming platform LazLive achieved 18 million views in Southeast Asia, and the GMV achieved through livestreaming also increased by 187% year-on-year. During the pandemic, the GMV generated by LazLive’s livestreaming service increased by 45% month-on-month, with more than 27 million active viewers in one month.

Currently, Lazada, which is rooted in Southeast Asia, has become the seventh largest e-commerce platform in the world.

Lazada is running very fast in the Southeast Asian race , but its competitor and latecomer Shopee (launched in 2015) is also catching up closely.

Shopee’s financial report data shows that in 2021, Shopee’s total order volume was 6.1 billion, a year-on-year increase of 116.5%; GMV was US$62.5 billion, a year-on-year increase of 76.8%.

According to Bain Consulting's " e-Conomy SEA 2021", the size of Southeast Asia's e-commerce market in 2021 is US$120 billion. The "E-commerce Industry Special Research Report: Shopee's Winning Strategy" released by Changjiang Securities pointed out that if it is assumed that 80% of Shopee's GMV comes from Southeast Asia, its market share has now reached 42%.

According to data.ai, in the fourth quarter and full year of 2021, Shopee ranked first in total downloads among global shopping apps; among Southeast Asian shopping apps, Shopee continued to rank first in average monthly active users and total user usage time.

The competition between Shopee and Lazada in Southeast Asia can only be described as "stalemate". Both of them want to find an opportunity to break the deadlock and take the lead. And they have indeed used some means.

On December 6, 2021, Alibaba carried out a new round of organizational restructuring. Jiang Fan was transferred to the head of "Overseas Digital Business". Among the subsidiaries facing overseas markets under his charge is Lazada. In addition, Alibaba has also sent more resources to Southeast Asia.

Shopee is not to be outdone by its competitors . It has developed completely different applications for users in different countries to adapt to local conditions. For merchants, Shopee provides a variety of subsidies to help them open stores quickly in a short period of time.

It can be said that Alibaba and Tencent are now in a fierce battle. At this time, ByteDance suddenly entered the Southeast Asian cross-border e-commerce market using social media as a carrier.

ByteDance takes a different approach and uses social media to expand into the e-commerce market

The story ByteDance wants to tell in Southeast Asia is completely different from that of Alibaba and Tencent.

Southeast Asians love social media very much. The penetration rate of social media in the region is as high as 81%. According to eMarketer's forecast, the penetration rate of social networks among netizens in Southeast Asia is the highest in the world. All of this provides fertile ground for the development of social e-commerce.

With the development of the Internet, more and more Southeast Asians are beginning to accept the interactive shopping model of live shopping. According to data from Bain & Co., the total value of social e-commerce in Southeast Asia reached US$109 billion in 2020, accounting for about 44% (or US$47.96 billion) of the Southeast Asian e-commerce market. In addition, according to The Ken, in the next five years, the share of social e-commerce will further increase, accounting for 60% to 80% of the total share of the Southeast Asian e-commerce market.

According to Reuters, TikTok has been downloaded 360 million times in Southeast Asia, which has a total population of 630 million. The "2022 State of Mobile" report released by Data.ai (formerly App Annie) recently showed that TikTok is among the top five most downloaded apps in the social software markets of Indonesia, Singapore, Thailand, the Philippines, Vietnam and Malaysia, and ranks first in the download rankings in Indonesia, Thailand and Malaysia. It can be said that TikTok has become popular in Southeast Asia.

In this context, ByteDance chose a different path from Alibaba and Tencent, using the short video social media TikTok to leverage the Southeast Asian e-commerce market. ByteDance chose Indonesia as its first stop.

According to Momentum Works data analysis, Indonesia's total e-commerce sales in 2020 reached US$32.2 billion, ranking fourth in the world after China, South Korea and the United Kingdom, and is the largest e-commerce market in Southeast Asia. In addition, in Southeast Asia, Indonesia is TikTok's largest market, with about 200 million users in Indonesia, accounting for more than 40% of the entire Southeast Asia region. Not only that, Indonesia has about 75 million monthly active users, currently ranking first in Southeast Asia.

Based on the above factors, TikTok's e-commerce business TikTok Shop was first launched in Indonesia. It is understood that in 2021, TikTok's e-commerce GMV was about 6 billion yuan, less than 30% came from the UK, and the remaining 70% (4.2 billion yuan) all came from Indonesia. It is reported that there are many merchants doing TikTok in Indonesia who earn more than 10,000 yuan a day.

TikTok Shop has achieved great success in Indonesia, which has greatly increased ByteDance's confidence in the social e-commerce market in Southeast Asia. On April 25 this year, TikTok Shop was launched in four more sites: Thailand, Vietnam, Malaysia, and the Philippines. Starting from April 30, sellers can use the yellow cart to sell products in videos and live broadcasts.

Since the Southeast Asian market adopts a targeted invitation system in the early stage of launch, merchants need an invitation code to complete the settlement. With one invitation code, you can settle in TikTok Shop's cross-border stores in four Southeast Asian countries.

This time, registration is open to all cross-border sellers. There are two ways to obtain the Southeast Asian cross-border store invitation code:

1. Sellers who have opened a UK store can obtain an invitation code from the designated agent of TikTok Shop to open a store. However, three conditions must be met: (1) the store has been open for more than 30 days and has an account manager; (2) the GMV of the UK store has been greater than US$100 in the past 30 days; (3) there are no high risks or violations during the operation period.

2. Sellers who do not have a TikTok UK store need to have experience in operating Southeast Asian platforms or independent sites such as Shopee and Lazada, and their GMV in the past 30 days must exceed US$5,000, and their comprehensive performance indicators must be greater than 4.5 stars or not less than 95% before they can apply.

E-commerce will be worth 230 billion US dollars in 2025, with huge potential

The three major Internet giants, Alibaba, Tencent and ByteDance, have started a battle for supremacy in Southeast Asia because the region's e-commerce market has unlimited development potential.

According to the "2021 Southeast Asian Internet Economy Report" jointly released by Google, Temasek and Bain , the catalysis of the epidemic has made Southeast Asia, with hundreds of millions of people, a new blue ocean for cross-border e-commerce. The scale of the Internet economy in Southeast Asia is expected to reach US$363 billion by 2025, exceeding the previous forecast of US$300 billion. By 2030, the scale of Southeast Asia's Internet economy will reach US$1 trillion. By 2030, the scale of Southeast Asia's Internet economy will reach US$1 trillion.

In this process, e-commerce remains the biggest growth driver of Southeast Asia's Internet economy. The report predicts that e-commerce revenue in 2021 will be US$120 billion, with an average annual compound growth rate of more than 60%. It is expected to exceed US$230 billion by 2025.

A report released by Southeast Asian logistics company Ninja Van Group in cooperation with DPDgroup also showed similar results. NinjaVan said that since the beginning of the COVID-19 pandemic two years ago, the number of online shopping consumers in Southeast Asia has increased by about 70 million, and is expected to grow to about 380 million by 2026. In the past 12 months, Ninja Van delivered about 2 million packages per day in six regions including Singapore, Malaysia, the Philippines, Indonesia, Thailand and Vietnam, confirming the huge growth of e-commerce.

In addition, RCEP has been implemented on January 1 this year, which has stimulated the expansion of the cross-border e-commerce market in Southeast Asia. RCEP is a trade agreement between the 10 member states of the Association of Southeast Asian Nations and China, Japan, the Republic of Korea, Australia and New Zealand. By reducing tariffs and non-tariff barriers, a free trade agreement to establish a unified market among 15 countries is currently the world's largest free trade zone.

Today, RCEP has achieved initial results in the field of cross-border e-commerce. At the end of March, the three consuls general of Vietnam, Thailand and Malaysia carried out live streaming sales through Lazada, recommending Guangxi specialties such as jasmine tea, oranges, edible bird's nests, medical supplies and snail noodles to Southeast Asian countries.

One of the three major opportunities that RCEP brings to cross-border e-commerce is to promote the replication and promotion of cross-border e-commerce standards and rules. After RCEP comes into effect, RCEP member countries can increase regional cross-border e-commerce cooperation, reduce the policy and operating risks of cross-border e-commerce companies in different countries, and improve the efficiency of customs clearance of goods.

This is undoubtedly a major benefit for cross-border e-commerce sellers in Southeast Asia. The biggest fear of cross-border business is regional policy restrictions. Now with the implementation of this rule, this problem has been solved. It is understood that at present, driven by the RCEP dividend, some sellers have indeed achieved rapid growth in order volume.

Now that many Southeast Asian countries have relaxed entry restrictions, the Southeast Asian economy, which was affected by the epidemic, is recovering strongly. According to data released by the General Department of Vietnam Customs, in the first quarter of this year, Vietnam's exports amounted to US$89.1 billion, a year-on-year increase of 13.4%; of which exports in March amounted to US$34.71 billion, a month-on-month increase of 48.2% and a year-on-year increase of 14.8%.

Under such circumstances, the e-commerce environment in Southeast Asia will surely improve steadily.

Southeast Asia cross-border e-commerce

Lazada

SHEIN

Shopee

TikTok