Having established a dominant position in China, ecommerce giant Alibaba is setting its sights on expanding in Southeast Asia. Last week the Chinese firm inked a deal with the Thai government to speed the development of the country’s ecommerce sector.
The agreement calls for ecommerce platform Lazada—the leading ecommerce site in Thailand—to provide ecommerce training to 30,000 small- and medium-sized Thai businesses. Alibaba acquired a controlling stake in Lazada earlier this year.
The deal also calls for Alibaba to advise the country’s postal service, Thailand Post, on shipping and logistics.
Ecommerce makes up just a tiny sliver of Thailand’s total retail sales (1.5%), but it is growing rapidly. eMarketer projects that ecommerce sales, excluding travel, will grow at a rate exceeding 15% annually over the next four years, reaching total $5.69 billion by 2020.
While other large international ecommerce players like Rocket Internet and Rakuten have been pulling up stakes in Southeast Asia this year, Alibaba has dug in.
Alibaba has the capital to outlast local competitors in order to gain market share, as well as deep experience handling payments and logistics problems in emerging markets. And it owns Lazada Thailand.
But Alibaba faces two potentially significant challenges in Thailand. One is that Thailand still lags behind developed markets in terms of internet usage. eMarketer estimates only 49.8% of the population of Thailand uses the internet as of 2016. Markets that are still in the early stages of internet adoption tend to need time to grow into ecommerce.
The second challenge for Alibaba is the other 800-pound gorilla in the global ecommerce sector: Amazon, the only competitor with the budget and will to battle Alibaba in a Southeast Asia turf war.
Alibaba already competes with Amazon in India via two surrogates in which it holds sizable stakes: Paytm, a payment and ecommerce company, and marketplace Snapdeal. The battle shaping up in India is likely a harbinger of things to come in Southeast Asia, according to Pawoot (Pom) Pongvitayapanu, the CEO and founder of local Thai ecommerce marketplace Tarad.com. “I think in the next 10 years there will be a few very big ecommerce sites,” Pongvitayapanu said. “Alibaba or Amazon, they‘re going to control the world. That’s coming for sure.”