Is Amazon losing market share to Lazada in SEA?

July 29, 2013 CK Wong Category : , , ,


Lazada vs Amazon

comScore has just released 2013 Southeast Asia Digital Future in Focus report with some interesting insights. What caught our attention is none other than the online retail section.

Based on comScore's measurement, top 5 online retail sites (in terms of traffic) are revealed for 6 SEA markets - Vietnam, Indonesia, Malaysia, Thailand, Philippines and Singapore.

Amazon is in the top 5 list for 4 countries - Indonesia, Malaysia, Philippines, Singapore. Lazada too is in the top 5 list for 4 countries - Vietnam, Indonesia, Thailand, Philippines. Do take note that Lazada is also growing fast in Malaysia but not present in Singapore.

Amazon and Lazada among the top retailers in SEA

From the chart above, it is also interesting to note that Alibaba (with Taobao, Tmall) is going strongly in Malaysia and Singapore, both with sizable Chinese populations.


Lazada's growth in Southeast Asia


Perhaps some one can calculate whether the amount of money Rocket Internet invested in fast-tracking Lazada (and Zalora) would be equivalent to building a rocket exploration to Mars, anyway the scaling is immense. Therefore, it is not surprising that Lazada enjoys huge growth rate from September 2012 to March 2013 furthermore they have just started in the local markets since 2012.

Among the 5 SEA countries, Lazada has the highest traffic in Vietnam, followed by Indonesia, Thailand, Philippines and Malaysia as of March 2013. In terms of growth rate, Lazada Indonesia almost double its traffic within 6 months while the other 4 countries are also enjoying strong growth.

Lazada's strong growth in Southeast Asia

From the chart above, Lazada Malaysia had about 490,000 UV in March 2013, while our predictions earlier projected Lazada hits 1M monthly UV in June 2013.


Lazada's growing fast, so is Amazon losing market share?


As opposed to Lazada, Amazon does not have any local business & operation setup in Southeast Asia for its e-commerce business. Therefore, it is not exactly fair to compare but then Amazon is a 800 pound gorilla.

Back to the question earlier, yes, Amazon did lose market share from April 2012 to March 2013 according to comScore research. Malaysia is the country in SEA that contributes the most visitors to Amazon but it is also Malaysia's traffic that Amazon suffers the biggest drop in this region (-28% within a year).

Amazon losing market share in Southeast Asia

Is this one of the reasons that triggered Amazon to offer free shipping to Singapore? Maybe.


How about brand searches on Google?


We should get another perspective to support the claim above - Google Trends. Let's look at how many people are searching for Amazon and Lazada, comparatively.

Following is the trend of Google searches in Malaysia, from January 2012 to June 2013, and you can see the searches for Lazada is almost on par with Amazon recently.

Google Trends of Amazon & Lazada in Malaysia
Click here to check on Google Trends (Malaysia)
If we look at the trend of the same period for Indonesia, Lazada brand searches has already overtaken Amazon!

Google Trends of Amazon & Lazada in Indonesia
Click here to check on Google Trends (Indonesia)


Will Amazon do anything in SEA? Is Southeast Asia big enough for e-commerce?


Will Amazon offers free shipping to other Southeast Asia countries just like what they have done recently for Singapore? Well, the challenges are other SEA countries might not be as import-friendly as Singapore.

Even if Amazon is able to do it, the shopping experience is not optimal for customers here. CEO of Lazada, Maximilian Bittner has recently spoken in a panel discussion held in Malaysia that not every customers are willing to wait 7-14 days for the order to arrive and wondering how Amazon would handle return & exchange.

Bittner has also mentioned that he does not even see Amazon or any other local players as their competitors. This is because every e-commerce businesses should be looking at the 99% share of offline transactions.

According to Euromonitor, e-commerce share of the whole retail market (physical products only, excluding services like travel) is lesser than 1% for all Southeast Asia countries except Singapore in 2011. Even in 2016, Euromonitor is projecting only Malaysia will join Singapore to achieve more than 1% online share.

Does that also imply Southeast Asia countries have huge e-commerce growth potential?

comScore's report concurs as both reach of retail category and minutes spent per visitor on retail category for most SEA countries are below world's average.

Huge e-commerce potential in Southeast Asia

This probably explains why Rocket Internet is so aggressive in this region, but Southeast Asia has its own challenges where SEA IS NOT EU. You can't just treat SEA as a whole as every country here is unique on its own.

So the question is, will Amazon follow suit? What are the chances of Amazon setting up operations here? If you look at Amazon's global expansion track record, they focus on big countries with big populations.

Will Amazon take another route by acquiring Lazada (as what Rocket Internet is hoping for)? Only time will tell. Another big question goes to Lazada, whether they have years behind them as that's what took Amazon to make profit by keeping prices low with razor-thin margin. Even today, Amazon is banking on their media and cloud (AWS) businesses.


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