With some of the world’s fastest-growing markets, Southeast Asia is fast becoming the next arena for business competition.

With its large population, growing GDP, and an increasing number of tech-savvy customers, the Southeast Asian consumer market has a bright future, making it highly desirable to many global brands and cross-border e-commerce sellers.

With the accelerating internationalization of China’s “smart manufacturing,” which optimizes factory and supply chain processes, more and more brands are entering the Southeast Asia market. Xiaomi and DJI were among the first to do so, followed by new consumer brands, such as POP MART, Perfect Diary, and Chi Forest.

On the cusp of exploring new markets, Southeast Asia’s leading e-commerce platform has become the first port of call for many Chinese brands aspiring to expand overseas.

On September 1, 2022, Lazada held the 2022 LazMall Brands Future Forum (BFF) in Singapore in the presence of more than 500 brands, sellers, and partners. At the forum, Lazada emphasized that it will continue to provide vital support and growth opportunities for brands and sellers in many aspects, such as registration, sales, service, cross-border logistics, and market information.

It’s evident that the consumer market in Southeast Asia is a ripe opportunity. So what type of business models will succeed in Southeast Asia? Is the region’s business environment as good as described? How can Chinese brands better establish themselves in Southeast Asia?

Entering Southeast Asia

For a long time, enterprises developing in overseas markets had the impression that the Southeast Asia market values cost-effectiveness above all else. But as Tony Guo, the product director of LazMall, observed, “Over the past two years, Southeast Asian consumers’ demands for brands such as digital products, mother and baby care, makeup, and other products are becoming more evident, and consumers require more for quality and service.”

Generally, there are four categories from China and beyond that are currently targeting Southeast Asia:

1) Native cross-border brands (Chinese online brands which only cater to cross-border business)
2) Factories or white-label manufacturers seeking to build up their own brands
3) Mature e-commerce brands
4) Traditional global brands that have gradually gone digital

A natural move towards SE Asia

Native cross-border brands have the advantage, it seems, since their operations are already online and they are able to sell products to overseas markets via these online channels. In the past, most of them targeted markets in Europe and the United States; however, in recent years, they have started to concentrate on emerging markets such as Southeast Asia.

Brands can also pivot. An example is David Jones Paris, a suitcase and luggage brand founded in 1987 with its design and production departments located in Shiling, Guangzhou, known as the luggage capital of China. Initially, the brand mainly operated in Europe, the United States, the Middle East, and Russia, focusing on offline sales.

In 2016, David Jones Paris began to explore new markets through online channels. The brand joined marketplaces to test the different markets. Eventually, it became clear that Southeast Asia—a market they reached via Lazada—was a key market.

Opportunities for emerging merchants

Aside from native cross-border brands, many emerging brand merchants with their own factories are also looking to Southeast Asia as they transform their brands.

ROCKBROS, for instance, is a bicycle accessories brand that began to engage in cross-border e-commerce through platforms such as eBay, AliExpress, and Amazon in 2009. It currently has subsidiaries in Europe, North America, Japan, Australia, and other overseas markets.

In 2016, ROCKBROS became one of the merchants on Lazada as it began exploring Southeast Asian business territory.

It proved to be a clever decision, as the demand for bicycle accessories is stable throughout the year due to a fairly consistent tropical climate and the popularity of cycling as a recreational sport.

Shi Jianghao, the founder of ROCKBROS, said, “The outdoor products sold to Southeast Asia can be produced all year round, which complements other markets with distinct seasons. It means that the factory will rarely be idle in the second half of the year.”

As competition intensifies, ROCKBROS has focused its efforts on branding in the last few years. During the interview, Shi commented, “All manufacturers of bicycle accessories in the Southeast Asia market are Chinese, who are very diligent when it comes to doing business. When the market becomes too homogenous, it’s impossible to compete.”

Expanding beyond a saturated Chinese market

The push factor of an oversaturated Chinese market also plays a part. Brands like POP MART and Flower Knows (a Chinese makeup brand) are increasing their presence in the Southeast Asia market, impelled by fierce domestic competition.

For these brands, their experience in the Chinese market can be useful for their entry into Southeast Asian markets.

Sabrina Li, the head of cross-border operations at LazMall, believes that expansion into the Southeast Asia market should not pose many difficulties for most brands.

“Native cross-border brands have experience in overseas e-commerce operations, mature operations teams and market insights, and strong competitiveness overseas,” she said. “Domestic e-commerce brands have proven methodologies for live streaming and advertising traffic, and the brands are relatively mature and are highly adaptable to the Southeast Asia market.”

There are also fewer barriers to entry compared to other regional markets.

“To attract global investment, the threshold for overseas goods to enter Southeast Asia is lower than in Europe and the United States. In their efforts to remain open, SE Asian economies have favorable business conditions and frameworks for companies and room for more growth and innovations,” said Shi.

In the case of brands like David Jones Paris, many wholesalers have been purchasing from their factories and reselling them to the Southeast Asia market. Entering the fray themselves would be a chance to better establish their brand and sell directly to a welcoming audience.

Tackling market problems

While Southeast Asian markets hold great potential, certain challenges exist when it comes to brand building, such as lower e-commerce penetration compared to China, limited purchasing power, and unstable political situations in certain countries.

Local e-commerce traffic is mainly concentrated on Lazada and Shopee while social e-commerce is still in the early stages of development. A product manager at LazMall said, “Traffic is very important to brand building. Ordinary sellers in Southeast Asia still have to rely on platform traffic at the moment, but brands need to develop both platform traffic and their own channels, such as private domain traffic and social media.”

The limited purchasing power of Southeast Asian consumers is also an important reason why many brands are waiting and observing the market before expanding to Southeast Asia. After Singapore, the country with the next-highest average monthly salary in Southeast Asia is Vietnam with RMB 2,000–2,500 (USD 288–360).

On the other hand, demographic data shows that the e-commerce consumers in Southeast Asia are still relatively young, so it is just a matter of waiting for their spending power to come into effect. “Take the cosmetics category as an example. Across six countries in Southeast Asia, more than 80% of the consumers are under 35 years old, and half of them are Gen Z,” said the LazMall product manager. “While their spending power is not that strong, this shows that e-commerce has a promising future in Southeast Asia.”

The need for brand localization

Southeast Asia is a classic example of a highly decentralized market, with different policies, languages, and monetary systems in each country. Therefore, brand localization is necessary.

Shi gave a good example of the importance of localization: “Singaporean consumers have strong buying power and high standards for products and services, so we have to set up overseas warehouses to deliver goods to them directly. On the other hand, consumers in Indonesia and the Philippines are more sensitive to prices, so we need to be mindful about offering discounts during promotions.”

Concerns also stem from the imperfections of the local logistics and digital payment systems. Faced with an immature e-commerce ecosystem, it is difficult for brands to establish a reputation in Southeast Asia alone. In order to break into the Southeast Asia market, it’s clear that these businesses need reliable partners to help them.

Dependable partners in a new market

Southeast Asia e-commerce merchants and online brands are still highly dependent on e-commerce platforms, and for good reasons. As the leading e-commerce platform in Southeast Asia, Lazada—backed by its parent company Alibaba—has been building its own e-commerce infrastructure, logistics, technology precision operations, and diversified payment options.

In 2016, when Lazada was acquired by Alibaba, the platform carried out technical restructuring, known as “Project Voyager,” which vastly improved the performance and stability of the website as well as the mobile application. Yang Lin, the technical director of LazMall, shared a specific example: “Lazada’s webpage presentation observes a three-second rule. We are mindful that if no content is displayed within three seconds, users who reach the page through paid traffic will move away. Now, it only takes one to two seconds to open a page on Lazada.”

More improvements followed. As demand for brands grew among Southeast Asian consumers, Lazada launched LazMall in 2018 to support global brands entering Southeast Asia and provide authentic products to consumers. According to Lazada, premium international brands such as Nike, Nestlé, Estée Lauder, and La Mer have also joined LazMall.

Due to the connections with Alibaba’s own system, the transition between Alibaba’s e-commerce platforms was very smooth for sellers and continues to be the case today. “We moved from AliExpress to Lazada. The whole transition process was very natural and quick,” said a spokesperson from David Jones Paris.

Integration with logistics and operations

One of Lazada’s core competencies in Southeast Asia is a logistics network. According to Lazada, the company delivered an average of 5 million packages a day as of September 2021, of which about 80% of the first mile and around 50% of the last mile of delivery were fulfilled through Lazada’s self-operated network. In terms of logistics fulfillment costs, the average delivery cost of local order packages was reduced by 20–30%.

Such is the power of Lazada’s logistics network that it can deliver packages to almost any island or fishing village across six Southeast Asian countries.

In the past, it was difficult to sell large goods such as appliances, furniture, and two-wheeled vehicles to Southeast Asia. In 2021, Lazada, integrated with Cainiao, a logistics service provider partly owned by Alibaba, opened a medium and large goods shipping network between China and six countries in Southeast Asia.

“Lazada’s shipping network has effectively solved challenges faced by sellers selling large and bulky items on any platform, especially treadmills, floor sweepers, and air fryers, as well as eSports gaming chairs that are particularly popular in the Philippines this year,” said a spokesperson in charge of cross-border logistics at Lazada.

Lazada was also one of the first Southeast Asia platforms to adopt a cash-on-delivery system, an effective move in an economy where consumption still heavily relies on cash transactions. Lazada Wallet has also been bound to bank cards, providing a more convenient and intuitive payment experience for consumers who are more accustomed to using bank cards.

With these measures in place, it’s clear that Lazada is poised to help even more global brands cross over to the Southeast Asian market. With strong competition in the e-commerce industry, this helping hand might just be what these brands need.

Brands looking to establish their presence on Lazada can sign up as a seller here and register for LazMall here.