Alibaba and Walmart Takeover Southeast Asian E-commerce Industry.
Recently there has been a news that has blown up the entire e-commerce scene of South East Asia. The Chinese e-commerce giant Alibaba group has acquired the whole business operation of Daraz in all of South East Asia including their operations in Nepal, Sri Lanka, Pakistan and Bangladesh. This move has taken the e-commerce industry of South East Asia by a storm. Followed by this event, the news of Walmart acquiring 77% of Indian E-Commerce giant Flipkart added fuel to the fire.
Why is this so significant? Bigger companies are acquiring smaller companies almost every single day. So why is this news so important? It is because these two events have the power to potentially change the whole e-commerce market of the region in many ways.
These two events were not only a merger between a small company and a large company. They were a merger between industry leaders. Which has the potential to affect the said industry greatly in both good ways and bad. Especially when the e-commerce market in the said region is not as developed as China or USA.
Let us talk about the good first. The merger of these giants will bring about a change in the industry of the countries where they operate. Having ample amount of influence worldwide and the financial backup to invest in the market, these giants can educate the customers and grow the market as a result. Not only that, using their advanced worldwide logistics they can ensure higher quality of products than that was previously sold in the market.
On top of that, whenever such mergers have happened between global giants and local market leaders, the infrastructure and the ecosystem has improved overall. There is a possibility that this might take place in this region as well. As a result, many entrepreneurs who are currently working with these e-commerce companies, as well as new entrepreneurs, might be benefited with increased business. The net value of the industry will grow. This can be a golden opportunity for the industries that are connected with the e-commerce eco-system such as logistics, online/mobile payment, digital marketing etc. No foreign company has ever been able to neglect local partners when they entered a new country for business.
On the other hand, there might be a downside as well. The hardest hits will be taken by the local competitors and investors that have invested in these companies. Especially e-commerce companies that work with a marketplace model. Alibaba and Walmart are two of the largest retailers of the variety marketplace model and if they exercise their worldwide influence and connections, they might be able to provide higher quality products at a lower price, potentially making the market a monopoly. This might cause a lot of problems for marketplace e-commerce and independent importers.
One might wonder, why Daraz and Flipkart? Why not other smaller companies that would have made the deal at a much lower price? It is because these companies are market leaders in their respective regions. They already have an established business operation, huge brand value and large customer base. It would be easier for Alibaba and Walmart to capitalize on their existing market value and grow upon it rather than build something from the bottom up. It is a strategic move to take over that market in a small amount of time.
In a nutshell, these two events may bring about both good and bad for the industry players depending on which side of the field they are. Like all other cases, the government can take initiatives to protect the local investors by imposing different trade barriers, but that aside the pros outweigh the cons in this case.
Article Cr: Shahnewaz Reza Mansur