Alibaba’s Trojan Horse for Southeast Asia. Sheji Ho is the group CMO of a. Commerce. More posts by this contributor:It’s been several months since Alibaba’s blockbuster acquisition of Lazada, the leading e- commerce platform in Southeast Asia. When the news broke, pundits and critics debated whether or not each side got a good deal, how it would impact rivals like Matahari. Mall, Tokopedia and Orami, and how the region would be flooded with cheap Chinese products. Elsewhere, startup founders and VCs high- fived each other as the move put the region on the global map and they hoped it would lead to more funding and exits in the future. However, everyone has failed to go beyond superficial observations.

Alibaba’s acquisition of Lazada is much more than simply growing retail GMV, proving exactly why Jack Ma is Jack Ma and why he’s always been several steps ahead of the game. Those celebrating the news, especially those in the retail space, may end up biting their tongues. Peter Thiel, Pay.

Pal and Why Distribution Matters. In his book ‘Zero to One’, Peter Thiel talks about how Pay. Pal almost didn’t survive were it not for their lucky break stumbling onto what would become their biggest distribution channel, growth engine, and eventual acquirer: e. Bay. Pay. Pal focused on targeting e. Bay’s Power Sellers — those responsible for the bulk of volume going through e. Bay — and then amplified it by paying for user sign ups and invites to friends, effectively turning Pay.

Pal into a mainstream payments platform. No wonder Peter Thiel has been such a fervent proponent of distribution, beyond just building a great product.“Poor distribution — not product — is the number one cause of failure. If you can get even a single distribution channel to work, you have great business. If you try for several but don’t nail one, you’re finished,” Thiel writes.

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Bay accelerated Pay. Pal’s growth thanks to its reach and velocity of transactions — high usage kept the payments company thriving. Distribution is exactly what Alibaba needs Lazada for.

But for what? Most definitely not cheap Chinese products. Inside The Belly of The Beast. Around the same time that Peter Thiel’s Pay.

Pal was acquired by e. Bay, the latter company was attempting to grab market share in China through an investment into — and eventual acquisition of — Each.

Net in 2. 00. 2, at that time the leading Chinese C2. C marketplace. In response to this, Alibaba launched Taobao in May 2. Each. Net to become China’s largest consumer- to- consumer e- commerce marketplace. In a timespan of 3- 4 years, e. Bay’s C2. C market share plummeted from 7.

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With this new war chest. A Trojan Horse Strategy? He is the first mainland Chinese entrepreneur to appear on the cover of Forbes. FierceMarkets is a digital media publisher, reporting and delivering daily news and objective analysis to three million business professionals in eight global industries. Have you wondered how some work groups exhibit effective teamwork and others remain dysfunctional for the team's life? Find 10 keys to successful teams.

Taobao’s share continued to climb, reaching over 8. Shortly after Taobao’s launch, Alibaba introduced Alipay, a third- party online payment platform, in 2. Taobao. Today, Alipay is China’s largest third- party payment platform with 7. Pay. Pal’s 9 million). Whereas Pay. Pal was primarily a peer- to- peer (P2. P) online payments platform based on email and linked to credit cards, Alipay was connected to bank accounts and incorporated features tailored to the Chinese market, such as escrow services. According to Jack Ma, Chinese culture, despite being one that traditionally values trust and integrity, lacked a system that enforced it.

As a result, Alipay’s escrow feature was a perfect solution to the trust gap and shifted China’s e- commerce behavior away from cash- on- delivery (COD) towards one that is seeing 6. With Taobao’s massive reach and distribution — 4. C2. C ecommerce GMV in China — Alipay was able to cement its position as the leading third- party payment method. Leveraging its 4. Alibaba e- commerce platforms, Alipay has grown beyond being an Internet- based payment platform into a finance and banking behemoth to the extent of threatening the old financial guard. In 2. 01. 1, Alipay spun off Alibaba to become Ant Financial Services Group, covering everything from online payments to microlending to banking and credit scores. Based on its recent funding round of $4.

Uber. With this new war chest, Ant Financial looked to expand into new markets and for a while had been trying to get a foot into Southeast Asia. The company set up a Singapore entity as early as 2. Ant Financial’s lucky break seems to have arrived earlier this year. Eyeing The Payments Opportunity in Southeast Asia. In many ways, Southeast Asia e- commerce is like China e- commerce but 8 years younger. Back in 2. 00. 8, cash- on- delivery (COD) was still the dominant payment method in China making up over 7.

Today, Southeast Asians rely heavily on COD when shopping online, attributing to roughly 7. To wean customers off a high dependency on COD, many well- funded startups and established conglomerates have been trying to solve the payments bottleneck, including Omise (Thailand), Doku (Indonesia), LINE Pay (Thailand), and True Money (Thailand). Despite the PR and media hype, these homegrown solutions have yet to shift consumers away from COD because a lot of these heroic efforts have been “technology for technology’s sake” — building a faster car when what is really lacking are more roads.

The Product Challenge. Platforms like Omise and 2.

C2. P are basically payment gateways and don’t offer a viable solution for the massive C2. C and P2. P space that Google and Temasek peg at ‘several billion dollars’.

These payment gateways still primarily process credit cards and, with credit card penetration across emerging SEA standing at single digits only, doesn’t really address the core of the issue. In addition, these solutions do not offer a fix for the trust issue often hindering C2. C and P2. P transactions — namely escrow. C2. P and Omise also face getting ‘pushed out’ as they don’t own any ties to the end consumer. Meaning if a cheaper and better alternative was to present itself, there is nothing stopping a merchant from swapping them out.

Taobao got users to sign up to Alipay, making it much easier to convince non- Taobao e- commerce platforms to adopt Alipay as well. You Only Live Twice Movie Watch Online. Rabbit LINE Pay, previously LINE Pay, never captured much market share despite its association with LINE, the popular messaging platform reaching 3. Thailand. LINE Pay’s limitation is that it only supports credit cards, stumbling yet again into one of the fundamental payment obstacles in Southeast Asia – lack of credit card penetration. The Distribution Challenge. Although good attempts at providing shoppers with a second payment method, fintech startups like Digio and Deep Pocket are building mobile wallets before solving their chicken- and- egg problem. It is difficult for mobile wallets to become widespread when awareness is low and users don’t have a strong (often financial) incentive to adopt it.

User acquisition then becomes an expensive play without an inherent distribution channel. The (Lack of a) Use Case Challenge. One of Thailand’s leading mobile wallets, Ascend’s True Money, connects with major banks in Thailand and has distribution access to companies in the CP conglomerate portfolio, including over 1. Yet, True Money is reported to have as little as 1.

True Money’s current use cases are limited to mobile phone top up, online game top- up, and bill and over- the- counter payment, typically at CP- owned 7- 1. Ecommerce is a more obvious and natural use case and therefore True Money is also used as a payment gateway on Ascend’s ecommerce properties We. Mall and We. Love. Shopping. However, with only 2. Lazada’s traffic, Ascend still has a long way to go before taking a page out of Peter Thiel’s playbook and turning its ecommerce properties into a fertile breeding ground for its payment solutions. Watch Killing Ground Online Free HD. The Lazada Acquisition: A Trojan Horse Strategy? Alibaba’s foray into Southeast Asia has never really been about growing retail GMV.

In the long run, it’s not so much about beating Lazada’s direct rivals or tapping into new growth markets outside of China; it’s about securing access to a massive end user base in a market whose lack of commerce infrastructure is eerily similar to early days China.