Why Alibaba is betting on Vietnam to reclaim Southeast Asian ecommerce

In 2017, Jack Ma came to Vietnam to address an e-payment forum. The Alibaba founder easily wooed the audience with his headline-grabbing quotes, painting a cashless future for Vietnam that was similar to what China has achieved.

“We need banks to develop but the banks need us even more,” Ma was quoted as saying. “When society is a cashless society, everything is digitalized, everything is transparent. No one can run away.”

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It was exactly this kind of “we can do better than banks” attitude that put the Chinese billionaire out of favor with regulators back home. The intense scrutiny, which led to the collapse of fintech affiliate Ant Group’s much-anticipated listing last November, may be forcing Alibaba to beef up its international ambitions.

Along with Hong Kong-based Baring Private Equity Asia, the Chinese tech giant recently led a US$400 million investment in Vietnam’s Masan Group. The money could give Alibaba-owned Lazada a boost, allowing the ecommerce player to deepen a partnership with VinMart, the Masan-owned supermarket chain.

The deal, however, has bigger implications for Alibaba’s ambitions in Southeast Asia, a region in which it cannot accept playing second fiddle.

Alibaba seems to be tapping into a pandemic-fueled growth in online groceries to find a second wind in Southeast Asia, where it once held the lead in ecommerce. Focusing on groceries makes sense: it’s one area in which it has some kind of advantage over rivals, thanks to the RedMart acquisition by Lazada in 2016.

But regaining the top spot won’t be easy. Industry heavyweights including Shopee and Grab as well as a clutch of multibillion dollar companies are itching to capture this opportunity.

A must-win market

Dialing back its international expansion is not an option for Alibaba. In May, the company reported its first-ever loss after Chinese regulators imposed a US$2.8 billion antitrust fine.

Indeed, Alibaba has poured billions of dollars into Southeast Asia. Among its biggest investments besides Lazada was Indonesia-based Tokopedia in 2017 and 2018, with two mega rounds worth US$1.1 billion each.

Even with its initial public offering hanging in the air, Ant Group recently set up a government relations team to accelerate its Asia push, according to Bloomberg. Southeast Asia was identified as among the priority markets.

But given that Tokopedia is en route to an IPO after its merger with Gojek, it makes sense for Alibaba to dig deeper in Vietnam, whose economy still grew by 2.9% last year despite the Covid-19 pandemic and where the number of middle-class households is expected to reach 17 million by 2030.

A land grab

Not guaranteed to fit

Lessons from the past