Opinion: Southeast Asia should not be afraid to copy China

Photo credit: Philip Jagenstedt.

China has always been regarded as a copycat of Western innovation. But given the successes of WeChat, Tmall, Ant Financial, and the like, its companies are starting to be recognized as true innovators.

In fact, China has developed so fast that Southeast Asia easily lags behind by roughly three to five years. But the region has been playing a catch-up game on many fronts by modeling companies after Chinese companies. Fortunately, many of them have worked well.

Shopee and Taobao

The Sea group (formerly known as Garena) launched Shopee in 2015 in Southeast Asia to fill a void in the ecommerce market. During that year, the market players included B2C players like Lazada and classifieds C2C players like Carousell and Bukalapak.

C2C was a fast-growing segment in ecommerce in the region because consumers liked the social interaction and personal touch involved before completing a transaction. However, one key problem with the traditional classifieds businesses was that they did not offer an end-to-end solution. They functioned mainly as an advertising portal, with buyers and sellers having to communicate on a different channel to complete a transaction.

Shopee therefore offered a complete end-to-end solution that includes an in-app chat feature, an escrow-based payment solution, logistics, inventory management, and analytics to help sellers. The best part is that it is completely free.

This is very similar to Taobao. In 2003, the key C2C player in the ecommerce market in China was eBay, which charged merchants a listing fee. To beat eBay, Taobao introduced free listing and website features like instant messaging and an escrow-based payment tool, Alipay. In its first two years, it overcame the Chinese market with 59 percent market share. Ebay eventually closed its site in China in 2006.

Back to Shopee. Shopee recently rolled out Shopee Mall, its B2C solution for established brands. This move is unsurprising because the company’s initial model had one critical problem: monetization. To fuel the hyper growth, it pumped millions of dollars into user and seller acquisition but received no revenue.

Introducing advertising and other related services at a fee would not really generate sufficient revenue, as most merchants would still be happy even without premium services. If Shopee were to suddenly implement hefty fees, it would likely see a significant drop in seller retention.

So, a better monetization strategy is to develop a B2C business unit to attract established brands to sell on the platform, charge them a listing fee, and take out commissions. This is a brilliant strategy because the platform’s 5.4 million monthly active users make the offer very persuasive to big brands. This was the exact strategy Jack Ma implemented in 2010 when he launched Tmall. It took off quickly, riding on the massive user base Taobao enjoyed and becoming Alibaba’s cash cow.

WeCharge and Jiedian

WeCharge is a Singapore-based powerbank-sharing business. It operates a number of mini stations across Singapore where users can simply scan the barcode to rent a portable powerbank. Users can return the powerbank to the nearest station and be charged based on the usage time.

This is incredibly similar to China’s Jiedian, which started in 2016. Jiedian operates power-charging stations in over 20 cities in China. Users can rent a powerbank by scanning a QR code and making a mobile payment. They can also use the app to locate nearby power boxes to return the powerbank after use. Jiedian has recently been acquired by Jumei, a Chinese online cosmetics retailer, for US$43.5 million.

FinAccel, Huabei, and Qudian

Launched in 2015, FinAccel is a fintech company that aims to give Southeast Asian consumers access to virtual credit cards. It enables payments in an installment basis, specifically for high-value ecommerce purchases like laptops and mobile phones.

Why do Chinese business models work in Southeast Asia?

Localization is key