The far-reaching implications of Amazon’s entry into Southeast Asia

Frederic Giron, vice president and research director, Forrester Research

Senior analyst Xiaofeng Wang and analyst Zhi Ying Ng contributed to this article.

July 27th marked Amazon’s first official e-commerce foray into the 640 million people-strong region of Southeast Asia. It launched its Prime Now app in Singapore with a compelling two-hour delivery offering that signals a new era in the region’s digital landscape.

Forrester sees the impact of Amazon’s move not only on the e-commerce and retail industries, but also at much broader and deeper levels:

• The online retail market in Southeast Asia will come of age. The e-commerce market in Southeast Asia is particularly fragmented. It’s also an extremely dynamic market with Alibaba and Tencent actively acquiring positions in numerous e-commerce players across the region. Alibaba upped its stake in Lazada by $1 billion in June, and recently invested in Tokopedia, the largest e-commerce platform in Indonesia. Tencent also acquired Thailand’s Sanook at the end of last year. Given this competition and despite its digital prowess and resources, Amazon has a lot of catching up to do in Southeast Asia. In fact, most of America’s Silicon Valley darlings are falling desperately behind China’s digital behemoths in this part of the world. Now, with Amazon on the battleground, we can expect an accelerated maturation of the e-commerce market in the region.



• The first shockwave will hit the retail industry. With Amazon entering the Southeast Asia market with a very compelling same-day, 2-hour delivery proposition, the existing players will need to up their e-commerce and omnichannel capabilities quickly. From day one, Amazon is setting a new gold standard in customer experience and we can count on them to execute flawlessly on their promise—maybe after a few launch-related hiccups. This will dramatically boost customer expectations, as consumers will begin to consider second-day delivery as a sub-par experience. In addition, both online and offline retailers will need to work harder to maintain their customer loyalty. Lazada’s Liveup lets customers enjoy benefits from other digital ecosystem players such as Uber and Netflix. Amazon’s Prime will certainly have competitive benefits as well.
• Supply chain and logistics players are next. To deliver on its 2-hour promise, Amazon will bring its logistics and Artificial Intelligence (AI) mastery to bear. In his letter to shareholders earlier this year, Jeff Bezos wrote: “Though less visible, much of the impact of machine learning will be […] quietly but meaningfully improving core operations.” Players like Ninja Van, GoGoVan as well as more established players like SingPost (in which Alibaba has a stake) will come under pressure to accelerate their transformation to remain competitive in the way they run operations and satisfy their B2C and B2B clients.
• The ripple effects of the e-commerce battle will shake the financial services industry too. On July 24th, Ant Financial—the Alibaba affiliate that owns Alipay—announced a partnership with CIMB, Malaysia’s second-largest bank, to launch an Alipay mobile wallet and other online payments services in the country. Amazon does not have a strong payment service yet, so this battle will be between Alipay, WeChat Pay and other payment platforms. Still, the digital giants are getting closer and closer to the banking incumbents’ turfs, with the possibility of disintermediating them. And it’s not just the consumer payments—Amazon has its eye on business lending as well. The online retailer has recently announced that it had surpassed $1 billion in small-business loans to more than 20,000 merchants involved in its Amazon Marketplace in the U.S. U.K. and Japan during the past year. Digital giants are gradually seeking a share of the incumbents’ pie in Southeast Asia, challenging the value proposition that banks here provide for customers.
• Amazon Singapore is now a real-life digital experience center for AWS’ cloud ecosystem. Singapore has been the center of attention in Asia Pacific over the past few months, attracting technology companies, startups and even legacy firms to build digital and innovation labs. Now operating in Singapore, Amazon offers a great, real-life example of how a customer obsessed company operates, by delivering new sources of value for their clients and delivering operational excellence with the use of Amazon Web Services’ cloud infrastructure and an ecosystem of powerful startups and open-source bricks. This is pure speculation at this point, but with Amazon being a significant client for a number of these cloud and data and analytics vendors, one can imagine this will accelerate the entry of these players into the Asia-Pacific region. And raise the competitive pressure a notch for the other hyperscale cloud vendors.

Forrester expects that this move will shake numerous industries in Singapore—not just online and retail—and will hopefully create a sense of urgency for many incumbent companies that have become complacent about the need to become digital businesses over the past couple of years. If not, they can expect Amazon, Alibaba, Tencent and firms like them to eat their laksa.