Chinese companies are entering the e-commerce market in the Southeast Asian region in a big way, but the heavily fragmented region poses a challenge, said Credit Suisse's head of emerging Asia economics.
Companies like tech giant Alibaba and Internet company Tencent are bringing their investments and technology to the region, Santitarn Sathirathai explained. Just this week, Alibaba announced an additional $2 billion investment in Southeast Asian online retailer Lazada.
"Now it will be interesting because the change is coming, the wave of investments at Alibaba, Tencent, is coming in a big way, could be the tech dragons waking up the hidden tigers. From here on it could reach a tipping point where you have an explosion in the e-commerce activities," Sathirathai said.
Currently, e-commerce penetration in the region is still only 2 percent, he said.
Aside from capital injection, Sathirathai said the Chinese companies are also bringing know-how such as their tech and data analytics.
That contribution might help with two key problems in Asia: Payments and logistics.
The payment mode used in Southeast Asia is still mainly cash on delivery, which is a constraint on e-commerce growth, he said. And smart logistics systems could solve problems surrounding last-mile delivery.
But companies would need to work with the fragmented markets in Asia first, and "localization" will be key to that, he added.
"It's going to be very different in each market. Just because you win in one market doesn't mean you can dominate another market."
But one thing is for sure, he said: The region is set to see many companies fighting for a piece of the market.
"Competition is going to be gruesome, consolidation is the next phase."