China e-commerce players tap Asean market for growth

Singapore

AS China's biggest online merchants accelerate their expansion plans to South-east Asia, they have also discovered that a lack of understanding of Singlish is putting them at a disadvantage when dealing with Singapore customers.

"Singapore consumers use many acronyms when they type, such as 'RU' for 'are you', and they also use Singlish expressions such as paiseh, lah, leh, lor," Mike Hu, co-founder and CEO of Addin.sg told Lianhe Zaobao. "The customer service staff of merchants in China, who are not fluent in English in the first place, can't deal with this, leading to bad experiences for local customers."

Mr Hu's company, Addin.sg, operates an e-commerce platform for home furnishing. An increasing number of e-commerce platforms, like his firm, are trying to grab a slice of the online retail market in South-east Asia in recent years. Lazada, which is part of Alibaba, Tencent-backed Shopee, as well as other online retail giants have already been in the game for some time, but that has not deterred newcomers who are drawn by the size of the online shopping market.

According to a report released by the United Nations Conference on Trade and Development (UNCTAD) on May 3, China topped the world in total sales revenue from cross-border e-commerce in 2019 at US$105 billion (S$139.08 billion).

And while the US and Europe remain the traditional markets for the majority of China online merchants, South-east Asia is emerging as a preferred market for 38.5 per cent of online retailers, according to the 2020 Cross-Border Export E-Commerce Industry White Paper published by CBNData, an Alibaba affiliated data provider.

Three biggest hurdles

But competition is stiff and merchants need to do their homework.

Each of the 10 member countries of Asean has different languages and cultures, and not all of them understand Chinese. Mr Hu said that many Chinese merchants fail to localise, and still include Chinese captions and labels in their product images on their websites targeting South-east Asian consumers. Buyers are able to make their purchase choices based only on the images; when they want to clarify any product specifications, they tend to run into communication problems with the Chinese merchants.

For the vendors, not having an after-sales service team based in the region also poses problems. For example, after customers purchase a smart door lock online from a Chinese merchant, there would be no one to install the lock after it has been delivered.

Mr Hu said: "All the Chinese sellers can do is send their customers instruction videos for DIY installations, but professional installation may be required, and repair and maintenance is also problematic, so it's very hard to sell the products."

Keren Wang, founder and CEO of online retail platform AladdinCommerce, said that the three biggest hurdles faced by Chinese merchants going global are logistics, payment, and language. Payment, especially, is particularly difficult.

For one thing, each country in the region uses a different currency, which means transactions may be subject to several currency conversions.

"We've come across a seller in Singapore who wanted to sell goods from China to Malaysia," said Ms Wang, who is from China's Ningbo but came to Singapore to study 15 years ago. "So, the renminbi was used to buy the goods, and the sales were made in ringgit, and then converted into Singapore dollars. The payment part was very complex, and the currency exchange rates weren't favourable either."

Secondly, as competition heats up among cross-border merchants and the sector matures, e-commerce platforms such as Shopee and Lazada have started to offer low commission rates, more benefits, and fewer product restrictions and other incentives to attract more merchants to set up local stores (stores that are based in the same location as the platform).

But there remain issues with payment processing and repatriation. The majority of China-based merchants do not have access to local bank accounts or registered business entities for receiving payment in South-east Asia. Third-party payment agencies are usually used in these instances, but it can be a risky prospect.

The volatility of exchange rates is another aspect to deal with, as currencies such as the Indonesian rupiah can fluctuate widely.

Recognising that online vendors in China face all these challenges, companies such as AladdinCommerce have stepped up to become e-commerce enablers for these merchants.

E-enablers as partners

Also known as e-enablers, these partners offer logistics and payment processing services, and may act as a consultant or be put directly in charge of product positioning and sales. They can be a third-party service provider or an online retail platform that offers similar services and can make or break a merchant's expansion in the regional market.

South-east Asian e-commerce platform Shopee has a cross-border team that offers merchants one-stop solutions for drawing traffic, language assistance, shipping logistics, payment and other services. The platform also established Shopee University, an online learning and instruction portal where merchants can familiarise themselves with the platform's rules, and access online training courses, setup instructions and other content.

Since 2018, Shopee has embarked on partnerships for training and incubation programmes with educational institutions in Yiwu, Xiamen, Hangzhou and other Chinese cities. It also started working with universities in China to nurture cross-border talent and offer training courses for cross-border vendors through licensed training organisations.

JD.com, another e-commerce bigwig in China, is also providing support to vendors from China trying to break into South-east Asia.

Soon Sze-Meng, president of JD.com South-east Asia, said the company's smart warehouse and logistics centre in Thailand offers a suite of supply chain services that include warehouse storage, logistics and distribution. In Indonesia, JD.com helps its merchants with importation of goods, company registration, legal consultation, distribution and logistics, and payment processing services.

E-commerce platforms in general hope to see an uptick in transactions between buyers and sellers that will ramp up traffic, translating into an increase in gross merchandise value (GMV) and the number of monthly active users (MAU) - two key indicators for e-commerce platform operators. This means that on top of satisfying the needs of all sellers, their supporting services also have to cater to buyers, while adhering to all the regulations of the platform. Third-party service providers on the other hand cater exclusively to sellers and try to negotiate more favourable terms on the sellers' behalf.

Joseph Liu, CEO of SCI eCommerce, an e-commerce enabler, said the merchant services offered by e-commerce platforms are standard, basic services, while third-party providers offer more services customised to the needs of individual merchants. "The former is focused on maximising the platform's interest, while the latter works from the perspective of the vendor and tries to maximise the vendor's interest."

AladdinCommerce's Ms Wang said that product optimisation and keyword advertising require a "made to measure" approach.

"At Aladdin we had a client selling pee pads for pet dogs, Chinese sellers usually use the translation service embedded in the enterprise resource planning (ERP) system for their product description, but the resulting translation was incorrect and not as localised as terms translated by a local."

Zhou Hao is a Journalist with Lianhe Zaobao China News Desk. This article is part of a collaboration on a series of weekly features translated from Lianhe Zaobao. The original story first appeared on May 30. The next package on June 14 will take a look at the development plans of Chinese financial firms in Singapore.

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