Amazon failed in Southeast Asia because it never even tried
The US firm lacked stomach for a disjointed region that lacks infrastructure and requires patience
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Amazon tried to bury its exit from Singapore on Friday. So today, we look at why the US retail giant left Southeast Asia before the party really got going, which gives me an excuse to reminisce on some of my TechCrunch scoops.
Amazon failed in Southeast Asia because it never even tried
Last Friday I buried the lede when I wrote in our news section that Amazon was laying off 10% of its staff in Singapore. The real story, it turns out, is that the company is ending the local services it has offered in the country since 2019. That effectively means it is exiting Southeast Asia.
Amazon isn’t known for being very communicative externally, be that with journalists or the public. You get a flavour of that from the announcement it made. Rather than explain upfront that it is leaving Singapore, it says it will “expand International Store selection [in Singapore] in response to customer demand. But the key phrase is buried within there:
“As we prioritize our investment in the Amazon International Store products our customers want most, we’ve made the decision to phase out our local fulfillment in Singapore, which includes Amazon Fresh and grocery partners,” it writes. It will continue to offer “everyday essentials” but that’s about it.
The news is not a huge surprise. Amazon moved into Singapore in 2017, viewing the launch as a potential beachhead into other markets in Southeast Asia. I broke news of Amazon’s plans the year before, but it took the US firm some time to firm things up and launch local services and its Prime membership in Singapore.
Ultimately, it did not push on and enter Indonesia, Vietnam or Thailand, typical growth markets in the region, or even Singapore-adjacent Malaysia, which would have been more straightforward. Even its market share in Singapore was estimated at just 6%.
Patience required
There was a lot of excitement when Amazon came to the region as it was a validation for an emerging e-commerce market filled with enormous growth potential. Alibaba paid $1 billion to buy Lazada in 2016, with Sea going public a year later just after Amazon Singapore launched. Shopee, Sea’s e-commerce business, saw its annual GMV jump from $1.6 billion in 2017 to $127.4 billion last year.
But Amazon chose not to dive into the market.
There was, and still is, undoubted e-commerce growth potential in Southeast Asia’s e-commerce market, but it’s a path that requires serious investment and patience. Alibaba has funneled billions of dollars into Lazada, and Sea did not achieve annual profit until 2023, and it regularly posts losses since then.
Southeast Asia requires a very different approach to Amazon’s core markets. The company is famous for efficient operations but that’s difficult in markets without Western infrastructure, or archipelagos like Indonesia and its 10,000-plus islands.
Yes, Amazon has taken the long route in India, but you’d expect that of a single market with 1.5 billion people. Southeast Asia’s fragmentation and infrastructure difficulties make it a different challenge to India.
Tough local rivals
Even in Singapore, which operates like a Western city, Amazon didn’t have it all its own way.
Ahead of Amazon Singapore’s launch, Lazada teamed up with Uber and Netflix to offer a bundled membership that looked an awful lot like Amazon Prime, but with a lot more local relevancy and pull.
“When people ask me what the stand-out moments were with Lazada, beating Amazon usually makes the Top 3,” Max Bittner, the former CEO and co-founder of Lazada, wrote on LinkedIn on Friday.
When people ask me what the stand-out moments were with Lazada, beating Amazon usually makes the Top 3 - Max Bittner
“We got wind that they were to launch in Singapore with a PrimeNow offering in 2017 as a first step for their South-East Asia strategy. To counter them we acquired RedMart, a food delivery business, and entered partnerships with Netflix and Uber, offering a loyalty program called LiveUp,” he recalled.
Amazon was actually in the mix to buy Redmart, as I reported at the time, but it lowballed the competition and Lazada acquired the startup.
Lazada and Shopee certainly made life difficult for Amazon, but ultimately Amazon left Southeast Asia because it didn’t have the stomach for the tough challenge. That’s perhaps the ultimate complement to those local players, which had the foresight and patience to build for a market that was a decade away from being meaningful in size.
Amazon market cap: $2.89 trillion
Sea market cap: $51.98 billion
Alibaba market cap: $336 billion
ByteDance: unlisted — approx $550 billion on private markets
The TikTok era
Today, the e-commerce landscape looks very different. Alongside Lazada and Shopee is another global franchise with a footprint across media, e-commerce, cloud computing and more. Instead of Amazon, it’s TikTok, which competes evenly with its rivals across the region.
We wrote last week that the Chinese firm has committed $25 billion to develop data centres in Thailand to supply its growing business in Southeast Asia. That’s on par with the commitment Amazon made in India ($35 billion by 2030), where it has over a decade of business, tangible numbers and impetus to fight battles.
The level of commitment to Southeast Asia has reached new heights, and it’s not a place Amazon wants to play.
Sea’s Q1 earnings will be published later today so we’ll have more that tomorrow
In other interesting news you won’t want to miss:
Chinese AI firms are raising money like crazy in recent weeks, Recode China AI has a great read to explain what’s happening and why [Recode China AI]
Japan is launching a program to train space industry professionals from developing countries including India, Philippines and Indonesia [Nikkei Asia]
F88, Vietnam largest pawnshop, is preparing for a local IPO [Nikkei Asia]
Shein accused rival Temu of “industrial-scale” copyright infringement in a new trial between the two in London [Reuters]
Social media firm Kuaishou Technology is reportedly preparing to spin off its Kling AI video unit ahead of a planned IPO next year [The Information]