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Chinese capital and know-how are boons for e-commerce in Southeast Asia

The ascent of e-commerce behemoths in China tells us consumers don’t care whether the platforms they use are backed by foreign capital.

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Southeast Asia’s e-commerce found its legs years ago, and it has been gaining momentum since then. The volume of the region’s e-commerce market grew more than four times from USD 5.5 billion in 2015 to USD 23 billion last year, with its online shopper population soaring from 50 million to 120 million. By 2025, transactions are expected to reach USD 102 billion, according to the e-Conomy SEA report for 2019 published by Google, Singaporean sovereign wealth fund Temasek, and Bain & Company.

As people marvel at the whopping growth potential of Southeast Asia’s e-commerce industry, some begin to question who is really benefiting from its boom. International players, especially Chinese tech firms, rather than local businesses, are reaping the benefits, they say.

One fact is evident: the region’s e-commerce stakeholders favor massive, resourceful foreign companies. Two of the top three e-commerce platforms in the region—Lazada and Shopee—are either owned by Chinese tech giants, or have received investments from them. But if the rise of China’s e-commerce industry in the past two decades is anything to go by, we see that tech conglomerates aren’t the only entities that find rewards in this growth; ultimately, the general population’s societal well-being is advanced as well.

It’s now cliché to speak of how rapid advancements related to the internet have changed lives. One neglected tale, however, offers a different look at how e-commerce has reshaped consumer life in China.

Twenty years ago, in September 1999, the now defunct search engine dreamer.com.cn and ten state media organizations co-hosted the first and only national Online Survival Contest. The premise was simple: 12 contestants from Beijing, Shanghai, and Guangzhou were each given RMB 3,000 (half in cash and half in online banking credits; altogether worth about USD 725 at the time), and those funds would have to sustain them for three days in hotel rooms that lacked bedding, toiletries, water, food, and clothing.

All 12 contestants were cut off from the outside world. Their only means of communication with people outside of their rooms was the internet. At the time, the idea was to demonstrate that web-based tools and transactions would redefine our daily habits. Looking back now, it exemplifies the humble beginnings of China’s e-commerce industry.

Chosen from a pool of more than 5,000 applicants from across China, the room-bound dozen had varying levels of familiarity with the internet. Some had been online for one or two years, while others have never used the internet before and didn’t even have an active email account.

Their choices for food and shopping services were limited. Only a handful of businesses in tier-one cities accepted online orders, and the limited number of small e-commerce platforms were hardly able to process and deliver orders within 72 hours, much less on the same day, due to limitations in banking and logistics. One 18-year-old college student from Beijing had to drop out of the contest, because he was unable to get any food or water in the first 26 hours of the contest.

Coinciding with the China’s first ever international e-commerce expo, the Online Survival Contest was designed to demonstrate the potential of the Middle Kingdom’s e-commerce industry. It was similar to an event hosted by Microsoft’s United Kingdom business a year prior.

In 1999, when the contest was held in Beijing, Shanghai, and Guangzhou, China saw the birth of its first e-commerce platforms, including China’s first B2C platform 8848.com, Alibaba, and Dangdang.com. Just two months before the contest, there were 4 million people connected to the internet in China—at the time the seventh largest economy in the world. Nearly 1.5 million computers were connected to the web, almost doubling the figures from six months before that.

And yet, even after the contest, spectators were left unimpressed. Only one contestant was able to acquire bedding and have it delivered. Everyone else slept on bare bed frames the whole time. All contestants subsisted on steamed buns and soymilk, because one restaurant chain, Yonghe Dawang, was the only F&B business that took online orders.

Most people were unable to spend their online banking credits, because few outlets accepted them at the time. To put it bluntly, 20 years ago, e-commerce looked bleak and unattractive to the pedestrian. But, very soon, an influx of foreign capital and market know-how into China’s e-commerce industry would lead to a sea change.

Now, with tried and true platforms of every ilk in place in China, consumers in the country have a plethora of options for products and services that they can access online, often via their phones.

If the Beijing college student who dropped out of the contest in 1999 were still living in China, he would most likely be reading the news, managing his finances and transactions, making purchases and bookings, ordering meals, and performing other day-to-day tasks through his smartphone. Companies like Alibaba, Meituan, and Tencent have brought incredible convenience to consumers in China—and they’re doing the same in Southeast Asia.

At the beginning of China’s e-commerce boom, foreign companies played a pivotal role. They laid the foundation for what was to come. And if we look at their investment returns, yes, their bets paid off. But there is no doubt now who is truly benefitting from developments in this space. Tech companies have flattened access to goods and services. It is, then, up to consumers to utilize tech in ways that improve their lives.

Chinese tech companies have landed overseas, taking their capital and know-how with them. They have experience with scaling up and educating prospective users relatively quickly—useful knowledge that is applicable when these conglomerates seek business partners in Southeast Asia.

Not so long ago, online shoppers in the low-tier cities and the rural areas in China were unlikely to have access to premium foreign products unless they took a trip to a major city like Shanghai or Shenzhen. Now, all it takes is a few clicks for them to order whatever they want, and it will be delivered to their doorsteps. The identities of the companies—foreign, domestic, a mix of the two—that make this possible matters little to them.

The same, I believe, goes for consumers in Southeast Asia.