Southeast Asian online retail will be dominated by Alibaba and Tencent, pure play e-commerce will enter the offline world and small startups will raise funds via initial coin offerings (ICO), while Amazon will acquire more companies for a shortcut entry into the region.
These are the key trends in 2018, according to an industry leader.
"Southeast Asia has become a gold rush destination for Chinese internet giants looking to expand beyond the mainland. E-commerce will be increasingly be factionalised into Alibaba and Tencent camps, and locals will pick sides," said Sheji Ho, group chief marketing of aCommerce, a leading Southeast Asia e-commerce enabling firm.
Alibaba's acquisition of Lazada last year that triggered a race between China's number one and two in Southeast Asia, and in turn, will cause local companies to choose sides.
Alibaba also led a US$1.1 billion (36 billion baht) investment in the e-commerce website Tokopedia in 2017, continuing to place its biggest bets on e-commerce. Moving forward, the company is expected to position Lazada and Tokopedia as the Tmall and Taobao of Southeast Asia, respectively. Tmall is a Chinese business-to-consumer (B2C) online retail site while Taobao is a customer-to-customer (C2C) shopping website similar to eBay.
Meanwhile, Tencent has aggressively tried to replicate a three-prong formula that was successful in its fight against Alibaba in China: gaming, mobile and payments.
Its first step was becoming the largest shareholder of SEA (previously Garena), a predominantly gaming powerhouse that runs Shopee, a mobile-first e-commerce marketplace.
Tencent then invested in Go-Jek, an Indonesian rival to Uber, turning it into a one-stop platform dubbed a "super app" like WeChat and WeChat Pay, also owned by Tencent.
WeChat Pay commands an impressive 40% market share in China vs AliPay's 54%.
"With both Tencent and Alibaba market caps at all-time highs, we expect this trend to continue in 2018 with both sides gobbling up more local companies across the e-commerce ecosystem and increasing their shares in existing ones," said Mr Ho.
The second trend is Amazon acquiring companies to fast-track its e-commerce expansion in the emerging region as it is facing slow organic growth, he said.
Amazon's long-awaited soft launch in Singapore was widely covered by the media even before the company's Prime Now services officially became available on July 26.
Mr Ho expects Amazon to expand further in the region, particularly in Indonesia and Thailand, where markets are being rapidly carved up by Alibaba and Tencent.
He said the third trend is pure-play e-commerce launching physical stores to offset rising online customer acquisition costs and improve last-mile fulfilment.
While traditional offline retailers like Central in Thailand and Matahari in Indonesia scramble to move their business online, online pure-play e-commerce is expected to make moves offline.
With online customer acquisition channels like Google and Facebook rapidly reaching saturation and diminishing returns, e-commerce players like Pomelo and Lazada will look to offline channels to reach new customers.
Pomelo has been dabbling with offline retail over the past few years but, fresh off a $19 million Series B, recently launched its biggest pop-up to date in Siam Square.
The store applies "click-and-collect", enabling customers to order online and try items in store before deciding which ones to keep or return.
Lazada hinted at the possibility physical stores in Indonesia earlier this year.
Mr Ho said the fourth trend is new e-commerce startups using ICOs as an alternative way to finance themselves to battle the giants. Funds raised will be used to widen customer base, new product development, and inventory financing.
The fifth trend is a wave of e-commerce consolidations as local players adjust to a new world order.
The past year has seen casualties and consolidation during the Southeast Asian e-commerce bloodbath, including the Japanese company Rakuten Inc's acquisition of Tarad.com, and Lazada's takeover of Zalora. In Thailand, Ascend Group put its assets WeLoveShopping and WeMall on life support to focus on fintech.
Come 2018, there will be a health check of the remaining bastions of home-grown, horizontal e-commerce players. As Alibaba and Tencent up the ante, there will definitely be more casualties in the new year.
The sixth trend predicted by Mr Ho is that new mobile-first fashion and beauty marketplaces will fill the void left by Zalora. These will be more nimble sites that see opportunities in a space dominated by mass-market, general e-commerce platforms like Lazada and Shopee.
Spearheading a new wave of mobile-centric Southeast Asian fashion marketplaces are Zilingo, fresh off an $18 million Series B, and Goxip, a Hong Kong based startup that recently completed a $5 million Series A with plans to enter Thailand. In Indonesia, there's Lyke, ironically founded by a former Zalora chief marketing officer.
The seventh trend in 2018 will see marketplaces like Lazada and Shopee purging the grey and counterfeit markets of blue-chip and luxury brands, which will set up an official presence on marketplaces as a way to pro-actively manage the customer experience and product image.
The eight trend will see marketplaces and e-tailer having their own labels in search of higher growth and margin, a move that will alienate rival brands, said Mr Ho.
Lazada launched a Lazada marketing solutions unit to monetise its 23 million active annual customers through advertising, the same way Tmall and Taobao charge for ads in China.
Today, Lazada offers display ads and programmatic promotional ads to customers but is expected to launch pay-per-click search ads in 2018 competing with Google, Facebook. Across the region, Shopee has already launched pay-per-click search ads.
Mr Ho said the ninth trend is B2B e-commerce to disrupt offline distributors, blurring the lines between online and offline distribution.
The last trend is Go-Pay, the payment gateway owned by Go-Jek, venturing outside of Indonesia through SEA, Traveloka and JD to become the WeChat Pay of Southeast Asia.
