BEIJING, October 20 (TMTPOST) -- The term "First Stop for Overseas Expansion" is a label that many Chinese companies interested in international business have affixed to Southeast Asia. The reasons for this can be attributed to the geographical proximity and cultural similarities between Southeast Asia and China.

As Southeast Asia's economy entered the much-anticipated "Digital Decade," the experience and business models of China's internet industry over the past decade have become a competitive advantage for Chinese entrepreneurs seeking to tap into the "Global Rush for Southeast Asia."

The number of internet users surged by 100 million in three years.

According to statistics from 2022, the total population of the ten ASEAN countries exceeded 675 million. This figure was about 9% of the global population, ranking second globally, only to China and India.

Over the last three years, Southeast Asia was one of the few regions globally where the GDP growth didn't slow down from 2020 to 2022. According to statistics from S&P Global Market Intelligence, the World Bank, and Bain analysis (data as of August 2022), the GDP growth rate of Southeast Asia was 3.5%, 5.3%, and 4.6% in 2020, 2021 and 2022, respectively, while India's GDP growth rates for the years were 8.7%, 6.9%, and 5.8%, respectively.

Southeast Asia is also in the nascent stage of a thriving internet economy. According to the "e-Conomy SEA (2022)" report published by Google, Temasek, and Bain analysis, Southeast Asia’s internet users increased by 100 million over the past three years to 460 million in 2022. The internet user year-on-year growth in Southeast Asia was 11% in 2020, which is roughly equivalent to China's internet development stage in 2011 when China's internet users surpassed 500 million with a year-on-year growth rate of 12%.

The period from 2011 to 2020 was considered the golden decade of China's internet development, during which companies like BATJ (Baidu, Alibaba, Tencent and JD.com) and TMDP (Toutiao, Meituan, Didi Chuxing and Pingduoduo) rapidly rose to become giants. It is expected that the decade following 2020 will also be a golden decade for Southeast Asia's internet development.

E-commerce, transportation and food delivery (including food delivery and ride-hailing), online travel (flights, accommodations), internet media (music, video streaming), and financial services (consumer loans) have become leading sectors of Southeast Asia's digital economy. Other application areas like health tech, SaaS, Web3, and edtech are also gaining momentum.

The "e-Conomy SEA (2022)" report predicts that the GMV (Gross Merchandise Value) of Southeast Asia's digital economy would reach nearly $200 billion in 2022, and this figure is projected to reach $330 billion by 2025, with e-commerce reaching $211 billion.

Faced with a market growing at an annual compounded rate of 20%, global investors and entrepreneurs are flocking to Southeast Asia, with Chinese entrepreneurs bringing their unique expertise.

The spark of live commerce

China’s dominance in live e-commerce is well-established, and it has also influenced the rise of live commerce in Southeast Asia.

The year 2020 was referred to as the “First Year of Cross-Border E-commerce Live Streaming” in China. Although live e-commerce was already on the rise in Southeast Asia before 2020, the COVID-19 pandemic accelerated its adoption among Southeast Asian consumers due to restrictions on offline businesses.

According to eMarketer, the overall e-commerce market in Southeast Asia grew by 35.2% in 2020, with even the slowest-growing countries achieving 28% growth. While the growth rate decreased slightly in 2021 as the pandemic situation improved, it still maintained a high growth rate of 26.1%. In 2022, e-commerce sales in Southeast Asia continued to grow and outperformed other regions. Of the top countries with fast growth in e-commerce, five were Southeast Asian ones.

Lazada and Shopee, two prominent e-commerce platforms in Southeast Asia, reported record-high live streaming data. For example, in April 2020, GMV generated through LazLive increased by 45% compared to the previous month. In May 2020, LazLive attracted over 27 million active users, and on Singles' Day in 2020, over 11 million people watched LazLive. In another data set, during the COVID-19 pandemic, Shopee's live streaming sessions in the Malaysian market increased by 70 times, and in the Philippines and Singapore, the growth was 40 times. In April 2022, TikTok launched TikTok Shop cross-border e-commerce business in four Southeast Asian countries (Thailand, Vietnam, Malaysia, and the Philippines), achieving an average monthly GMV compound growth rate of nearly 90%.

This high growth rate and large market offer significant opportunities for Chinese entrepreneurs.

"We hire hosts for 100 to 300 live streaming rooms at once, with 2-3 operators in each room, adding up to 1,500 people. The development of local live commerce is especially rapid," said Zhou Haibo, who is involved in internet recruitment in Indonesia. He mentioned that their company began offering localized recruitment services in Indonesia at the beginning of 2022.

In mid-2022, Yunxi Technology from Hangzhou, China, introduced a live streaming device for TikTok in Southeast Asia, and the shipments doubled from quarter to quarter, likely due to the relatively small base of live streaming in the region.

"Back in 2016, when we first started our business, we noticed that fans' trust in hosts was significant enough to purchase a large number of products," said Ken, the founder of BeLive, a live streaming solution service provider based in Singapore. However, live e-commerce wasn't very popular in Southeast Asia back then. In 2019, BeLive shifted its focus to the B2B sector, providing live streaming SaaS services to e-commerce platforms. This transformation took four years to complete.

As live commerce gains popularity in Southeast Asia, BeLive has expanded its customer base to include major Southeast Asian companies like Grab, Shopback, and Bukalapak (70 million monthly users), as well as large-scale Japanese live shopping platform Rakuten Live, Turkey's Trendyol, and Africa's Jumia. In 2022, BeLive's investor FTAG increased its investment to SGD 9.3 million (approximately $68 million).

Shenzhen-based Shan Jian Intelligence launched its live digital avatar product, "Digital Human," for overseas markets. “We established a local team in Singapore in August, as it became clear that many Chinese cross-border sellers were using digital avatars to conduct live streams in Southeast Asia and Indonesia,” said Yan Huapei, the CEO of Shan Jian Intelligence.

Tencent's Vice President Qiu Yuepeng told TMTPost that Tencent Cloud's international business maintained double-digit growth in the first half of 2023. “The performance in Europe, Japan, Singapore, Malaysia, Indonesia, and the Middle East was particularly impressive. On the front of serving Chinese companies going global, our overall growth rate far exceeds the market average,” he added. As the live streaming trend sweeps across Southeast Asia, Tencent Cloud's audio and video products are in high demand, with clients including Shan Jian Intelligence and other live streaming solution service providers.

"Emerging markets offer greater opportunities when driven by new technologies," said Yan.

"Cross-generational thrills: bring AI on"

"I never thought about going international, but after the discussion, it was suddenly ignited. I wondered whether what I couldn't achieve at Dajie could be attempted with such a market opportunity," says Zhou Haibo about his excitement for the Southeast Asian market.

Looking back in time, Zhou is part of the first generation of Chinese internet product managers. He has led well-known social and SNS products both in China and internationally, such as edu.Sina.com, Renren.com, CYWORLD, and later went on to become the CEO of Dajie and co-founder of Momo.

"Internet recruitment in China can no longer rely on simple business model innovation. But how to start from scratch? The biggest barrier in the recruitment industry is scale,” said Zhou. With this in mind, Zhou agreed to become the CEO of the Indonesian internet recruitment platform KUPU. His two other co-founders are Ma Song, KUPU's founder, known as the "father of JD’s 618" in the industry, and Yang Jiaojiao, formerly responsible for JD.com's retail technology management department, with investment from Indonesia's largest conglomerate, Sinar Mas Group.

Two years ago, KUPU had already released a new version, and it began to promote in early 2022. Although Zhou jokingly refers to himself as an "inexperienced newcomer" in international expansion, the results of KUPU's products seem to be quite impressive.

The starting point was the dominant recruitment agency in Southeast Asia, Jobstreet.

For Chinese internet recruitment companies, employers download an internet resume for an average cost of around 8 RMB. However, the cost on Jobstreet is as high as 45 yuan, which is even more expensive than LinkedIn (international version). "Our company has to pay about $1,134 JobStreet every month and we hire 2-3 people each month. Recruiter costs are not included, so it might cost me around 5,000 yuan ($683) to hire an administrative and an ordinary salesperson."

Simply overpowering traditional recruitment companies in terms of cost was not Zhou's original intention. What really motivated him as an entrepreneur was the cross-generational technological implementation.

"In Indonesia, I often have strong contrasting experiences. For example, when you order in an Indonesian restaurant, they provide a QR code. After scanning it, you'll discover it's a PDF download. With the 4G internet speed in Indonesia, and non-streaming  manner, it actually has to load completely to display the menu. That experience is even worse than having a paper menu," Zhou said with a bitter smile. So he uses "dimensional reduction" to describe the competitiveness of many Chinese products in Indonesia.

KUPU took bigger steps. While Chinese users were still gradually adapting to video interviews, KUPU has already made video interviews the primary form of interviews. Zhou has also applied the "dual-end matching model" that he couldn't succeed at Dajie directly to KUPU.

The Indonesian market has an oversupply of labor, but there's a severe shortage of laborers with quality and experience. For a relatively ordinary and undifferentiated labor position, it's normal to receive 2000-3000 applications, but only 1%-2% of them are worth considering. What KUPU aims to do is help employers with initial screening, finding the most suitable candidates, and improving the efficiency of recruitment.

"At its core, it's a more refined dual-end matching model, incorporating virtualization technology, AI, and extensive use of algorithms, including the ChatGPT’s position matching model. We use virtual humans for real-time or quasi-real-time video interviews, creating a more contextual interactive experience," Zhou explained. KUPU has also received support from several Chinese technology partners, using Fxiaoke for CRM, Tencent Cloud for audio and video, and connecting with underlying large models such as ZhiPu and Ernie Bot.

"Chinese companies excel in two aspects. First, quick service response. Chinese service providers can respond immediately whereas other service providers may take 2-3 weeks to resolve an issue. Second, top-notch technology. Given the worse Indonesian network conditions than in China, after comparing multiple service providers for supporting core businesses like video interviews under such weak network conditions, we still chose the Chinese team," Zhou  explained.

Challenges Ahead

Mixue Ice Cream & Tea, which already has over 1500 stores in Indonesia, is a familiar sight in Jakarta. With consistent sweetness levels, ingredients, and prices, every Chinese consumer can't help but grab a cup.

Entrepreneurs venturing abroad have realized that although it's a blue ocean, success isn't secured by simply copying. It requires understanding the local market and demand, and above all, patience.

The new e-commerce law in Indonesia has posed a challenge to TikTok Shop, which operated in Southeast Asia for just over a year. As a result, TikTok Shop shut down its operations in Indonesia on October 4. Subsequently, Malaysia also took similar steps by considering banning e-commerce transactions on the social media platform TikTok.

"TikTok's local public relations capabilities are very weak. The government allowed only one week to shut down e-commerce operations after issuing the decree. This is highly unusual. To some extent, it reflects the weakness of TikTok's local PR team, which lacked the ability to interact with high-level government officials. Waiting until problems arise is already too late," wrote Zhang Ping, Founder and CEO of Shanhaitu Technology in Indonesia.

Challenges related to policies and compliance, like those faced by TikTok, also affect other companies entering this market to the same or even greater extent, despite their apparent thorough preparations before entering the market.

Cultural factors play a significant role as well. Besides considering the local population's language and habits, cultural integration is a major issue. "Chinese people may consider themselves hardworking and intelligent, but locals view certain Chinese behavior as being glib, and disrespectful of the rules," says one overseas entrepreneur.

"The pace of live streaming in Malaysia is much slower compared to China.The highly competitive live streaming format doesn't work here," says Liang Yuhao, Director of Product and Operations at Elelive. Founded in 2015, Elelive got its user base in the Malaysian Chinese community, and with core team members coming from YY, it has

garnered respect and expanded business in the Malaysian Chinese community, becoming profitable in 2020.

Zhou's "trick" for integrating into the local culture is to completely transform the company into an Indonesian local firm, maintaining a 5:1 ratio of Indonesian employees to Chinese employees.

"Our second customer in Southeast Asia was a multinational insurance company in Indonesia. This may be because I speak a little Indonesian, making communication smoother and responses faster," says Wee, the General Manager of CRM’s outbound company Neocrm in Southeast Asia. Neocrm began building its Southeast Asian team at the end of 2021 and secured several deals within six months.

Respecting local culture, full localization, rather than pursuing profit and growth only, may well be the necessary path to minimize the difficulties in going abroad.

(This article was originally published on the TMTPost. Reporting by Qin Conghui)

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