By Aaron Stone

Traditionally, Southeast Asia has proven to be a complex and challenging market for businesses to navigate. Despite the obvious appeal of 618 million inhabitants, the region’s population is fragmented across thousands of islands, of which substantial parts remain underdeveloped. Each country comprises a unique language, culture and demography, alongside distinct laws and logistical considerations. Coupled with a reputation for corruption, entering Southeast Asia can be a virtual minefield for burgeoning enterprises.

E-commerce presents a host of additional barriers to companies with ambitions in the region. Internet connectivity and speeds can be dreadful, locals continue to have a penchant for cash purchasing and bricks and mortar stores, and lack of credit card availability all place limitations on online purchasing behaviour. It is no coincidence that relatively few e-commerce start-ups have chosen to expand throughout Southeast Asia — often preferring to focus on their home market or a familiar neighbour.

However, it is not all doom and gloom. Despite a somewhat chequered history, Southeast Asia is in the middle of an upsurge in online shopping. In 2014, founder and CEO of Lazada, Maximilian Bittner, suggested that online shopping equated for only 1% of total retail sales in Southeast Asia, a miserly volume compared with global frontrunners. More reliable and faster broadband and mobile connectivity speeds, an increase in tech savviness of consumers, and the success of online merchants such as Lazada have since led to healthy growth. A Maybank report by economists Chua Hak Bin and Lee Ju Ye claim online shopping now accounts for 4% of retail purchases.

Admittedly, 4% is still relatively small. Particularly when you consider the Chinese and South Korean markets which enjoy online retail penetration rates of 16% and 18%, respectively. But there is no doubting that emerging markets such as Malaysia, Indonesia and Thailand present a significant opportunity for future growth in e-commerce. Strong population growth and an emerging economy are generating a rapid increase in Southeast Asia’s middle-class population with disposable income — providing a growing e-commerce user base.

There is still some uncertainty around the exact role e-commerce will play in lubricant purchasing behaviour, particularly when you consider the growth in the ‘millennial’ generation and their predisposition towards a ‘do-it-for-me’ culture. However, rising vehicle ownership rates and ongoing industrialisation is central to a forecast growth of 3.3% in Asian lubricant sales through 2017. It is reasonable to expect that growth in online purchasing will satisfy a segment of this increased demand.

Lubricant marketers are cognisant of the opportunity to drive online purchasing growth in Southeast Asia. Despite the perhaps unique and challenging market, several companies are pioneering e-commerce in the region.

In August 2017, Shell Malaysia Trading announced its foray into online purchasing in Southeast Asia with the launch of an official Shell online store on the e-commerce platform Lazada Malaysia. Shell Lubricants Executive Director of Southeast Asia and Oceania, Troy Chapman, confirms Shell is the “first oil and gas company in Malaysia to have an official presence on a leading e-commerce platform such as Lazada Malaysia.” He believes the move will help expand their market coverage and reach significantly and complement an extensive bricks and mortar network throughout Malaysia.

The online store features a wide range of official Shell Helix products alongside access to product technical support. Interestingly, the Lazada partnership also offers the ability to purchase engine oil service packages from selected authorised workshops in Klang Valley and Johor. Purchasers are contacted by an official Shell distributor to arrange the service venue, date and time — providing a full end-to-end booking service.

PTT Philippines, a wholly owned subsidiary of Thailand’s largest oil and gas company, PTT Public Company Limited, is another corporation looking to harness the potential of e-commerce sales of its products in Southeast Asia. PTT Philippines remains a challenger brand in the Philippine archipelago with a fuel network of only approximately 100 sites — concentrated on the island of Luzon in northern Philippines and in the province of Cebu in southern Philippines. The online alliance aims to broaden the company’s reach for its lubricant products in this geographically challenging market.

“We see e-commerce as one of the most efficient ways to bring products to the public, particularly to our target market, given the convenience nowadays of shopping online,” says Sukanya Seriyothin, president and chief executive officer.

PTT Philippines has also made several of its lubricant products available online by partnering with leading online retailer Lazada, along with two other shopping sites — shopee.ph and motobuy.com.ph. Lubricants available include the Dynamic Synthetic and Non-Synthetic and the Super Common rail for diesel engines; the Performa RD2, the Performa Racing Synthetic and Super Synthetic for gasoline engines; and the Challenger Synthetic 4T, 4T-AT, Synthetic 2T and Hi-Speed 4T for motorcycles. Brake fluids and flushing oils are also available through the Lazada online site only.

Shell and PTT may have found the right formula for entering Southeast Asia by partnering with Lazada. The privately owned German e-commerce company, dubbed by many the ‘Amazon of Southeast Asia,’ has worked out this difficult market the hard way and is now driving substantial growth in an area neither Amazon nor Alibaba dared to venture. Lazada has done the leg work and could help Shell and PTT reap some of the rewards.

Lazada was founded in 2011 by Rocket Internet, a German incubator with a ‘copycat’ reputation for building companies in emerging markets based on the business model of successful U.S. businesses. An embryonic online consumer market and lack of Amazon presence were central to the formation of this new business venture. Like Amazon, Lazada began with custom inventory and warehousing, though has since evolved into an open warehouse, allowing small and major brands to sell direct.

The online retailer operates in half-a-dozen Southeast Asian countries including Singapore, Indonesia, Malaysia, the Philippines, Thailand and Vietnam. Singapore is a relatively well-established market, though the others remain difficult, early tech markets that have been plagued by a variety of barriers — forcing Lazada to innovate and adapt.

Despite operating an open warehouse for buyers and sellers, Lazada has been compelled to build centers for logistics, fulfillment and distribution in several markets — owing to lack of reliable infrastructure. Overcoming a local ‘cash culture’ has also required a ‘think outside the box’ mentality. Cash on delivery is one of Lazada’s most popular payment methods, a relative anomaly for online retailers.

The online retailer’s strategy has certainly been successful. Lazada’s marketplace has grown to include hundreds of thousands of products across a broad range of categories. In March 2016, the company claimed it recorded USD1.36 billion annualised gross merchandise value (GMV) across its six markets in Asia — making it the largest e-commerce player in the region. Encouraged by the early success of Lazada, the Alibaba Group purchased a controlling stake in the company in April 2016 for USD1 billion. The acquisition aims to support the company’s expansion plans in Southeast Asia — as the Chinese powerhouse looks for ‘fresh and fertile ground.’

Shell has clearly recognized both the difficulties and strategic importance of e-commerce in Southeast Asia. The partnership with Lazada not only allows the company to expand its market coverage in Malaysia, equally important is the reputation for quality and authenticity that Lazada has fostered. The move by Shell aims to ensure ‘genuine’ Shell Helix motor oil is more easily accessible to discerning car owners across Malaysia.

“This is a winning collaboration for Lazada and Shell that, first and foremost, benefits the consumers as they now have unparalleled access to a wide range of official Shell Helix products via our platform,” says Lazada Malaysia CEO Hans-Peter Ressel.