Jack Ma, Chairman of Alibaba Group, speaks during the Computing Conference in Yunqi Town of Hangzhou, Zhejiang province, China. Source: Reuters

Is Alibaba and Tencent’s dominance in Southeast Asia a good thing?

WHEN one thinks about the virtual landscape in China, two huge companies come to mind: Alibaba, which dominates the country’s e-commerce industry; and Tencent, which plays a huge part in keeping China online.

Without these two companies, China’s rather dramatic rise to virtual prominence would be nowhere close to where it is now. Dean Collins, a senior lawyer and PE fund formation expert based in Singapore, recently told Deal Street Asia that without Alibaba and Tencent, the online economic landscape of China would not be that exciting at all.

According to Collins, the magic of China’s success in the e-commerce industry comes from the capability of its premier tech firms to adopt the most progressive business trends available to its target demographic.

“If you look at the China tech story and you take out Alibaba and Tencent, it is not that exciting. Those two are so dominant in market cap, in terms of investments,” he told Deal Street Asia.

 

An employee at online retailer Lazada fills an order at the company’s warehouse in Jakarta, Indonesia. Alibaba is a major investor in the firm. Source: Reuters/Darren Whiteside

 

“A lot of truly the groundbreaking stuff comes out of the US. Things that truly change the way we do things. For China, it takes the existing things and adapting it to the local market.”

Considering how successful Alibaba and Tencent currently are, it is difficult not to agree with Collins. The two tech firms are, after all, almost creating an independent monopoly side-by-side. Alibaba dominates the country’s e-commerce and online financial sphere, while Tencent is doing the same with regards to Internet value-added services.

Tencent And Alibaba’s dominance

Tencent’s messaging platforms WeChat and QQ, for one, are used by roughly two-thirds of China’s population. The company’s apps so popular in China; venture capitalist Mary Meeker stated that the country’s netizens spend roughly 1.7 billion hours a day on Tencent’s apps, according to a Bloomberg report.

Alibaba, on the other hand, heads the country in the e-commerce market, with its Taobao Collection and Tmall being utilized by China’s internet-savvy population regularly. The firm’s Singles’ Day Sale, for example, has become so prolific that its revenue consistently eclipses the earnings of the iconic Black Friday and Cyber Monday Sales in the US by a wide margin, as stated in a CNBC report.

This trend in China’s virtual business industry is a double-edged sword for business owners and consumers in the country. On the one hand, the formidable scale and spread of the frameworks that are being created by Alibaba and Tencent are enabling small businesses to thrive and expand rapidly by relying on these stable and progressive platforms.

On the other hand, the reliance of China’s e-commerce industry on Alibaba and Tencent could also mean that if any of the two companies are compromised, the multitudes of small businesses that depend on the firms’ services and systems will take massive blows as well.

Chinese e-commerce sources will outpace sales from the iconic US Black Friday and Cyber Monday sales. Source: Shutterstock

Businesses and customers

The undeniable dominance of Alibaba in the region, as well their strict regulations on small business partners, for one, can actually suppress the original market strategies of local enterprises. This is already happening to some of Alibaba’s vendors, according to a study published by Marketing91 last year.

Being a company that dominates social media, messaging and local search engines in the country, Tencent also carries a notable amount of risk for China’s enterprising community. The company, after all, is a huge target for hackers, as it holds valuable information from innumerable enterprises and individuals.

The Chinese e-commerce market’s reliance on Alibaba and Tencent affects consumers as well, both positively and negatively. In a more optimistic light, the emerging monopoly that Alibaba holds in online finance means that it would soon be even simpler and more convenient to initiate financial transactions through the Internet through the firm’s lineup of services such as Alipay.

At the same time, however, Alibaba’s emerging monopoly in China could also limit consumers’ choices. While Alibaba has a formidable range of items and services available for its consumers, items not available in its Taobao Collection and Tmall would be incredibly difficult to find and buy.

Tencent’s dominance of value-add Internet services has been crucial to its rise as a giant. Source: Reuters

Tencent’s emerging monopoly in messaging and search services, on the other hand, has become a breeding ground for privacy concerns. Just last year, reports emerged that Tencent’s QQ browser was found to be sending personal user data to the company’s servers with subpar encryption, according to The Globe and Mail.

This, of course, is a notable concern for consumers who engage in business transactions online. After all, with customers initiating financial transactions through the internet, the last thing Tencent’s users need is a platform that is not fully protected from cyber attacks.

Overall, the emerging monopolies of Alibaba and Tencent in their respective industries are something that could work for and against local small businesses and consumers. Maybe in the near future, another upstart business would rise up to challenge the status quo, just like Alibaba did when Jack Ma founded it back in 1999 at a small obscure apartment in Hangzhou, China.






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