To watch Alibaba and Amazon battle for online shoppers, keep an eye on Malaysia

These headscarves are probably cheaper online.
These headscarves are probably cheaper online.
Image: Reuters/Bazuki Muhammad
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E-commerce giants Alibaba and Amazon have very different business models, but share one common goal—both want to be the world’s biggest online retail site.

Whether the future belongs to Amazon’s “buy goods, build warehouses, and squeeze costs” model, or Alibaba’s “connect buyers to sellers and take a cut off the top” arrangement is still anyone’s guess. Both currently dominate their home markets: in China, Amazon lags far behind Alibaba and; in the US, few consumers have ever heard of Alibaba’s online shopping malls.

But as both push aggressively into new markets, there are a few countries where they are going to meet on relatively equal footing. Take Malaysia, a country with a fast-growing middle class with access to the internet. The country’s consumers are facing higher living costs, which makes it a perfect microcosm of the cost-conscious, plugged-in consumers that Alibaba and Amazon desire.

The government is investing in e-commerce friendly projects, like online payment systems. While online sales were estimated at just under $900 million last year, or 3% of total retail sales, they are expected to grow quickly. Cushman & Wakefield dubbed the country is a “possible future online star” because of good infrastructure (key to deliveries) and customer potential. Malaysia’s pro-internet retailing culture has even spawned plenty of conferences for new entrants, full of panels like “Wow your customers like Yunye Meat Curd.” (Yunye Meat Curd, for the curious, is a pocket-shaped dried meat product that is juicier than jerky, and sold mostly over the internet).

Neither Amazon nor Alibaba break out their sales by country, and neither one have a dedicated Malaysia site. But Euromonitor says that Amazon, which ships some products to Malaysia but does not have warehouses there, is already the largest internet retailer in the Malayasia, with 26% market share by value in 2013, up from 24% in 2012. Alibaba, meanwhile, just partnered with the Singapore Post, which has offices in Malaysia and other southeast Asian countries that will help Alibaba ship to the region.

And by at least one measure, Alibaba is gaining fast—as of July last year, Amazon was Malaysia’s top foreign e-commerce site, judged by web traffic and Alibaba’s Taobao was ranked a lowly 63rd, according to information from Alexa (which is itself owned by Amazon). Today, Taobao is the top foreign e-commerce site, by traffic, and Amazon just behind it.

June 2 rankings for Malaysia websites, by traffic.
June 2 rankings for Malaysia websites, by traffic.