Amazon has its sights set on Southeast Asia (AMZN)

Amazon is set to enter Singapore as early as this week, marking its first step into Southeast Asia, a source with knowledge of the plans told TechCrunch.

The company will reportedly offer its standard e-commerce services along with Amazon Prime and Prime Now delivery.

Singapore, which is one of few developed jurisdictions in the region, could serve as Amazon’s base as it looks to extend its reach in the area, where the e-commerce market is expected to reach $88 billion in 2025. This projection can be largely attributed to the region’s growing middle class and expanding internet access.

Amazon will directly battle Chinese e-commerce giants Alibaba and JD.com in Southeast Asia. Alibaba owns 83% of Lazada, a Southeast Asian e-commerce company that had the most page views among retail sites in Thailand, Indonesia, Singapore, Malaysia, and Vietnam in December 2016, according to data from SimilarWeb. JD.com, China's second largest e-commerce company after Alibaba, also has a subsidiary in the region, and is one of many companies rumored to be interested in Indonesian e-commerce company Tokopedia. No company has a stronghold on the nascent market, making it attractive to all of these e-commerce behemoths.

Gaining a foothold in the region could help Amazon improve its international business. Amazon is extremely reliant on domestic revenue, and succeeding in Southeast Asia would help it diversify its business by opening up an increasingly valuable market. While Amazon is the second-largest player in India’s burgeoning e-commerce space, it has been unable to attain similar results in other places, including China and the EU. These shortcomings are due to heavy competition and its inability to attract Prime subscribers outside of the US, both of which are issues Amazon will likely work hard to overcome in Southeast Asia from the start.

However, Southeast Asia poses difficult problems for Amazon. The region features many underdeveloped countries with poor transportation infrastructure and large unbanked populations. Amazon could look to create a mobile wallet to facilitate purchases, as it did in India to provide payment credentials for the underbanked, but this would likely be more difficult and time-consuming in Southeast Asia. That's because the company would need to work with individual governments in each country to gain similar licenses. Partnering with local governments, as Alibaba has in Malaysia, may help Amazon handle payment problems, as well as cross-border shipping and customs issues.

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