In 2016, Alibaba chairman Jack Ma debuted the concept of “New Retail” to describe the company’s drive to expand its reach from e-commerce to brick-and-mortar sales. According to Alibaba’s own statistics, despite nationwide e-commerce growth, physical outlets still account for more than 80 percent of China’s total retail sales — a market that Chinese technology firms have long been eyeing.

The main goal underlying New Retail is to integrate online and offline shopping, allowing consumers to choose how and where they shop. Alibaba’s New Retail initiatives have thus far been spearheaded by the company’s Hema supermarket chain. Alibaba has built 64 Hema outlets around China over the past three years, where it’s offered a range of fresh meat and produce, as well as freshly prepared meals, to shoppers in major cities around the country. Consumers who prefer shopping online can opt to have their food delivered.

New Retail is also a part of Alibaba’s strategy to become a global retail powerhouse. One of the company’s recent areas of interest has been Southeast Asia, where it’s investing billions of dollars in local startups and New Retail ventures. While it’s been doing this, a number of rival Southeast Asian companies have begun preemptively rolling out their own versions of Alibaba platforms and brands, as well as New Retail projects. While some reports have characterized this as a “Copy from China” strategy, that’s an over-generalization — and no more useful to understanding it than when Western companies complained about Chinese firms doing so a decade ago. It’s more apt to say that these startups are learning from successful Chinese companies and working to localize their ideas before China’s much larger tech companies get a foothold in Southeast Asia.

In October, the Singaporean online grocery service honestbee launched a Hema analogue of its own. Known as “habitat,” honestbee refers to the store as an example of “NewGen Retail.” The similarities between habitat and Hema have attracted attention, but is habitat a straightforward copy of a Hema supermarket? The short answer: No. While it has certain elements in common with Hema — such as an emphasis on mobile payments and the ability to shop online or in-store — habitat focuses more on customers’ in-store experiences. Whereas Hema focuses on efficiency, habitat sees shopping as a social activity. It believes that a warmer, more high-end atmosphere will entice Singaporean consumers to spend more time in the store with their family and friends — and spend more money in the process.

In other words, they’re not copying Hema, but learning, localizing, and refining. The Indonesian e-commerce platform Bukalapak is also experimenting with a New Retail model of its own. Since 2017, it’s signed up over 300,000 small-scale retailers to serve as online-to-offline sales agents. The move is reminiscent of an earlier Alibaba project to use China’s family-owned convenience stores as distribution channels, in exchange for helping them enhance their delivery and inventory management.

One reason local startups are so keen to adopt Chinese business models is that they know that several major Chinese technology companies are interested in expanding to the region. Alibaba, for example, has invested in the Singaporean e-commerce platform Lazada, the Singaporean e-commerce platform Redmart, and the Indonesian e-commerce platform Tokopedia. Tencent, meanwhile, has made significant investments in Go-Jek, an Indonesian ride-hailing company. Apart from getting access to a local brand, Chinese companies like Alibaba benefit from these partnerships by being able to tap into local customer databases and networks, potentially helping them expand further into various Southeast Asian markets in the future.

Rival Southeast Asian startups are trying to leverage their local market knowledge to localize Chinese innovations before Chinese and Chinese-backed firms can do so. By transplanting Chinese business models and ideas — and compiling data about what works and what doesn’t in their own markets — they can establish themselves early on and build customer brand awareness. For example, habitat’s theory is that by providing a more premium offline retail experience, there will be better sales in a market like Singapore. Data from these experiments will be crucial when they face Alibaba or any other Chinese competitors, who will come equipped with tried-and-true business models, but less local experience.

This will raise the entrance cost into Southeast Asia for Chinese firms. Based on the habitat and Bukalapak examples, Southeast Asian startups are generally able to introduce their own localized versions of Chinese products and platforms within a year or two of these products’ Chinese debuts. And even if Alibaba or other potential Chinese competitors do subsequently incorporate these startups’ ideas into their own expansion efforts, they will still need to find a way to win over local consumers and partners from established local companies.

This strategy is especially viable in Southeast Asia, since, like China, mobile internet is more widespread than traditional home internet. However, any product localization must account for significant differences as well. No other country in the world shares China’s combination of a very high mobile penetration rate, widespread adoption of digital payments, and advanced logistics infrastructure. The stakes are huge: The region’s GDP — an imperfect, but commonly used metric of economic development — is growing fast, doubling between 2007 and 2017, when it hit $2.8 trillion.

Ultimately, Chinese companies shouldn’t think of their Southeast Asian competitors as simple copycats. They should recognize that these firms have adopted what could be termed a “Learn from China” strategy: working to improve on and localize Chinese business models for their own purposes. If Chinese companies want a share of the Southeast Asian market in the long run, they must work with their partners, take the time to understand local preferences, and continue innovating to deliver unique, high-quality products and services to the region’s consumers.

Editors: Wu Haiyun and Kilian O'Donnell

(Header image: The websites of the Chinese e-commerce platform Taobao (right) and its Indonesian competitor Bukalapak. Shi Yangkun/Sixth Tone)