- 07/11/2016
- Category: Commentaries
Home to more than 250 million smartphone users, Southeast Asia has the potential to be a robust electronic commerce (e-commerce) market. This efficient mode of transaction has developed significantly in the region since the turn of the decade, thanks to domestic businesses switching its customer engagement digitally and to foreign investments from e-commerce retail giants. Now numerous small and medium enterprises (SMEs) have benefitted from this phenomenon, with some businesses operating and expanding solely via the Internet. Big digital retail companies like Lazada, Zalora and Amazon are present in each ASEAN-6 country (Indonesia, Thailand, Malaysia, Singapore, the Philippines and Vietnam). The configuration of e-commerce actors in the countries examined are as presented on the graph below.
Figure 1 – Preferred platforms for e-commerce in ASEAN-6 countries
Even though Southeast Asia is home to many smartphone and Internet users, the difference between online consumers and its total population is concerning, with only one in four consumers over the age of 16 that has ever made an online transaction. Furthermore, this sector has only achieved $7 billion in sales regionally in 2015, compared to online sales in both China and the US where it has reached $293 billion and $270 billion, respectively. So why, despite the region’s online transaction prospects, is the e-commerce market still relatively small?
Low Internet penetration serves as the main reason behind this. Internet penetration refers to the percentage of Internet users from its total population in a given area or region. Even though Internet penetration in Southeast Asia has increased from 25% in 2010 to 33% in 2014, it has mostly been focused on major cities only, leaving rural areas out of the much needed development of Internet and mobile services. The impact is that Internet users account for only around 40 percent of the region’s total population, which indicates that it has plenty of room to grow. For e-commerce to proliferate, a large number of the population needs to be able to access the Internet and engage in online transactions.
Another contributing factor comes from the people themselves. Surveyed customers in Southeast Asia said that they do not trust e-commerce platforms, claiming that they are worried of scams and prolonged arrival of their deliveries. Many also preferred traditional means of shopping due to the lack of touch-and-feel experience in digital commerce. These are all typical complaints from consumers about engaging in e-commerce, which is why businesses must find a way to improve their credibility through marketing and other means necessary.
These problems present a challenge for a region that is consisted mostly of developing countries. Even though Southeast Asia’s middle class is growing and that online shoppers are on a rise, there are still work needed to be done by the public and private sectors to tap the potential of e-commerce. Action is needed to increase broadband access, to minimize the polarization between those who have access to Internet and credit cards against those who don’t. Support must also be given to local players, especially SMEs, that does business digitally in order to establish a more level playing field between SMEs and major companies. This is crucial since economic growth in Southeast Asia are predicted to be driven by SMEs in the years to come. Ensuring high quality and reliable transactions over the Internet comes next, so that retail companies could guarantee online security and win consumers over.
With the massive amount of holes that needs to be filled, there are still hope for enlarging e-commerce in the region and tapping into its potential. This is mainly because mobile phones are becoming a lot more affordable nowadays, resulting in the region’s consumers as “technology leapfrogs” who use mobile phones for online purchases straight away rather than using PCs in the first place. This trend would enable more people to explore digital platforms and purchase products online. Moreover, it is predicted that in 2020 Internet users in the region will grow up to 360 million, with an estimated Internet penetration of 62%, almost doubling the figure in 2014. With this in mind, it is no doubt that e-commerce will definitely become one of Southeast Asia’s largest market in the future.
Additional statistics of Southeast Asia’s e-commerce market:
Figure 2 – ASEAN-6 retail e-commerce market size (2013, $ billion)
Figure 3 – Differences between ASEAN-6 population, digital consumers, and per country
References
ASEANup, Overview of e-commerce in Southeast Asia, 02 August 2016, <http://aseanup.com/overview-of-e-commerce-in-southeast-asia/>, accessed on 05 November 2016.
Hoppe, F., Lamy, S., & Cannarsi, A., Can Southeast Asia Live Up to Its E-commerce Potential?, Bain & Company Inc., 2016.
Jae-kyoung, K., ‘ASEAN e-commerce market keeps booming’, The Korea Times, 17 October 2016, <http://www.koreatimes.co.kr/www/news/biz/2016/10/123_216282.html>, accessed on 05 November 2016.
World Trade Organization, e-Commerce in Developing Countries – Opportunities and challenges for SMEs, WTO Secretariat, Switzerland, 2013.
picture credit: pexels.com
