2020 predictions: How Southeast Asian eCommerce is shaping up
Southeast Asia; the epitome of progression and forward-thinking, it has become a gold-rush for Chinese eCommerce giants looking to spread beyond the mainland.
With Alibaba infusing a whopping $1.1b into Tokopedia and doubling its Lazada investment to 83%, 2017 was a landmark period for SEA eCommerce.
So, what’s on the horizon for the next 2 years?
In this article, we will shed light on the fastest growing eCommerce sector, helping you to understand the SEA market, it’s potential, why intelligent, dynamic custom-tailored pricing is the way forward for eCommerce retailers and how BitRewards can help local e-commerce businesses.
The current state of SEA eCommerce
In the Google-Temasek’s eConomy SEA Spotlight 2017 report, they estimated that Southeast Asia — Singapore, Malaysia, Thailand, Vietnam, Philippines, and Indonesia — could be home to a $200b eCommerce sector in 2025.
Fuelling the hype, the report claims that the Gross Merchandise Value (GMV) or goods sold online in SEA exceeded $10b in 2017, up from $5.5b in 2015. That represents an impressive 41% Compound Annual Growth Rate (CAGR).
Therefore, it comes as no surprise that the region billed as “The Selfie Taking Capital of the World”, is poised to be the pacesetter in eCommerce for the foreseeable future.
More Active Online Consumers
One factor that facilitates this certainty is the growing number of online shoppers in Southeast Asia. Between the region’s 6 most powerful economies — Singapore, Malaysia, Thailand, Vietnam, Philippines and Indonesia — the number of online consumers exacted to over 330 million by the end of 2017.
Google-Temasek predicts the number of monthly active internet users — and therefore, online shoppers — to exceed 480 million in 2020. A likely bet considering the progression so far. Furthermore, a Global Web Index Survey uncovered that 90% of SEA consumers are using smartphones and spend 3.6 hours per day using mobile internet to shop.
In contrast to the 1.8 hours spent by UK consumers and the 2 hours by Americans, this makes SEA shoppers an ideal target audience for eCommerce companies and vindicates China’s urgency to monopolize the market.
Main players in SEA eCommerce
Due to the alluring opportunities in SEA, eCommerce giants are squaring up for an expensive fight to win the region.
Chinese competitors Alibaba and Tencent are acquiring strategic players and deploying capital to play a more active, expansive role in the market. This was proven by Alibaba’s acquisition of Singapore based company Lazada last year, triggering an arms race between themselves and Tencent, which arguably prompted local SEA companies to pick sides.
A Business Insider report states that this nifty move from Alibaba boosted the online sales of 50,000 marketplace sellers, with Lazada offering charter flights to Indonesia and Thailand to deliver goods to customers.
But, clipping relentlessly at Alibaba’s heels are Tencent. They took over Singapore mobile-platform company Shopee last year and raised $884 million in an IPO to dominate Southeast Asian eCommerce.
Google and Amazon, in comparison, may struggle to assert any sort of dominance in this region, which isn’t a surprise, given the fact that SEA boasts such established players supported by deep Chinese pockets.
Challenges SEA eCommerce players face
You know what they say, every silver lining has a cloud.
Amongst the flourishing rosy realms of the SEA eCommerce market, there are tough challenges companies have to face which threaten to wilt their growth.
Apart from the vast sums of money which keep flowing in, the region is struggling to deal with challenges such as a lack of local tech-talent, infrastructure problems, dwindling internet speeds and a fragmented digital payments ecosystem.
One-dimensional payment systems are one of the biggest issues companies face when it comes to expansion and diversification.
In Singapore, consumers pay using credit and debit cards. Alipay, PayPal, Apple Pay and local payment platforms are also popular, and one of the reasons for Alibaba and Tencent investing so heavily in the region’s eCommerce businesses. This works swimmingly in the cozy clutches of Singapore. But beyond the border, consumers want a wider range of choice.
Payment options need to be more diverse to accommodate preferences, and in a consumer-driven, commodified world, this is ever more pertinent.
A separate challenge eCommerce companies must overcome is the difficulty associated with pricing products.
In a region where consumers spend more time on smartphones than anywhere else, shopping online regularly involves switching between multiple apps and online stores in search of the best deal.
This has led to many companies manually changing prices, which in a fast-moving market, it’s virtually impossible. Especially when competing with other brands across the region and beyond, retailers with thousands of products will never be able to act quick enough to change prices dynamically.
Southeast Asia is arguably the motherland of bargain hunters, and brand loyalty isn’t in their DNA — so retailers need to think of a new pricing strategy to ensure they stay competitive.
Future trends and next steps for SEA retailers
This leads us to believe that the next trend in eCommerce will be companies rolling out an effective, dynamic pricing blueprint.
With more consumers making instantaneous purchase decisions based on price, vindicated by Deloitte’s 2017 BTS study, having a clear understanding of what competitors are charging for similar goods is a step that forward-thinking eCommerce companies need to take.
Outside of Southeast Asia, pricing is already shifting away from manual towards dynamic optimization, repricing goods on a regular basis to give the brand an advantage in a highly competitive market.
This isn’t about purely and simply lowering prices — it’s much more intelligent. With the right information at their disposal, retailers can assess how they sit alongside competitors, allowing them to up their prices without making a loss while lowering others as market conditions change — price monitoring.
However, automated pricing strategies cannot stop customers shopping around, in fact, it only hangs out bait for the hungry shoppers to engulf and move on.
If retailers are to really make a mark in eCommerce, they need to find a way to not only catch customers but keep them hooked.
Could blockchain technology be the answer to some of these challenges? Progressive loyalty schemes like BitRewards may help retailers to retain customers, something that’s currently proving difficult.
Through liquid Ethereum-based tokens, customers are rewarded for their purchases and receive regular, personalized offers from that brand. This encourages them to spend again with that retailer and boosts customer retention for retailers, something that could generate a 95% increase in profitability.
Besides, it is extremely important to educate local e-commerce businesses and show the benefits they can gain from using a crypto-based loyalty platform. In this regards, at BitRewards we have more than 5 years of experience in learning merchants to take the most out of the loyalty schemes.
In a busy eCommerce landscape where it’s very much dog eat dog; customer loyalty could potentially be a retailer’s saving grace.
eCommerce in Southeast Asia is undergoing a sustained period of adjustment. Customer needs are evolving quickly, and big players in this space are having to consolidate their positions amid new rivals.
Thus, we can expect growth to continue at the current pace, potentially exceeding the $200b market size Google-Temasek predicts in 2025.
Online retailers need to question whether they’re prepared for the influx of competition and price-sensitive customers and get ready for new, blockchain technology which could revolutionize the market as we know it.