Trends in Southeast Asian E-commerce You Should Better Know
Let’s take a brief look at the e-commerce trends in the region where web usage is growing the fastest and one of the most interesting and booming markets of all.
What is Southeast Asia? The future world no.3 e-commerce market!
Southeast Asia is estimated to become the world’s 4th largest economy in 2050 and the 3rd e-commerce market in the world (after China and India, surpassing even the US). With 260 million Internet users, SEA is the 4th largest internet market in the world and what’s more is that number is increasing by 3.8 million new users every month! Indonesia serves as a great example — the number of Internet users there was 2 million in 2000 and in June 2016 it was 88 million (with a penetration of just 34.1% today, Indonesia has enormous potential to grow). Overall it is estimated that there will be almost 500 million internet users in Southeast Asia by 2020.
Southeast Asian countries has overall population of 600 million people. 260 million out of them are active internet users, which is 37% growth since 2000.
What factors influence the growth of the e-commerce market?
- Rise of the middle class
- Much younger population than in US and EU (70% is under the age of 40)
- Increase in internet and mobile penetration
- More supply of new e-commerce players
- Increasing logistic options
And what challenges you will face in the SEA e-commerce market?
- Low trust in online payments
- Problems with delivering what was promised
- Lower quality logistics infrastructure
- Foreign ownership regulations
Southeast Asia has its own way…
In SEA there are specifics that could be very well used to create a competitive advantage. First, people in Southeast Asia are internet focused — they spend more time on the internet than on other forms of media (yes, even more time than on TV). Second, they are very addicted to social media. Finally, SEA is a mobile-first e-commerce marketplace. Let’s see Thailand, where the average Thai person has 1.4 mobile phones — that means a 140% adoption rate (in U.S. it is 91%, in China 77%). If we look at the percentage of mobile internet users out of total internet users the number is 139%, meaning that Thailand has more mobile phones connected to the internet than there are internet users. (In U.S. it is only 47%, in China it is 75%).
The specifics of SEA e-commerce market:
mobile-first approach | social media addiction | fear of internet payments | poor delivery infrastructure
Indonesia — the fastest growing internet market in the world
Indonesia is predicted to be the biggest market of SEA in the future. In 2013 there were 4.6 million online shoppers and three years later there is almost 9 million of them, that means average growth of approx. 1.5 million online shoppers per year. Indonesia is also the SEA country with the highest number and highest growth in internet users (88 million in June 2016). The most preferred e-commerce payment method is bank transfer (57%) and the most popular e-commerce category is apparel (67.1%).
What are your customers’ preferences? Do you know them well? Check the most popular payment and delivery methods and make your advantage out of it.
As was mentioned above, one of the most essential specifics in Southeast Asia e-commerce market is the mobile-first approach. Indonesia is a great example — about 70% of their internet traffic is from mobile devices. Indonesia has the highest mobile Facebook usage rate in the world (63 million users in 2015) and it is estimated that by 2018 almost 99% of Facebook access will be via mobile. That’s why it is so essential to focus on mobile functional solutions.
What already works in SEA? Selected e-commerce businesses.
Lazada — the dominant e-commerce platform.
Lazada was founded in 2012 by Rocket Internet as the “Amazon of Southeast Asia.” It is said that Lazada is a combination of Amazon and Tmall. Lazada today gets 70% of its gross merchandise value (GMV) from third-party marketplace transactions and 30% is generated through “traditional” Amazon-style direct retail. Lazada serves around 550 million customers.
In April 2016, the Alibaba Group announced that it intended to acquire a controlling interest in Lazada by paying $500 million for new shares and buying $500M worth of shares from existing investors.
The e-commerce market in Southeast Asia has for enormous potential despite the fact that it is relatively young (with only 1% of total retail GMV being generated online compared to 7.1% and 15.9% in the US and China respectively), forecasts show very interesting future numbers — the market is expected to grow 32% year-on-year, to reach $88 billion by 2025 and achieve a 6.4% penetration rate — up from today’s $5.5 billion and 0.8% penetration rate. The huge advantage is that SEA market is less competitive because of the lack of global players. There are surely plenty of opportunities, however you have to account for Southeast Asia specifics and adopt to their unique local behavior.
