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Asean may have 150 million digitally active consumers, with high levels of product search and engagement – but e-commerce lags because of logistics and payments infrastructure shortfalls, according to a report by Bain & Co.
In south-east Asia, about 250 million people are now connected via smartphone, with 100 million engaged in online transactions. The region’s online retail sales are estimated at US$6bn, which is less than 4% of total retail – a figure that sees the region lag well behind developed markets and other developing markets.
Bain expects online retail sales in south-east Asia to hit $70bn by 2020. This market will be of interest to international retailers even though it does not yet match China’s $500bn market.
"The growth of the south-east Asian e-commerce market is slow but significant, particularly when you consider that it started from a very small base in 2012 and has doubled every year since," said Sebastien Lamy, Bain partner and co-author of the Bain-Google survey of 6,000 consumers in Singapore, Malaysia, Indonesia, Philippines, Vietnam and Thailand.
"We believe this region is on the cusp of a digital boom that is beginning to transcend e-commerce and impact sectors from travel and tourism to financial services and payments. Those that recognise its early potential, in spite of persistent complexities, will reap the rewards," said Lamy.
The biggest challenge to greater e-commerce growth in south-east Asia is the highly fragmented nature of the region, with region-specific cultures, regulations, infrastructures and customer preferences. These make it difficult to establish a presence and build scale, which can be a deterrent for merchants seeking to enter the market.
Read more about ecommerce in the Asean region
- Consumers in the Asean region are increasingly using their mobile devices to make online purchases, according to a study by Visa.
- When Singapore Post realised it had to change its business model to survive, it appointed its first CIO to front the technology transformation.
- DHL's innovation centre in Singapore is trying out the future logistics technologies it plans to introduce across its Asian business.
However, the report noted that local and regional players are thriving simply by providing a highly tailored customer experience. This includes competing on more than just price – more than 60% of survey respondents cited both experience and choice as a driver of loyalty. Merchants across the region are also offering not just credit card payment and door delivery, but also cash payment and pick-up options.
Another finding is that the region's consumers are still largely "site-agnostic" and will make purchases from a large variety of platforms. Consequently, search has become a leading source for product research and discovery, led by the use of video – especially in Indonesia and Thailand.
Social media is highly influential in building consumer trust around product quality and seller's credibility. The survey found that over 80% of consumers use social media and over-the-top content to research products or otherwise connect with sellers.
Sandy Shen, research director with the e-commerce team at Gartner, said the challenges to e-commerce in south-east Asia differ by market. As a general rule, the mature markets usually have better infrastructure in e-commerce players, logistics, payment and customer services, said Shen. In contrast, the less developed or early-stage markets have challenges in those areas.
“E-commerce in south-east Asia is still at an early stage, although some markets – like Singapore – are more advanced than others. But even mature markets have plenty of room for improvement, so it is an endless journey where e-commerce companies deliver a compelling customer experience and keep improving that,” she said.