Is the future of e-commerce in Southeast Asia?

April 15th, 2020

Discover the Emerging Market

Southeast Asia

The emerging economy of Southeast Asia, with the addition of an evolving cross-border e-commerce ecosystem, has created an attractive opportunity for foreign brands to enter the market. Southeast Asia is home to some of the world’s fastest-growing economies, such as Malaysia, Singapore, Indonesia, Thailand, Vietnam and the Philippines. According to Bain & Co, 50 million new consumers will join the ranks of the middle class in ASEAN countries by 2022, contributing to the region’s USD 300b (EUR 272.7b) middle-class disposable income. The middle class will expand to include approximately 350 million people. This group is also benefiting from increasing internet coverage, more smartphone users and tech-savvy populations.

According to the iPrice report from 2019 about the map of e-commerce, the e-commerce market in Southeast Asia has grown sevenfold since 2015, to USD 38b (EUR 34.5b) in 2019, surpassing any other internet-based sector in the region, and it is expected to exceed USD 100b (EUR 90.9b) by 2025. Southeast Asia's e-commerce today has become a regular shopping experience with over five million transactions coming in on an average day. Numbers of active users of e-commerce have been increasing, from initially only 49 million users in 2015 to triple the amount in 2019 at 150 million users.

Platforms Vying for Customers

For Alibaba, China’s top e-commerce platform, Southeast Asia offers a golden opportunity to break out of the barrier of its domestic market and turn into a global business. Today, Alibaba is the major player and has been successful in developing a cross-border business within China on its Taobao and Tmall platforms, with the focus on importing foreign brands into China for Chinese shoppers. Alibaba aims to replicate its success in China in Southeast Asia. As a result, Alibaba acquired Lazada as part of its Southeast Asia expansion plan in 2016. By 2018, Lazada itself had become the largest e-commerce operator in Southeast Asia based on average monthly web visits, and Shopee, the Singapore based e-commerce C2C marketplace, has emerged as Lazada’s biggest competitor. Just like Shopee, Lazada is also headquartered in Singapore. They both have been staying in the top mobile app charts on a monthly basis and have been actively operating all across Southeast Asia.

Shopee became Southeast Asia’s most visited e-commerce platform in Q1 2019, with the website and app traffic rising by 5% continuously to 184.4 million visits, with Vietnam and Indonesia as its main markets, followed by Malaysia, the Philippines and Thailand. Nevertheless, Lazada remained ahead of Shopee on the number of unique visitors. Lazada has its main market in Singapore, Malaysia, Thailand and the Philippines, and was also still a significant player in Vietnam and Indonesia. The strongest selling point of Lazada are the tech innovations, which have helped to boost its popularity among users, turning the platform into ‘shoppertainment’, where users can play games and watch in-app livestreams in addition to purchasing items. Lazada, with Alibaba's backing, has matured its shoppertainment strategy, where Alibaba already implemented and holds a stake in the livestreaming site Bilibili in China.

E-Commerce is Key in the Corona Crisis

It is true that in recent years e-commerce has been providing significant contributions to economic growth in Southeast Asia. However, when it comes to the corona crisis situation, how will e-commerce further contribute to the economy?
One thing we see is that, as part of their overall channel strategy, most big retailers may have already started their journey into e-commerce over the past decade, even before the crisis hit, either as a branded online store or as part of an existing online marketplace such as Lazada, Shopee, Tokopedia or Sendo.vn.

Obviously, given the rapid spread of the virus and as part of physical distancing measures, the Covid-19 (coronavirus) outbreak has resulted in empty brick and mortar stores across Asia, including emerging countries such as Malaysia, Indonesia, Thailand, Vietnam, the Philippines and even for developed countries such as Singapore. Except for essential groceries such as disinfectants, toilet paper, instant noodles, and rice, most consumers throughout the world are delaying non-essential purchases like luxury products as well as holiday and travel plans. While traditional retail is suffering under the outbreak, e-commerce has become the number one option for customers to purchase their daily necessities and stay safe at home. Changes in consumer purchasing behavior will result in them shifting their purchases online.

Moreover, such success stories from Singaporean retailers such as Luiga and Awfully Chocolate have reported an immense increase through online sales, while their offline stores in the shopping malls have been experiencing a drastic drop in sales due to Covid-19. Many other brands can leverage this change in consumer behavior to drive their digital transformation, ensuring that they remain accessible and be there for the customers, especially during these hard times.

At the same time Shopee and Lazada, two major marketplace providers, are issuing vouchers for free delivery in their markets. These platforms are providing next-day deliveries for items like masks and hand sanitizers across all of Southeast Asia. Currently they are embracing the mission to ensure that health-related products and essential household items remain available and accessible to their customers. According to the Google Temasek report, before the coronavirus outbreak, the e-commerce market across the region's top six economies was projected to quadruple between 2019 and 2025 to USD 153 billion. Today, given the corona crisis situation, actual growth could be far exceeding the projections as Southeast Asians have to stay home.

What’s Next?



What can brands do to keep contributing to their loyal customers or even to reach out to new groups, while also maintaining a reasonable revenue in these challenging times? Keeping up with digitalization is the key: Stay ahead of the game and be there for your customers by being present on the most relevant e-commerce platforms in Southeast Asia. If Lazada were to become the dominant ecommerce platform in Southeast Asians' universe, the consolidation of the e-commerce market in Southeast Asian countries and China under Alibaba will offer a more comprehensive ecosystem and greater reach for the brands.

Especially from a new brands perspective, tapping into these non-stop emerging markets is a no-brainer investment, as it will significantly increase brand awareness and secure a spot in the consumer’s mindset in the long run.

But Where to Start?

Considering Alibaba’s stakes in Lazada and Tokopedia (the strong national e-commerce player in Indonesia), Alibaba will certainly be a strong player in ASEAN’s growing e-commerce markets for years to come and a good starting point. So, what are brands waiting for?

Sources: thepaypers, nikkei, e27, bain, statista, entrepreneur, theborneopost, iprice, google temasek

Photo: Shopee, Lazada