With the world’s third largest population and a comparatively low, but growing, Internet connectivity, Southeast Asia is an upcoming market of interest for e-commerce. Still in its infancy, the ASEAN e-commerce market presents many growth opportunities for businesses ready to face its challenges.
The e-commerce market in ASEAN
Southeast Asia is currently a very attractive market for companies involved globally in the e-commerce sector and smaller local players. At a turning point in terms of Internet and mobile penetration, the population of Southeast Asia is quickly adapting its behaviors to take advantage of new opportunities available in purchasing products and services online.
The number of Internet users in Southeast Asia, and particularly in the 6 largest ASEAN countries, add up to create a large untapped market. Though the Singaporean e-commerce market is more mature, in Indonesia, Malaysia, Thailand, the Philippines and Vietnam, e-commerce is still at a very early stage and full of opportunities for retailers.
In some countries, consumers still face difficulties to reach traditional shops. Potential customers are therefore even more eager to buy online the goods they cannot obtain locally. These retailing challenges are however transferred to the sellers who need to find new solutions to collect payments and deliver products.
Despite these difficulties, big and small companies are rushing to move and sell online, as many analyst expect the market to boom in the coming years. With less than 1% of the total retail market currently happening online (except in Singapore), if it were to reach 5% of total retail, the Southeast Asian e-commerce market could be worth more than 20 Billion USD.
Trends for e-commerce in Southeast Asia
The following slide deck provides a general overview to the most interesting trends in e-commerce in Southeast Asia: a large, addressable and maturing market that is particularly well versed into the use of mobile devices and social media.
With details on the latest developments of start-ups, companies and investors until 2015, this presentation lists the key players of the region and how the business is evolving in the US and other more mature markets.
Key trends and major players of e-commerce in Southeast Asia
- Southeast Asia’s population – slide 6
- A young population, 67% under 35 years old – slide 7
- …and becoming richer – slide 8
- Structural shift in the use of Internet in Southeast Asia – slide 9
- Southeast Asia is taking up fast – slide 10
- Comparing Southeast Asia’s online landscape – slide 11
- Internet has surpassed TV – slide 12
- A high mobile penetration rate – slide 13
- Room for growth – slide 14
- More affordable smartphones – slide 15
- Comparative study: Thailand VS China – slide 16
- LINE case study – slide 17
- A low e-commerce penetration – slide 19
- ASEAN’s market potential is massive – slide 20
- ASEAN at an inflection for e-commerce – slide 21
- Global perspective on digital development – slide 22
- Big players moving into e-commerce – slide 23
- Recent moves of listed players – slide 24
- Southeast Asia tech funding at an inflection point – slide 25
- Asian e-commerce unicorns – slide 26
- Funds coming in Southeast Asia for e-commerce and marketplace – slide 27
- The next big online businesses – slide 28
- Several notable exits in Southeast Asia – slide 29
- Sizable e-commerce deals in Southeast Asia – slide 30
- Companies raising over $ 100 M – slide 31
- Leading e-commerce players in Southeast Asia – slide 32
- 2015 largest deals go to mobile commerce – slide 33
- Current trends in the US – slide 34
- Summary – slide 38
- Trends for e-commerce in Southeast Asia until 2020 – slide 39
For a broader perspective on commerce, you might want to read about the retail and wholesale sector in Asia. For more information on the development of e-commerce in the fashion vertical, you might be interested in reading more on the rise of female consumers in Asia.
Facts and figures of e-commerce in ASEAN-6
This second slideshow provides a lot of detailed information, facts and figures on e-commerce in Southeast Asia in general, as well as its major markets: Singapore, Thailand, Malaysia, Indonesia, the Philippines and Vietnam.
For a more comfortable reading, it is quite suggested to open the report in full screen!
Key facts and figures of e-commerce in Southeast Asia
Key factors of development – slide 5
- Rise of Middle Class
- Greater mobile/Internet penetration
- More supply of new e-Commerce players
- Increasing logistic options
- Alternative Payment Methods
Key challenges – slide 6
- Lack of robust ecosystem
- Management of customer expectations and perception
- High customer service needs for small purchases
- Trust in online payments
- Securing supply chain
- Cross border commerce issues
- Inconsistent duties
- Logistics, taxes, customs clearance, payment methods
- Lack of reliable, low cost logistics infrastructure
- Local contracts, deals, localization for each ASEAN country
- Fulfilment infrastructure not built to serve the scale of e-commerce scale
- Foreign Ownership Regulations
See below for more details on the challenges of e-commerce in Southeast Asia.
Tables, figures and comparisons
- ASEAN e-commerce landscape – slide 7
- ASEAN shopping websites traffic comparison – slide 8
- Rise of middle class – slide 9
- Greater Internet penetration: ASEAN 2011-2016 – slide 10
- Increasing supply of e-commerce & logistics players – slide 11
- E-commerce market size (2013) and potential – slide 12
- E-commerce value chain – slide 13
- Platform architecture – slide 14
- Framework for competitive analysis – slide 15
- Foreign ownership regulation for e-commerce – slide 16
- Status of e-commerce law in ASEAN – slide 17
- Impacts of customs in ASEAN – slide 18
- Status of transport network in ASEAN – slide 19
- Country differences – slide 20
- Country similarities – slide 21
- E-commerce market size – ASEAN 7 Billion USD in 2013 – slide 23
- A huge growth opportunity – slide 24
- E-commerce potential in ASEAN – slide 25
- Indonesia middle class – slide 27
- Indonesia online shoppers – slide 28
- Preferred e-commerce channels in Indonesia – slide 29
- Preferred e-commerce payment methods (2013) – slide 30
- Innovative Indonesian payment methods (2013) – slide 31
- Indonesia Top Shopping websites by monthly traffic (March 2014) – slide 32
- Popular categories (2013) – slide 33
- Timeline – slide 34
For more information on e-commerce in Indonesia, check “Internet and social media in Indonesia“.
- Philippines middle class – slide 36
- Philippines Top Shopping websites by monthly traffic (March 2014) – slide 37
- Timeline – slide 38
- Thailand Top Shopping websites by monthly traffic (March 2014) – slide 40
- Timeline – slide 41
- Example of US import tax calculation in Thailand – slide 42
- Malaysia Top Shopping websites by monthly traffic (March 2014) – slide 44
- Timeline – slide 45
- Challenges in SME adoption – slide 46
For more information on e-commerce in Malaysia, check the following resources:
- Mobile Internet and social media in Malaysia
- Malaysia e-commerce: online shoppers’ habits
- Malaysia e-commerce: online sellers’ characterisitcs
- Timeline – slide 48
- E-commerce valuations – slide 50
- Zalora financials H1 2014 – slide 51
- Lazada financials H1 2014 – slide 52
- Listed logistics companies – slide 53
For more information on e-commerce in Singapore, check “Digital behaviors and habits in Singapore“.
Challenges of e-commerce in ASEAN
ATKearney has recently published a report to help understand the challenges faced by e-commerce companies in Southeast Asia and how to pass these obstacles. It is summarized in 5 key guidelines to help companies and authorities develop the e-commerce business in Southeast Asia.
- Increase broadband access
- Support the emergence of local players
- Reinforce online security
- Promote e-payment
- Improve logistics and trade efficiency
Answering to Bloomberg TV Malaysia’s Sophie Kamaruddin, Olivier Gergele, Principal at ATKerney, explains how the offering of online shops is critical for success in the region while presenting the findings of the report. In this video, he also highlights the report’s main points and how the market could grow by 25% a year.
The case of Zalora: a leader in fashion e-commerce in Southeast Asia
Zalora Group, a pioneering company in Southeast Asia’s online fashion retail, has been moving fast to grab a big portion of the fashion e-commerce market in ASEAN. Launched in late 2011 by the German startup incubator Rocket Internet, Zalora is based in Singapore and regroups more than 2000 staff across Southeast Asia and beyond.
Michele Ferrario, Zalora’s managing director, shares some insights and perspectives on growing an online fashion retailer across the region.
A promising market
People in secondary cities of countries like Indonesia, the Philippines, Vietnam or Thailand do not have the same access to fashion as in the larger and more connected cities like Singapore.
Rocket Internet therefore seized the opportunity to develop Zalora and strengthen its position in e-commerce in Southeast Asia which is expected to skyrocket in the coming years.
However, Zalora faces fierce competition from global heavyweights like Amazon, ASOS, Alibaba and Rakuten. It also needs to address local infrastructure challenges for effective cash collection and merchandise delivery in each country.
Zalora has therefore developed its own infrastructure to satisfy its customers’ needs. They have created warehouses in each country and partnered with local delivery companies in every country to ensure fast delivery. Zalora focuses on delivering a great customer experience, while also learning about the local markets and habits and sharing global best practices.
The first mover strategy
To reach its present size, Zalora has moved very fast: they opened in six markets in the first six months, with warehouses in each country, and hired 1000 staff. The critical elements to conquering the Southeast Asian market have been scale, speed and customer satisfaction. To ensure customer satisfaction, Zalora has hired a dedicated team to implement best practices and learn from negative feedback.
A fashion startup culture
Zalora’s core team was built in the first year of existence and it has stood together since then. They have hired new talents as the company developed later on, but the company does not face a big staff turnover problem, as Zalora employees share a common company culture.
Employees share the vision that they are involved in the same team with a similar lifestyle and work experience. It also helps that the average age of employees is below 30 years old, with many of these young people holding important responsibilities.
A “glocal” supply chain
In order to cope with different fashion tastes across the region, Zalora customizes certain areas of its business while other parts are standardized. This creates important needs for sourcing and logistics management in a mixed supply chain: some products are sourced in each country from local manufacturers while global brands are managed by the Singapore team and dispatched across the region.
Key figures of the online fashion market in Southeast Asia and Zalora’s appetite
- The fashion market in Southeast Asia is expected to reach 100 Billion USD by 2018
- About 20% of fashion retailing is now done online in the US and Europe, while a fraction of this is currently happening in Southeast Asia
- Zalora hopes to capture close to 50% of the online fashion market of Southeast Asia
Presentations respectively from June 2015 by Dr. Adrian Vanzyl – published by Jared Polites – from March 2015 by Nittin Mittal. Youtube videos from September 2015 by Blomberg TV Malaysia and January 2015 by CNBC International