Southeast Asia: The New Battleground of Alibaba
March 15, 2017

Southeast Asia e-Commerce Trends 2017

Southeast Asia is the new frontier for e-Commerce. Online shopping is rising in Southeast Asian countries including Singapore, Thailand, The Philippines, Vietnam, Myanmar, Malaysia and Indonesia; attracting major international online retailers. In addition, numerous local e-Commerce startups came into existence working on innovative technologies and services that are disrupting the traditional businesses in the region. In this post, I shall be writing about the e-Commerce trends of 2017 in these seven countries.

Before discussing about the e-Commerce trends of 2017, let us have a look at the condition of the e-Commerce market of Southeast Asia. Here three reports published in 2016

Priceza.com study

Bangkok based shopping search engine and price comparison website Priceza.com published a report on consumer behavior and popular categories in e-commerce across six Southeast Asian countries (Thailand, Indonesia, Malaysia, Singapore, the Philippines and Vietnam). Priceza created the report based on the data of more than 130 million buying intents made by its users from Jaunary 1 to October 31 2016.

From January to October, Priceza Malaysia, Philippines, Singapore, and Vietnam reported over 7 million sessions. Analyzing these sessions revealed a growth of more than 245% in these four reasons.

Thailand and Indonesia observed the highest e-Commerce growth.

Thailand

Priceza Thailand recorded more than 68 million sessions with around 130 million pageviews.

Among these 63.27 percent came from modile devices, 29.98% from desktop and 6.75% from tablet PCs.

55.2% male vs. 44.8% female age ranging from 18years to 44 years.

Indonesia:

42 million sessions analyzed in 10 months plus 62 million page views.

70.92 percent came from mobile devices, 25.14% from desktops and 3.94% from tablet PCs.

63.2% male vs 36.8%  female age ranging from 18years to 44 years.

Here is a chart showing the popular items sold online in these six countries-

Bain & Company and Google survey report

Last year, Bain & Company, in partnership with Google, conducted a survey on 6,000 consumers in Singapore, Thailand, Malaysia, Indonesia, The Philippines and Vietnam. Here are the report highlights-

e-Commerce is 3% of the total retail of Southeast Asian region. One in four consumers over the age of 16 made an online purchase.

150 million (15 crore) people searched about products online and engaged with sellers. Of these people, 100 million (10 crore) made online purchases.

Digital content:

Digital content highly influences consumers’ decisions. In the Philippines, 34% of online shoppers are influenced by online content prior to making a purchase. However, online retail penetration is only 1.2%. Online shoppers watch a lot of video contents on their mobile devices on products

Top product categories:

Top product categories include clothing and footwear (24%), travel (18%).

Serious online shoppers:

31 million people are serious online shoppers. Of these, 18 million are city dwellers while 13 million lives outside the cities. These consumers regularly search all products online.

9 million female shoppers, living in urban areas, are addicted to buying beauty products online.

36 million female shoppers, living outside city, regularly search about health, wellness and beauty products.

People above the age of 36 research and buy travel online.

Mobile first nation:

Outside big cities most of the people access internet via mobile devices. In Thailand, 85% of the people living outside big cities use smartphones to buy products online. More than 250 million people in Southeast Asia use smartphones.

Fragmented market:

Southeast Asian online shoppers buy from different sites. No e-Commerce site has more than 20% of consumers in a particular country. In Singapore more than 12 e-Commerce sites are controlling 90% of the market.

While searching about products, the shoppers first go to a Search Engine. They do not directly visit a particular e-Commerce site or online marketplace.

Social media:

80% of digital consumers in the region use social media such as photo-sharing, message. More than 30% of online commerce takes place through social media in Southeast Asia.

Experience over deals:

Online shoppers in Southeast Asia does not shop online for attractive deals but for experience and availability of choice

Door-to-door delivery:

Door-to-door is the most preferred method of delivery to the consumers.

Cash-on-Delivery:

Cash-on-Delivery is the most preferred payment method.

Challenges:

Ethnic diversity:

Southeast Asia has great ethnical diversity. There are numerous communities. They have their own languages and sub-culture. The e-Commerce companies need to adopt different strategies to appeal to people living in different regions of the country.

Local law:

Many countries still do not allow 100% foreign investment in this sector. For example, Indonesia.

Infrastructure:

The online payment and logistics are big challenges in Southeast Asia. There are not many well-developed online payment options. Small towns, villages and remote areas are not well connected by roads, railways. Hence, delivering products, purchased online, is a big hassle. Trust issue:  

Many people do not feel comfortable buying products online for they are used to buying in traditional offline shops where they first touch and feel the product.

Kantar TNS’s “Connected Life 2016”

Market research Group Kantar TNS’s annual study “Connected Life 2016” focuses on people’s behaviors across social media platforms. The study surveyed 70,000 people in 57 countries.

The study revealed that photo and video sharing apps are changing the e-Commerce landscape of the Southeast Asia especially, the way people discover brands.

Though young people are the primary users of such apps, increasing number of older people are also using them.

Many people are now moving towards visual content-based platforms like Instagram and Snapchat from Facebook.

Instagram:

Instagram has a 73% penetration rate in Malaysia the highest in Asia-Pacific.

Singapore has the highest smartphone penetration rate in the region and in the last two years. In 2014, 51% used Instragram which rose to 63% in 2016.

In Singapore, 33% of the Internet users of 55-65 age range use Instagram.

More than half of the Indonesians surveyed (54%) use Instagram.

Snapchat:

Snapchat has 37% penetration in both Malaysia and Singapore.

In Indonesia Snapchat’s penetration rate is only 9%

10% of the Internet users of 55-65 age range use Snapchat in Singapore

Consumers do not like direct branding. They do not like to be interrupted while working. They want seamless integration.

Here are the trends of e-Commerce in Southeast Asia in 2017:

Battle of the e-Commerce Titans: Alibaba vs Amazon

The Chinese e-Commerce market is maturing and Alibaba is looking outside China. In April last year, the Chinese e-Commerce giant paid $1 billion for a controlling stake at Lazada Group which operates in Indonesia, Malaysia, the Philippines, Singapore, Thailand, and Vietnam.  Lazada is an online marketplace that sells a wide range of products.

Lazada is the biggest overseas acquisition in the history of the Chinese e-Commerce giant. It is also a clear indication that the company is serious planning to expand its business in Southeast Asia.

Tech Curnch reported that Amazon is planning to launch in Southeast Asia. Its office will be located in Singapore. The American e-Commerce giant is buying trucks, offices, hiring employees. In October, it launched its Prime free shipping service in China.

Change in Payments and Logistics:

Cash-on-Delivery is still the most preferred method for online shoppers in Southeast Asian region. There are credit card holders but they are not motivated to make online purchases through credit card.

CoD is not a very reliable payment method and for the growth of e-Commerce CoD has to go away. Already banks, mobile network operators and various startups are offering different payment solutions such as pre-paid cards, mobile wallets, e-wallets. Government is now supporting fintech. In 2017, more fin-tech startups will come up with innovative solutions.

Alibaba’s entrance in the region will also be another big catalyst for change in payment and logistics scenario. Already Ant Financial, the parent company of Alipay, started its expansion. It invested in Thailand’s Ascend Money and Singapore’s M-Daq. Alibaba’s Cainiao network will also expand its operation through various investments in the region.

More shutdowns, acquisitions and mergers:

In 2016, many e-Commerce start-ups were shut down or merged with other businesses or picked up by other companies e.g. Thai Retail Conglomerate Central Group acquired Rocket Internet’s Zalora; Lazada acquired Singapore’s online grocery store Redmart; Rakuten shut down its Singapore, Malaysia and Indonesia marketplaces and sold its e-Commerce site Tarad to  its founder. More such shutdowns, mergers and acquisitions will happen this year as well.

VC funding will be tough

The excitement and hype around e-Commerce are gone now. Till now, top Southeast e-Commerce companies received generous VC fundings. According to the Jefferies, e-Commerce industry accounts for 68% of total VC funding in ASEAN. It helped the e-commerce companies to grow their market shares facing huge losses; but not anymore. Compared to 2015, financing decreased last year and will continue the trend this year as well. It will be much harder for the e-Commerce companies to get VC fundings and investment this year. Revenue growth for e-Commerce companies will not be enough to please the investors.

Change in strategies:

With entrance of giants like Alibaba and Amazon in the region, local e-Commerce players will change their strategies. Instead of just selling products online, companies will fine tune their products, services and offerings. They will try to explore different niche products and niche markets. Initially, MatahariMall, the Indonesian e-Commerce site competed with Lazada and sold products online. Now, the company is focusing on online-to-offline e-Commerce.

Same day delivery:

With increasing number of online shoppers, delivery has become an important issue. Survey revealed that many shoppers in the region are even ready to pay extra for same day delivery especially if it is a product they need to have on urgent basis. Many logistics service providers and online marketplaces in Southeast Asia are offering same day delivery services facing numerous limitations

Google and Facebook will face competition:

Alibaba has its own platforms such as Alimama Taobao Affiliate Network,  TANX (Taobao Ad Network and Exchange), and Data Management Platform. Lazada merchants will also get access to these platforms. Hence, Google and Facebook will face serious competition from Alibaba in terms of advertisements.

Direct to consumer sales:

Renowned brands will gradually stop selling their products on online marketplaces and launch their own online stores and start selling directly to the consumers in 2017. Online market places offer large customer bases and store set-up cost is low but it is not good for long term business. Online marketplaces collect lots of data about its visitors, buyers, their buying habits, time of buying, occasion etc. Based on these data the marketplace might launch private-labels. Hence, reputed brands will open up their own online stores and sell directly to their customers.

Selling services online:

As product-based e-Commerce has become highly competitive and capital heavy, e-Commerce companies will gradually move towards selling services online such as healthcare, travel etc.

Myanmar:

Myanmar will attract lots of e-Commerce companies this year. The country has 10 million Facebook users and 20% of its 53 million people are internet users. They access Internet through mobile devices. Rocket Internet already started its operation in 2012. More e-Commerce startups will spring up in the country this year.

Demise of On-Demand Services:

Many on-demand service companies shutdown last year and this will continue in 2017.

Omnichannel:

Omnichannel e-Commerce enables retailers to engage its customers more successfully both online and offline. It started in Southeast Asia and will increase further this year. Challenger, is a Singapore-based electronics retailer with 50 stores, got into omnichannel e-Commerce. Buyers who buy from Challenger’s online store can either collect their products from Challenger’s physical stores or have them delivered at their homes.  Singapore Post is going to start its e-Commerce Stall from the middle of this year. Using the stalls online shoppers would be able to arrange for home delivery of the products they purchased online.

Marketing Automation:

With the growth of e-Commerce, marketing automation will become more important for the retailers this year. Through marketing automation, the retailers would be able to collect more data on their buyers and successfully target them and offer better customer experience. At the same time, such automation will enable retailers to handle more sales data with existing workforce.

Selling luxury products online:

Many offline luxury brand retailers have started to feel the effects of showrooming. As a result, they are opening online stores and selling luxury products to the masses at affordable prices. This trend will continue this year.

Social Commerce:

Bain & Co research already mentioned the immense popularity of Social networks in Southeast Asia.  It has become another major online channel. The young population of the region uses Facebook, Instagram and other social media platforms. Already many companies are showcasing and selling their products and services via social media platforms in the region and this trend will gather momentum in 2017.

Source:

Bain.com

Bloomberg

Chinavest

e27

Smartosc

Tech Crunch

Tech in Asia (1)

Tech in Asia (2)

Thailand Business News

The Wall Street Journal

Web in Travel

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