SEA’s e-commerce market to surpass US$25bil by 2020

  • In 2015 the market earned US$11 billion
  • Malaysia generated US$2.3 billion in revenue in 2015

SEA’s e-commerce market to surpass US$25bil by 2020

 

SOUTH-EAST Asia is poised to become one of the world’s fastest-growing regions for e-commerce revenues, exceeding US$25 billion by 2020.

In 2015, the market earned US$11 billion despite several acquisitions, market exits, and many online retailers struggling to achieve profitability.

Analysis of the Southeast Asian E-commerce Market is new research from Frost & Sullivan’s Telecommunications and Digital Services (Digital Transformation) Growth Partnership Service programme. The report examines market trends and opportunities in six key Southeast Asian markets such as Indonesia, Malaysia, the Philippines, Singapore, Thailand and Vietnam with forecasts to 2020.

Total revenues from business-to-consumer (B2C) e-commerce in the six largest Southeast Asian countries will increase at a CAGR of 17.7%.

Malaysia and Thailand were the largest e-commerce markets in Southeast Asia in 2015, generating revenues of US$2.3 billion and US$2.1 billion respectively.

By 2020, both of these markets are expected to be eclipsed by emerging economies in South-East Asia including Vietnam and Indonesia.

“Despite being relatively young, the e-commerce market in South-East Asia is developing quickly, thanks to the astounding rate of digital adoption in the region,” stated Frost & Sullivan Asia-Pacific Lead Consultant in e-Commerce, Digital Transformation Cris Duy Tran.

“However, companies pursuing an Amazon-style B2C mass market business model are struggling to turn a profit and there have been several mergers and acquisitions and market exits in 2015,” he added.

“With fewer players in the market, e-commerce players are beginning to compete beyond price points and logistics and moving into new areas such as Online-to-Offline (O2O) e-commerce and loyalty programs,” said Tran.

Although the mass marketing approach has not worked so far in South-East Asia, there are many  opportunities in specialized e-commerce and P2P e-commerce.

Services such as Carousell, Tokopedia and Shopee are aggressively pursuing a ‘mobile first’ strategy, and Frost & Sullivan expects to see more sector-specific services in areas such as travel, food delivery, and luxury goods.

Frost & Sullivan has identified several key factors inhibiting growth.

These include low credit card ownership that stands at less than 7% in all South-East Asia markets except for Singapore and Malaysia.

In some countries, more than 50% of the population does not have bank accounts, making payment the biggest challenge for e-commerce companies in the region.

Logistics is another issue hampering the growth of e-commerce in South-East Asia, especially in areas with complex geographies such as Indonesia and the Philippines.

However, recent investments by regional logistics players such as aCommerce and SingPost to strengthen the e-commerce logistics infrastructure in these markets could accelerate the growth of online retail in the region.

The rapid expansion of the Chinese e-commerce market is providing further impetus for online retail growth in South-East Asia.

“In 2015, the e-commerce revenue in China represented 12.1% of all retail sales, surpassing the US, Europe, and Japan. Given the massive adoption of e-commerce in China, South-East Asia is set to follow a similar upward trajectory; even though at present, e-commerce only represents less than 2.5% of all retail sales. The region is well-positioned for more M&A activities during the forecast period, and we expect to see more exciting market developments in the near future,” noted Tran.

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