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SOURCING / BUSINESS DEVELOPMENT MANAGER - FERGUSON GLOBAL

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SE Asia online sales to hit $70B by 2020

2016-03-24 15:21:30

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SOUTHEAST Asia’s growing e-commerce sector is projected to be worth $70 billion by 2020, but market players are finding it hard to penetrate the region due to logistical and payment infrastructure constraints, according to a joint report by Google and management consulting firm Bain & Co.
 
“The growth of the Southeast 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,” Sebastien Lamy, a Bain partner and coauthor of the report, said in a statement yesterday.
 
The report, titled “Can Southeast Asia Live Up to Its E-commerce Potential,” surveyed over 6,000 Southeast Asian consumers across the Philippines, Singapore, Malaysia, Thailand, Indonesia, and Vietnam.
 
Bain said online sales in Southeast Asia could hit $70 billion by 2020, which may seem small in comparison to China -- now a more than $500 billion market.
 
“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 recognize its early potential in spite of persistent complexities will reap the rewards,” Mr. Lamy said.
 
The Bain report estimates that more than 150 million consumers in the region are digitally active, “with high levels of product search and engagement.”
 
Filipinos make up the third largest population of digital consumers in Southeast Asia at 28 million, next to Indonesia with 51 million and Vietnam with 31 million. Thailand is fourth with 23 million, followed by Malaysia with 14 million and Singapore with 3 million.
 
Bain noted that while online retail penetration in the region is small, consumers are “highly influenced” by digital content.
 
“For example, penetration is a mere 1.2% in the Philippines, but 34% of those who have made a purchase online in that country reported they were influenced by online content prior to making a purchase,” it said.
 
In the Philippines’ top cities, 29% of consumers used mobile phones for online purchases and research, lower than the 50% seen in areas outside these cities.
 
“[T]he country is poised for further growth as large parts of the region -- mainly those outside Tier-1 cities -- become ‘mobile first’ and leapfrog older technologies,” Mr. Lamy said.
 
Consumers in the region are buying from different digital platforms, with search engines as a source for product research and social media influencing consumer trust around a product and seller.
 
For Filipinos, their preferred e-commerce sites are Ensogo, eBay, Amazon, Metrodeal, Sulit, Zalora, OLX, and Lazada.
 
Still, Bain pointed out that e-commerce in the region “is proving to be a tough nut to crack due to constraints in Southeast Asia’s logistics and payments infrastructure.”
 
Foreign companies are deterred by regionally-specific cultures, regulations, infrastructures and customer preferences that make it “difficult” to establish a presence and build scale.
 
“However, 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,” Bain said.
 
Many local companies are also adapting to the varying banking penetration in the region by offering cash payment and pick-up options, aside from credit card payment and door delivery. -- Daphne J. Magturo
 
Source: BusinessWorldOnline.