IF COMPANIES play their cards right, a lot can be had from the growing digital media connectivity in the region.
The prospects for e-commerce are deemed significant, with online retail space offering a rich resource of opportunities for growth and expansion across the region. Online retail sales in Southeast Asia, including the Philippines, are expected to hit $70 billion by 2020 from the current estimate of $6 billion, according to a new report released by global management consulting firm Bain & Company and tech giant Google.
However, this space was proving to be a “a tough nut to crack due to constraints in Southeast Asia’s logistics and payments infrastructure,” read the same report entitled “Can Southeast Asia Live Up to Its E-commerce Potential.”
The new report pointed out that digital media connectivity in Southeast Asia now rivaled that of China, as more than 150 million consumers in the region were already digitally active, with high levels of product search and engagement.
“Online retail represented a $6-billion market in Southeast Asia, but with online sales below 4 percent of total retail, the region still lagged well behind developed markets and even other developing markets,” the report stated.
“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 co-author of the report, said in a statement issued last week.
“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 recognized its early potential in spite of persistent complexities would reap the rewards,” Lamy added.
The Bain-Google report showed digital influenced just 20 percent of consumer purchases, particularly for mobile phones, clothing and laptops. The report surveyed more than 6,000 Southeast Asian consumers in the Philippines, Singapore, Malaysia, Thailand, Indonesia and Vietnam.
In the Philippines, the percentage was slightly higher at 34 percent, an indicator that the country was poised for further growth in this space.
Bain-Google also said the biggest hurdle for e-commerce in Southeast Asia was the highly fragmented nature of the region. “Regionally-specific cultures, regulations, infrastructures and customer preferences make it difficult to establish a presence and build scale here, a deterrent for foreign-owned businesses. However, local and regional players were thriving simply by providing a highly tailored customer experience.”
Bain-Google said competition goes beyond the price offered. “[M]ore than 60 percent of survey respondents cited both experience and choice as a driver of loyalty. Many local companies were also adapting to varying banking penetration across the region by expanding beyond credit card payment and door delivery and instead offering cash payment and pick-up options.”
The report also revealed the region’s consumers were still largely site-agnostic, preferring to purchase from a large repertoire of platforms. As a result, search has become a leading source of product research and discovery, led by the use of video, particularly in Indonesia and Thailand.
Social media, it added, was also highly influential in building consumer trust for the product’s quality and seller’s credibility. It was found that more than 80 percent of consumers used social media and over-the-top content to research about products or connect with sellers.
“Our research is a ‘last chance’ warning for Southeast Asian companies,” said Florian Hoppe, a Bain partner and co-author of the report.
“We’ve had a front row seat to watch the digital disruption unfold in other markets—first the United States and Europe, followed by China and India. With a few regional differences, we know how it would play out here, too, but companies are running out of time to act if they want to stay ahead of consumer preferences and beat the competition,” Hoppe added.