2000 digital economy GMV reached, what are the opportunities for Southeast Asian e-commerce?

Southeast Asia, a promised land of e-commerce markets flowing with milk and honey.

There is an abundant demographic dividend here. In 2022, the six major Southeast Asian countries (Thailand, Indonesia, Vietnam, Malaysia, the Philippines and Singapore) had a combined population of about 670 million, one of the largest net population additions in the world, and Southeast Asia has a large young population, with the exception of Singapore and Thailand, the remaining four countries account for more than 50% of the population under the age of 35. In the Philippines, for example, the median age of Filipinos in 2022 was 24.1 years, compared to 38.4 years, 48.6 years old, and 43.2 years old in China, Japan, and South Korea, respectively. The advantage of young demographic dividend can not only provide sufficient labor for Southeast Asia, but also inject strong impetus into the development of Southeast Asia's Internet economy, especially in the field of e-commerce.

Southeast Asia also holds great potential for the digital economy. According to the latest edition of the Southeast Asia Internet Economy Report, jointly released by Temasek, Bain and Google on 27 October 2022, the number of Internet users in Southeast Asia increased by 100 million in the three years from 2019 to 2022, and the overall growth rate is considerable. The report predicts that the GMV of Southeast Asia's digital economy is expected to reach US$200 billion in 2022, with a compound annual growth rate of 20%; Among them, e-commerce will reach $131 billion. And in the long run, Southeast Asia's digital economy GMV will reach $330 billion by 2025 and may reach $1 trillion by 2030.

Such a fertile land for e-commerce full of infinite possibilities will inevitably attract many players to enter the game and compete for the deer.

Shopee, an e-commerce giant under Sea Limited, known as "Southeast Asia's Little Tencent", has been attacking the city all the way and has become the most visited and largest transaction platform in Southeast Asia, but its growth rate has slowed down in the past two years and faced bottlenecks; Lazada, which is backed by Alibaba, has received multiple rounds of capital injections totaling about US$4.8 billion from Alibaba, and has been fighting with its old rival Shopee for many years. Indonesia, the largest economy among the six Southeast Asian countries, gave birth to the local e-commerce platform Tokopedia, occupying the first throne of Indonesian e-commerce with its first-mover advantage, while its own rising stars Bukalapak and Blibli are not to be outdone and strive to catch up; In February 2021, TikTok's e-commerce platform TikTok Shop successively entered Southeast Asian countries, seizing the Southeast Asian market through high subsidies and a huge user base; Temu, which has been making great progress in North America, may also expand into Southeast Asia, impacting the existing e-commerce platform and competitive landscape.

So, in the Southeast Asian battlefield where competition is gradually intensifying, what is the situation of the e-commerce market pattern? What are the pain points and opportunities in each link in the value chain? What are the characteristics of Southeast Asian e-commerce users? What will be the future development trend of the Southeast Asian e-commerce market?

Based on relevant industry data and user surveys from 2019 to 2022, Xiaguang Think Tank, a consulting service brand under Xiaguang Society, analyzes the current situation of the Southeast Asian e-commerce market from the dimensions of platform e-commerce, e-commerce users, and upstream and downstream of the value chain, and predicts the development trend of the Southeast Asian e-commerce market, and officially released the "2022 Southeast Asian E-commerce Market Trend Research Report", hoping to provide reference for cross-border e-commerce industry participants.

Southeast Asian e-commerce market landscape

1. Southeast Asian e-commerce scale will grow the fastest in the world in the next five years; The penetration rate of e-commerce is lower than that of mature markets, and the growth potential is large

In 2022, the GMV of e-commerce in Southeast Asia was US$131 billion, of which Indonesia was the largest e-commerce market. It is estimated that by 2025, the scale of Southeast Asian e-commerce will reach 211 billion US dollars, with a compound annual growth rate of 17%, of which Vietnam will grow at a compound annual growth rate of more than 30%, which is expected to surpass Thailand to become the second largest e-commerce market in Southeast Asia. In addition to Singapore, the five major Southeast Asian countries ranked among the top eight in the world in the growth rate of e-commerce scale in 2022, making it the fastest growing region along with Latin America.

In addition to Indonesia, the proportion of GMV of e-commerce in total retail sales in Southeast Asian countries is still far behind that of China and the United States. Considering that the offline retail market in Southeast Asia is not yet developed, coupled with the dual growth of total retail volume and penetration, Southeast Asian e-commerce will enter a stage of explosive growth. Among them, Indonesia's e-commerce penetration rate is growing rapidly and is expected to be on par with China by 2025.

A think tank researcher told Xiaguang that Indonesia's political environment is stable enough to create conditions for economic development. Relying on the populous domestic market, Indonesia's economy has shown strong resilience, although the economy shrank by 6% after the outbreak of the epidemic, but in the second quarter of last year, Indonesia's GDP growth rate reached 5.4%, the highest among major emerging economies, and the Asian Development Bank predicts that Indonesia will maintain economic growth of more than 5% in 2022 and 2023.

The researcher analyzed that in the third quarter of 2022, Indonesian government budget revenue increased by 49%, tax revenue increased by 58%, and a trade surplus was achieved for 28 consecutive months, especially in terms of exchange rate, in the context of the strong US dollar, the Indonesian rupiah depreciated by about 5% against the US dollar, and exchange rate stability is more favorable for cross-border e-commerce and import and export trade.

2. The upstream and downstream of the Southeast Asian e-commerce value chain are highly fragmented and there are many opportunities

First of all, from the perspective of e-commerce platforms upstream of the value chain, Southeast Asia has formed a polar (Shopee) diversified (Lazada, Tokoedia, Bukalapak, Blibli, Tiki, etc.) competitive pattern, but in the high-growth market, the head players do not show absolute advantages, because the development stages of various countries are not synchronized, there are their own market characteristics, and new head players may still be bred. Emerging social e-commerce platforms (TikTok Shop, Temu, etc.) will also have an impact on the platform e-commerce market.

From the perspective of the marketing link of the value chain, social media platforms are the most important marketing drainage channels for e-commerce in Southeast Asia, and the growth of e-commerce platforms also depends on social media. For sellers, the current traffic of the platform is not enough to support subsequent growth, traffic costs will rise rapidly, and effective drainage means outside the site need to be sought, so there are still many growth opportunities for marketing services for e-commerce sellers.

Taking Vietnam as an example, the boom of the domestic e-commerce market has also led to the vigorous development of the live streaming market. According to people familiar with the matter, MCNs of different sizes have sprung up every day, and TikTok alone has more than 100 Vietnamese MCNs, and many institutions have Chinese-funded backgrounds, and many MCNs from China have even directly moved their live broadcast bases to Vietnam. Janice, who has been engaged in platform operation in Vietnam for 6 years, told Xia Quang that the current Internet celebrity ecology in Vietnam can be described as "flooding waves and promising prospects", much like the Chinese Internet celebrity market in 2017. "The new forms of live streaming and consumption and grass cultivation are still very new to the young generation in Vietnam, and there is still some time and room for development."

From the perspective of the logistics link of the value chain, the logistics service form of Southeast Asian e-commerce is not stable, overseas warehouses are still in the rising cycle, local last-mile delivery difficulties have not been solved, and logistics reliability still has room for improvement. Cross-border complexity has spawned a variety of logistics service models, and the third-party logistics market is relatively fragmented. With the development of e-commerce, the competitive landscape of logistics services is still variable, and there is a blue ocean market in the segmented field.

Indonesia, for example, is the world's largest archipelago country consisting of 17,508 islands spanning Asia and Oceania. A local e-commerce practitioner told Xiaguang News Agency: "More than half of Indonesia's population lives on Java and Sumatra, which can rely on railways and roads for transportation and transportation, but in other places, the population is too scattered, the distance between islands is very long, and it is impossible to build bridges, so it can only rely on air transport and ships, which is inefficient and the cost of e-commerce reach is extremely high." There are probably two forms of e-commerce logistics in Indonesia, one is that the seller ships the goods to the local front warehouse of the platform in advance, and the consumer directly ships the goods after placing an order; The other is that the platform transfers the order to the seller after receiving it, and the seller ships the goods by himself. The former can be delivered in large cities such as Jakarta in 1 day at the fastest, while the latter method has many uncontrollable factors, the fastest 7 to 10 days, and now the latter is rare, and the big platforms are building their own logistics systems. ”

Looking at the payment link located in the lower part of the value chain, the payment demand of Southeast Asian users is scattered, and the era of cash is king is about to pass, but the promotion of the government and the change of user habits make the future market pattern of Southeast Asian payment services not clear, due to the differences in Southeast Asian countries, there will be no winner-take-all situation, bank cards, online real-time payment and electronic wallets will develop simultaneously.

Whether it is Ant Financial, which entered the market earlier, or WeChat Pay, which entered the market later, Southeast Asia has to face many local competitors in three directions: first, e-wallets and digital banks launched by banks and Internet technology companies; Secondly, it is the payment service incubated by local Internet companies in Southeast Asia; Third, there are local digital banks.

Senior product manager Bei Bei told Xiaguang Agency: "The core need for users to choose mobile payment tools is security, so local tools are likely to have an innate advantage over foreign tools in this regard, and this natural closeness is difficult to break through in the hearts of consumers." ”

Another factor that challenges the domestic mobile payment industry to penetrate into Southeast Asia is the policy of mobile payment and financial digitalization. "The data collected by mobile payment involves the consumption data and financial data of local users, and the processing of this data, as well as further policies for the marketization of mobile payment as a whole, depend on the local area." Bei Bei said that this is also a variable that the domestic mobile payment industry has to face in Southeast Asia.

Southeast Asian e-commerce user observation

From the perspective of Internet usage habits, the young generation of e-commerce users in Southeast Asia is highly mobile and social. Finding the products you want to buy through categorical navigation browsing or site search is the logic of the previous generation of Internet e-commerce, and it is not the most suitable shopping method for the current user needs.

From the perspective of core consumer groups, the current mainstream users of Southeast Asian e-commerce are young women, and the main sales category is "self-pleasing" products (clothing, beauty and digital), so their purchasing behavior has a certain randomness, easy to be affected by social interaction planting, belongs to early adopters, and does not have clear needs.

Some practitioners of Southeast Asian e-commerce platforms told Xiaguang that when many users open TikTok, they are not actually here to buy things, but to see content and entertainment. In the absence of a clear purpose, the probability is to be attracted by the content, which increases the uncertainty of consumption. In this way, consumers have higher requirements for content, and the expression of products is more complex than that of shelf e-commerce.

From the perspective of purchase path, unlike Chinese e-commerce users who spent a lot of time shopping on Taobao when they had nothing to do, Southeast Asian e-commerce users spent a lot of time on social media platforms.

Yang Lingjiao, founder of the Indonesian employment platform KUPU, told Xiaguang that Indonesian young people like social software very much, with more than 190 million social media users and Indonesian users using the Internet for more than 8.5 hours. "The trend of mobile online shopping in Indonesia is very obvious, more than ninety percent of the traffic is from the mobile terminal, we have done some user analysis and research, and found that many young people do not have their own computers and rarely use them. So many people say that the Internet development in Southeast Asia is like China ten years ago, I don't agree, people who say 'like' may think that Indonesia's e-commerce development is relatively rudimentary, but Indonesia has now skipped some of the Internet development stages we have Chinese experienced and directly entered the mobile Internet era in Chinese Internet circles. ”

Therefore, in Southeast Asia, where the penetration rate and duration of social media are high, the development of e-commerce is bound to the mobile terminal, and social media may become the second pole of e-commerce. E-commerce is only a channel for the final order, and its influence in the purchase behavior path is low; In the market where social media controls traffic and affects user demand, social e-commerce has more growth potential. The e-commerce market will shift from the traditional "best match" store logic to the "guess what you like" push logic, forming a closed loop of planting-ordering-word-of-mouth.

Future trends in Southeast Asia's e-commerce market

1. Shift from homogenization to branding

Generation Z, who already have e-commerce consumption habits, will become the new working-age population. With the growth of the middle class driven by the growth of economic level, the e-commerce market will develop from the current "find cheap" to "Taobao has everything", that is, from the stage of "province" to "more", and even partially upgrade to the pursuit of brand and quality.

2. Digital intelligence trend of e-commerce in Southeast Asia

The development of e-commerce in Southeast Asia will accelerate the digital transformation of the upstream and downstream of the value chain, mainly manifested in the digital intelligence of payment, marketing and operation.

The digital intelligence of payment is reflected in: with the rapid development of e-commerce, diversified payment methods and scenarios continue to emerge in the online payment market, which deepens the complexity of payment management; Fraud has increasingly become one of the major challenges for e-commerce sellers, which puts forward higher requirements for intelligent risk control technology.

The digital intelligence of marketing and operation is reflected in: in order not to be kidnapped by e-commerce platforms, more and more sellers operate platform e-commerce and self-built websites at the same time, and begin to buy volume directly from social platforms to open up private domain traffic, which brings more opportunities to third-party marketing services; MULTI-CHANNEL OPERATION PUTS FORWARD HIGHER REQUIREMENTS FOR PRECISION MARKETING, ACCURATE PRODUCT SELECTION AND SAAS OPERATION BACKGROUND, ORDER MANAGEMENT AND CUSTOMER MANAGEMENT BASED ON BIG DATA, AND DIGITAL INTELLIGENCE MEANS AND REFINED E-COMMERCE OPERATION PROMOTE EACH OTHER, BECOMING A STRONG SUPPORT FOR SMALL AND MEDIUM-SIZED BUSINESSES.

In addition to the above, the "2022 Southeast Asia E-commerce Market Trend Research Report" also sorted out in detail the scale, value chain layout, head e-commerce platforms, core user groups and other aspects of Southeast Asian countries, and also summarized the phased characteristics and future development trends of Southeast Asian e-commerce in 2022.