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Southeast Asia e-commerce themes to look out for in 2019

One major point is a move beyond the tier-1 markets

In the midst of the new year settling in, we can take some time to reflect on 2018 and anticipate what 2019 might bring. After a month of observation, I am sharing what we might expect to see from this exciting industry, in an equally thrilling and promising region.

E-commerce in Southeast Asia – a global growth bright spot

Broad-based economic growth may become a scarce commodity in 2019, owing to near term macro-factors such as global trade tensions and rising interest rate environment. But in a potentially challenging year ahead, Southeast Asia’s digital economy is likely to become one of the globe’s bright spots.

A number of structural drivers and strong fundamentals contribute to this optimism.

E-commerce in the region has grown by more than 62 per cent Compound Annual Growth Rate (CAGR) over the past 3 years, according to the Google-Temasek e-Conomy SEA 2018 report. The report also estimates that e-commerce will exceed US$100 billion in Gross Merchandise Volume (GMV) by 2025, from US$23 billion in 2018.

Despite such astonishing numbers, online commerce remains hugely unchanged, at around 2 -3 per cent of total retail sales. This pales in comparison to around 20 and 10 per cent in China and US respectively.

As such, we expect that the digital economy – and e-commerce in particular – will continue to shine in 2019.

The emergence of experiential e-commerce – discovery, entertainment and social engagement

At a time when consumers are spoilt for shopping choices, both offline and online, experiences are the new currency. Consumers want more than just to shop for what they need – they want to discover new products, be entertained, and even engage with the online community.

As a result, online shopping in Southeast Asia is becoming an increasingly social and immersive experience.

A rising number of e-commerce apps in our region have evolved from in-and-out transactional platforms for consumers. Consumers may dip into the app without a prior desire to buy specific items and instead simply browse through products and deals curated by e-commerce platforms.

Consumers may also want to chat with sellers to learn more about different products, or catch up on the social feeds of their friends or family.

They may even come to e-commerce apps to consume content. For example, one of Shopee’s most popular new features is an interactive in-app quiz that you can play with family and friends, hosted by celebrities.

As the boundaries between shopping, socialising and entertainment fade, time spent on apps and the ability to retain users attention will likely become more important performance metrics for e-commerce platforms.

Offline retailers and e-commerce platforms build non-zero sum partnerships

Some observers have long assumed that offline retailers and e-commerce platforms are locked in a zero-sum rivalry – for one to succeed, they must take a consumer away from the other.

2019 will see that paradigm challenged more than ever before, as more offline retailers engage e-commerce platforms as trusted partners… even the brands who already have an online presence.

Beyond just transacting online (listing and selling, processing payments and arranging necessary logistics, etc.), more and more traditional brick-and-mortar stores are looking towards e-commerce platforms to manage their overall online strategy and offline logistics needs.

This signals a shift in the role e-commerce platforms play towards becoming trusted e-commerce partners.

Also Read: The e27 Southeast Asia Startup Ecosystem Report 2018 is here

Stores coming online and placing their trust in e-commerce platforms could potentially reap the many benefits that the partnership offers, from data utilisation and predictive technology, to more effective advertising and promotion and fulfilment services

In other words, the offline-online retail industry is not a zero-sum game; offline stores and large online platforms have become complementary players. We are already witnessing a rising number of large retail chains and consumer goods company partnering with e-commerce platforms in the region (Miniso in Singapore, Nestle in Malaysia, and BigC in Thailand) and we expect this trend to continue in 2019.

Unlocking hidden assets in Southeast Asia

As a digital platform, e-commerce marketplaces empower entrepreneurs and brands of all sizes to reach beyond their local markets and beyond the well-penetrated Tier 1 cities.

In places like Indonesia, the growth of the mobile generation of middle class consumers and rapidly improving smartphone penetration indicate that the importance of consumers outside the capital regions is constantly rising.

This group accounts for approximately 90 per cent of the total population of Indonesia, yet has traditionally been an afterthought in many brands’ retail strategies.

This afterthought might soon be the centre of focus for many bands this year.

Also Read: “General awareness about entrepreneurship in Malaysia needs to go beyond selling food at stalls”

But this isn’t a one-way flow of goods. In fact, budding entrepreneurs and SMEs from beyond the Tier 1 areas are also finding that e-commerce enables them to tap onto new market opportunities.

Take the example of Ibu Vina from Bali in Indonesia. She produces high-quality, false eyelashes and began with a small store. But selling offline was difficult given her harsh living expenses and relying on foot traffic and door-to-door neighbourhood salons for scaling quantities. At first, she only sold 100 pairs of eyelashes per month.

However, in April 2017, Ibu made the decision to shift her business online. By opening an online store with her husband, she immediately accessed a huge market for her high-quality but affordable products far beyond her home province of Bali.

They can now sell up to 10,000 pairs of eyelashes per month, a 100-fold increase. Today, her little online business venture has more than 50 employees working with them to process all the orders.

2019 will be a promising year of change and growth for the e-commerce industry; from the emergence of new ways to experience commerce to platforms playing a central role for brands coming online.

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Photo by mahda doglek on Unsplash

 

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