“Singapore’s market is too small; shouldn’t we just use it as a regional hub?”
“Indonesia accounts for 40 per cent of Southeast Asia’s population and one-third of its GDP, so we should focus there.”
When approaching Southeast Asian markets, many companies use population size as their primary criterion. Indonesia with 280 million people, and the Philippines and Vietnam with over 100 million each, are undeniably attractive from a demographic perspective. In contrast, Singapore, with its domestic market of just under six million people, has received relatively less attention.
However, recent performance data from Southeast Asian unicorns (private companies valued at over US$1 billion) and success stories of Korean companies in Singapore are challenging the preconception of Singapore as merely a regional hub. Kevin Aluwi, Co-Founder of Indonesian unicorn Gojek, recently emphasised in an interview that “B2C startups must first prove themselves in Singapore.”
Indeed, Singapore’s GDP of US$462 billion significantly exceeds that of the Greater Jakarta (US$276 billion) and Bangkok (US$236 billion) regions. Even more noteworthy is its purchasing power. Singapore’s top one per cent earn an average monthly income of US$61,000, incomparable to Indonesia’s US$5,700.
Remarkably, 90 per cent of Singaporean households are “power users” – highly receptive to innovative products and services and willing to pay premiums for quality and convenience.
These market characteristics are well illustrated by recent successes of Korean B2C companies in Singapore. Athleisure brand ‘Andar’ expanded to a second outlet this year following strong consumer response after its initial entry last year. Food-tech startup ‘Gopizza’, which entered Singapore in 2020, has grown to become the third-largest pizza chain locally with over 20 outlets, using this success as a springboard to expand into Bangkok and Jakarta.
Korean beauty e-commerce platform ‘cocomo’ is extending its online success to physical stores, while various Korean F&B establishments are gaining tremendous popularity among Singaporeans amid the K-food wave.
These cases demonstrate the need for Korean companies to maintain a balanced perspective on both B2B and B2C markets when entering Singapore. While historically, companies often focused on B2B products to establish regional headquarters or target government procurement markets, recent years have seen increasing B2C success stories driven by the Korean Wave.
Particularly, lifestyle products align well with Singapore’s high living standards, creating a stable premium market.
Southeast Asian consumers are generally price-sensitive, necessitating dual strategies: tailoring approaches to regional income levels while maintaining separate premium and mass-market strategies. Deep analysis of middle-class characteristics is crucial, considering not just income levels but also education, digital literacy, and consumption patterns.
Singapore’s middle class, for instance, tends to quickly adopt innovative products and services, backed by high education levels and technological affinity.
Southeast Asian mobility platform Grab generated 23 per cent of its total 2023 revenue from Singapore – nearly matching Indonesia’s 29 per cent, despite the latter’s population being 40 times larger. This underscores Singapore’s strategic importance. As suggested in a previous column, success in Singapore can serve as a powerful foundation for expansion into other major Southeast Asian cities through the “point-line-plane expansion strategy.”
Companies eyeing Southeast Asian markets must move beyond the simple equation of “population equals market size.” When comprehensively considering purchasing power, consumption patterns, and market maturity, Singapore – though small – with its powerful purchasing power is establishing itself not just as Southeast Asia’s Silicon Valley but as a touchstone for foreign B2C companies’ success in Southeast Asian expansion.
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* This article was originally sourced from this.
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