Online sales represent just 4% of SEA retail market

Eden Estopace
Enterprise Innovation

Online retail represents a $6 billion market in Southeast Asia, but with online sales below 4% of total retail, the region still lags well behind developed markets and even other developing markets.

While 250 million consumers are now connected via smartphone in Southeast Asia and 100 million engage in online transactions, e-commerce is proving to be a tough nut to crack due to constraints in the region’s and payments infrastructure.

These are the findings from a new report by Bain & Company and Google released on Thursday.

The report, “Can Southeast Asia Live Up to Its E-commerce Potential?” includes a survey of more than 6,000 Southeast Asian consumers across six markets (Singapore, Malaysia, Indonesia, Philippines, Vietnam and Thailand).

"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," said Sebastien Lamy, a Bain partner and co-author of the report.

"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."

Bain anticipates online retail sales across Southeast Asia could hit $70 billion by 2020. While this does not yet match the pace of China – now a more than $500 billion market – multinational retailers are finding it harder to ignore the region's emerging influence.

According to Bain, the biggest hurdle for e-commerce success in Southeast Asia is 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, which is a deterrent for foreign owned businesses. 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. Many local companies are 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.

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