ASEAN Consumer Survey: E-Commerce Potential

With a population of about 640 million, a growing middle class and rising internetpenetration, the ASEAN region is often considered a potential next ‘gold rush’ for e-commerce.

In a 2016 report[1] released by Google and Temasek, the average annual growth rate ofinternet users in the ASEAN-6 countries for 2015-2020 was forecast at 14%, well above4% for China and 1% for the US and EU.

In total, the ASEAN-6 countries will have approximately 483 million internet users by2020. Indonesia ranked top with 215 million users, followed by the Philippines (93million), Vietnam (82 million), Thailand (59 million), Malaysia (28 million) and Singapore(6 million).

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The same report also forecast the combined size of online retail market in theASEAN-6 to grow to US$88 billion by 2025, up more than 15-fold from US$5.5billion in 2015. Among the six countries, Indonesia will be the fastest growingmarket, with an astonishing 39% compound annual growth rate (CAGR) during the 10-year period, outpacing the ASEAN-6 average of 32%.

In absolute terms, Indonesia’s e-commerce is expected to grow into a US$46 billionmarket by 2025, from just US$1.7 billion in 2015. At the same time, Vietnam, thePhilippines, Thailand and Malaysia will all become much better markets, ranging betweenUS$8-11 billion. The fast e-commerce expansion in the ASEAN-6 will also drive onlinesales as a percentage of total retail sales to reach 6.4% by 2025, up from 0.8% in 2015.

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Increasing Online Shopping

A survey by HKTDC Research revealed that ASEAN consumers have increasingly switchedfrom shopping at physical stores to shopping online. Apart from travel tickets and hotels,which most consumers are already accustomed to booking online, more and more peoplenowadays buy film tickets, clothes, electronics and other products online. Some 40% ofthe surveyed interviewees said that they shop online at least once a week.

One of the most important factors driving growth in e-tailing is the growth of mobiledevices with internet access and a change in consumer behaviour. Nowadays, ASEANconsumers look for devices that offer ease of use and convenience and are increasinglymaking informed purchase decisions by reading online reviews and comparing pricesacross websites to find the best deals.

Overall, the survey results showed that “convenience” is the top reason for consumersplacing an order online, with 73% of the respondents citing “can shop anytime when I amfree” as their primary motivation for online shopping. Closely following this was “haveeasy price comparison” cited by 69% of respondents, reflecting that price remains amajor consideration even among middle-income consumers. Indeed, nearly 60% ofrespondents also indicated that they shop online in looking for cheap deals. Greaterproduct variety was also commonly identified as a decisive factor driving online shopping.It is noteworthy that more than half of respondents (55%) believe that online channelsoffer a greater variety of products than physical channels.

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Shopping by Smartphones

Given fixed line infrastructure limitations, a large number of internet users in ASEANmarkets have opted for smartphones as their choice of digital device. It is not uncommonto find respondents for whom smartphones are their only digital device. This, togetherwith a host of technological advances and increased retail apps investment making iteasier to shop via smartphones, has fuelled the use of mobile devices as the primarymeans of online shopping.

According to the survey, 77% and 62% of respondents cited that they use smartphonesfor browsing and placing order, overtaking laptop or desktop computers. While 56% ofthe respondents said they use tablets for browsing, only 36% have placed an orderthrough these devices.

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Shopping Journey of Middle Class ASEAN Consumers

The HKTDC Research survey findings show that the ‘path to purchase’ of most middleclass ASEAN consumers has changed from a simple, linear path to a more circularjourney, where consumers will move back and forth between online and offline channelsbefore reaching the final purchase decision.

Although bricks and mortar shops remains a key linear retail channel, the path topurchase is now greatly affected by the internet, with many consumers now opting to doonline research, looking up product information and checking on product reviews beforemaking the ultimate purchase decision. It is notable that information gathered online canbe instrumental in making offline purchases, as reflected in the cases wherebyrespondents “browse at store, online compare, and buy at store”, as shown in the figurebelow. Examples include going to a movie theatre as opposed to subscribing to streamingpackages and/or watching video-on-demand movies.

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While online marketing is essential, there are many factors to encourage shoppers tomake additional, unplanned purchases, such as the use of buzz words, convenience, priceand design. In the survey, 58% of respondents said “special offer” is the top incentive forthem to purchase additional items online. In addition to “special offer”, 49% listed “freeshipping” as an incentive, followed by “bulk discount” at 46% and “coupons” at 43%.Nearly 40% of respondents also said sending them “you might also like” or “most popularitems” messages could also prompt extra spending.

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ASEAN Middle Class: Multi-channel Shoppers

As stated above, the shopping journeys of many middle class ASEAN consumers havechanged profoundly due to the ease of making an informed purchase decision, thanks toadvances in internet and social media. To this end, a multi-channel sales strategy is anecessity for retailers.

Online marketplaces help retailers create and accentuate brand awareness and enablethem to understand consumer preferences with low marketing costs. Physical stores allowretailers to develop customer relationships more intimately and provide the spacesneeded to showcase their products directly.

According to the survey, the top three online retail categories picked by the middle classASEAN consumers were “Travel and Leisure”, “Fashion”, and “Entertainment”. Each ofthese categories had more than 70% of the responses from those who have made atleast one purchase online in the past two years. While the rise of online travel agenciesand fashion stores has stimulated e-commerce activities in these categories, digital mediaand streaming also make more consumers shop for online entertainment products.

In contrast, bricks-and-mortar shopping is still preferable when shoppers need to touch,feel and try out items. Physical stores remain the preferred channel for categories suchas “Cuisine and Catering” and “Home and Living”.

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Lazada Dominates E-Commerce in ASEAN

At present, major regional players in the ASEAN e-commerce space include Singapore-based Lazada and Zalora, as well as global e-commerce operators like eBay. Hong Kongcompanies may consider selling their products via these platforms, taking advantage ofthe ease in setting up compared with a physical presence, and access to free trafficgenerated by the host marketplace.

As revealed by the survey results, Lazada is the leading e-commerce platform for theASEAN middle-class. Majority-owned by Alibaba since 2016, Lazada is an online sellingplatform with extensive product offers in categories ranging from consumer electronics tohousehold goods and fashion items. It is also the only online marketplace ranked amongthe top 10 choices across all five countries surveyed: Malaysia, Indonesia, thePhilippines, Thailand and Vietnam.

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One interesting feature of the e-commerce landscape in the ASEAN region is the largenumber of specialist players that operate either at a local country level (e.g.Thegioididong – a Vietnam-based e-commerce platform focused on selling consumerelectronic devices) or are expanding their business at a regional level (e.g. 11street – aKorean-headquartered online marketplace with a presence in Malaysia and Thailand).

Indeed, content localisation seems to be a crucial factor in winning the hearts of theASEAN consumers. While Lazada is a clear winner at the city level, sites with locallanguage content also made their way to the top sites used by the ASEAN middle-class,as the Survey results show below.

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[1] e-economy SEA: Unlocking the $200 billion Digital Opportunity in Southeast Asia

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