Netsale Thailand

9 Takeaways from Southeast Asia’s 2017-2018 Online Business & e-Commerce Performance

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A study by Google indicated that Southeast Asia’s internet economy has reached $50 billion in 2017, outpacing expectations by 35%.

(Source: Google)

Earlier research estimated that around 3.8 million new users would come online each month in the region. This makes Southeast Asia the fastest growing internet market in the world between 2015 and 2020.

This, combined with a burgeoning young population, rising disposable incomes (all six major countries in the region are expected to break the estimated $3,000 GDP per capita barrier), greater availability of payment systems, and a lack of available organized retail, will spur the growth of the internet economy, which is estimated to grow to $200 billion by 2025.

Here are the vital indicators of e-Commerce’s potential in the region.

1/ Southeast Asia is a Mobile-First Economy

The average Southeast Asian spends about 3.6 hours using mobile internet every single day. This figure is the highest in the world and makes Southeast Asia the only region with this unique statistic.

According to various analysis on the six major cities in the region (i.e. Singapore, Malaysia, Indonesia, the Philippines, Vietnam, and Thailand), mobile commerce or “m-commerce” has grown by 19% on average, and now captures 72% of overall web traffic.

Leading the pack is Indonesia, which now has a staggering 87% share of mobile traffic.

->> [Southeast Asia] Export Potential in Indonesia (PART I)

Across the region, desktop traffic represents just less than 30% of web traffic, indicating the importance of a mobile-friendly platform for e-Commerce merchants.

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2/ Southeast Asians Spend a lot of Time on Online Shopping

On average, Southeast Asians spend about 140 minutes shopping online every month. That’s double the time Americans spend on e-Commerce.

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As the graph shows, shoppers in the region are very likely to shop during working hours.

The number of orders is highest between 9am and 5pm, when people are typically at work or in school. However, it’s different in Singapore, where the peak hour is 10pm.

Southeast Asians are also more likely to make a purchase on weekdays than on weekends.

Nevertheless, mobile traffic is highest on weekends, indicating that consumers are more likely to browse e-Commerce sites and discover products during this time and make the purchase on a weekday.

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3/ E-Commerce Startups Raised nearly $8 billion in 2017

According to Google, “the amount of investment into Southeast Asian startups is on par with India’s”.

As of 2016, e-Commerce startups in Southeast Asia raised more than $2.52 billion. This figure tripled in 2017, reaching $7.86 billion. That’s the highest growth since 2013 and came about despite the number of deals falling from 335 to 320.

4/ A Market’s Maturity doesn’t Necessarily Translate to a Higher Conversion Rate

Among the most important metrics for any e-Commerce operator is conversion rate, which reflects both the quality of a company’s marketing activities and the website’s effectiveness.

Improving conversion rate can have a dramatic effect on the bottom line and the profitability of a business.

Interestingly, merchants in Vietnam are leading the way with a conversion rate that’s 30% higher than average.

->> Everything you need to know about your Vietnam dropship business

Singapore displays the second highest conversion rate and is closely tied with Indonesia.

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5/ Basket Size is Closely Correlated to the GDP per Capita

Basket size is another key metric which heavily impacts the unit economic profitability of the business.

It measures the average total amount spent for every order made by the customer over a defined period of time.

The basket size is structurally different among verticals and the market positioning of each merchant.

This below large sample, which consists of merchants from various verticals, makes the basket size comparison in each country particularly interesting.

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Singapore has the highest GDP per capita ($90,530), while Vietnam has the lowest ($6,880).

Relatively, Singapore’s merchants score the highest with a basket size of $91. This is 3.7x higher than their Vietnamese counterparts, which has an average basket size of $23.

6/ Bank Transfer is the Most Popular Payment Method across the Region

Due to low credit card penetration in the region (excluding Singapore), e-Commerce players face unique challenges unbeknownst in the West.

As a consequence of this structural shortcoming, a much more diverse range of payment solutions have proliferated in the region.

  • Cash on delivery (COD) is offered by more than 80% of e-Commerce players in both Vietnam and the Philippines.
  • Bank transfer is popular in Indonesia (94%), Vietnam (86%), and Thailand (79%).
  • Almost 50% of merchants offer offline points of sales in Thailand and Vietnam.
  • Installment payments prove to be very popular (and increasingly so) in both Vietnam (47%) and Indonesia (42%).

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7/ Mobile Phone Marketing on the Rise

Emerging markets such as Myanmar are recording a rapid increase in mobile phone marketing.

“Myanmar is coming online via mobile, via smartphones”, says David Madden, founder of Phandeeyar, the country’s first tech hub based in Yangon.

8/ Efficient e-Commerce Platforms Help Ease the Path

Small businesses and startups will find it easier to participate in e-commerce, with platforms such as Shoptiq, which provides all the tools one would need to create, build, and grow an online business.

On this platform, creating an online store is fast and fuss-free with 60 free mobile-responsive templates and a wide range of payment methods that include PayPal, credit card, debit card, and COD.

Shoptiq’s partners also provide professional value-added services such as customization of store design, product copywriting, and product photography.

It also allows regional SMEs to connect and sell through established online marketplaces like Lazada and even Facebook.

9/ Chinese Continue with the March

Chinese internet behemoths Alibaba and Tencent will continue to aggressively invest in Southeast Asian e-Commerce platforms. Both firms are expected to “gobble up” more local companies across the region’s e-Commerce market.

In March 2018, Alibaba injected another $2 billion into Lazada in a bid to boost its regional expansion through Southeast Asia’s leading online shopping firm

(Source: acommerce)

Among the most pressing challenges hampering the growth of internet economy in Southeast Asia is the shortage of local talent.

This has led to the opening of tech hubs in other regions like China, India, and the US, where top talent is readily available.

But emerging companies in Southeast Asia often find themselves grappling to hire the right candidates, choosing between highly experienced foreigners and locals who have regional understanding but less experience.

Though highly challenging, the future remains bright for e-Commerce and online businesses in the region, especially as governments and educational institutions continue to kick-start various initiatives to fill the gap.

E-Commerce businesses should also consider performance-driven partnerships to obtain local expertise (i.e. Lazada working with Ninja Van in Singapore and Go-Jek in Indonesia).

Only time will tell whether the predictions for the internet economy’s growth will come about. To reiterate what Google said, the success of startups in Southeast Asia depends largely on how well CEOs develop themselves as the internet economy matures.

 

[vc_separator color=”orange” align=”align_left” style=”dashed”][vc_column_text]Netsale lets you find products from thousands of suppliers worldwide, add them to your store and ship them directly to your customers. No inventory, no risk. Let’s start dropshipping!

Hotline:

Email address: support@netsale.asia/thai

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