Online spend in South-east Asia to outpace growth of digital consumers threefold

ONLINE spend in Southeast Asia is projected to outpace the growth of digital consumers by a factor of three, with clothing and personal care emerging as two of the leading categories.

Bain & Company has projected that the average spend per digital consumer is expected to increase dramatically to US$390 by 2025, more than three times the average spend of US$125 as of 2018. They also project that there will be about 310 million digital consumers across Southeast Asia by 2025, compared with 250 million as of 2018.

Specifically, 70 to 80 per cent of the growth in digital consumers will come from the emerging middle class, said the consultancy.

Facebook and Bain's new study, "Riding the Digital Wave: South-east Asia's Discovery Generation", looks at how the behaviours of today's digital consumer is reshaping online spend in the region. The study surveyed 12,965 respondents across Indonesia, Malaysia, Philippines, Singapore, Thailand, and Vietnam.

Currently, the penetration of online commerce to retail is 3 per cent for Southeast Asia versus 23 per cent in China, said Praneeth Yendamuri, partner at Bain & Company.

"Looking at China, where it is 23 per cent, we feel that this is an opportunity waiting to exponentially grow," he noted.

"Most of the growth will come from clothing and personal care and beauty. These categories are expected to grow about 25 per cent per year," said Mr Yendamuri.

The total value of the clothing, footwear and accessories category is US$47 billion and online commerce penetration is 9 per cent; the personal care and beauty category is valued at US$15 billion with online penetration at 7 per cent.

"Grocery could be a dark horse. It's a huge category, about US$350 billion of spend. Most of this is offline (spend) because it's difficult, logistically, to carry out fresh deliveries," noted Mr Yendamuri. Online penetration for this category is currently 0.3 per cent.

The Discovery Generation

The study also found that the large majority of digital consumers in Southeast Asia (67 per cent) do not exactly know what they want to purchase before they shop online, with more than 50 per cent of respondents saying they learn about new products and brands via social platforms.

Respondents also indicated they shop across platforms and brands. In Singapore alone, 75 per cent of the respondents said they are either open to other brands or will buy from multiple brands while shopping. Digital buyers from Philippines and Malaysia were equally open to buying from other brands, at 72 per cent and 70 per cent respectively.

Meanwhile, savvy consumers shop-hop across 3.8 platforms on average before they make a purchase decision.

"There is no longer just one way to shop and nobody shops the same way twice. The key takeaway is that designing for discovery is absolutely crucial, given that customers engage with a business through multiple channels at the same time," said Sandhya Devanathan, country managing director at Facebook Singapore.

In terms of relative market share (referring to the leader's market share versus that of the second largest player), e-commerce players in Southeast Asia lag behind markets such as the U.S and China where the largest e-commerce player is 6.5 times and 4 times larger than the second largest player in each respective market.

"This means businesses of all sizes, including specialty players have a significant opportunity to compete on a larger scale in Southeast Asia," she said.

Specifically, the study found that loyalty programmes are a useful tool - respondents with a loyalty programme indicated they were 1.5x times more likely to be a promoter than those without a loyalty programme. Loyalty members were 45 per cent more likely to make recommendations across categories, 25 per cent more likely to have higher purchasing frequencies across categories, and 20 per cent more likely to have higher spending across categories.

Southeast Asian shoppers also showed a strong preference for omnichannel shopping experience. Over 80 per cent saying they compare prices across online discovery platforms and in-store before they make a purchase decision. Specifically, 53 per cent said they will do comparison shopping across websites. Interestingly, 33 per cent of shoppers check physical stores before making a purchase.