The Boston Consulting Group's report, How the Digital Revolution Is Integrating Southeast Asia's Consumers, looks at how the rise of e-commerce is complementing government efforts towards Asean integration, and how businesses can capitalise on this trend. ASEAN Business brings you a summary.
The digital 'common market'
Alongside official integration efforts and agreements, the rise of e-commerce is, in effect, creating a common market in Asean, say the report writers. E-commerce has given consumers access to goods that were previously out of reach, from imported groceries to trendy cosmetics. According to a study by Google and Temasek, e-commerce in the region is expected to grow from US$5.5 billion or less than 1 per cent of total retail sales in 2015, to US$88 billion or 6.4 per cent of all retail sales by 2025.
Megatrends in Asean e-commerce
While the Asean middle class continues to grow, there is even faster growth in the ranks of the affluent, according to the report. In Asean's four most populous nations of Indonesia, the Philippines, Thailand, and Vietnam, this group of consumers is growing at 8 per cent annually. BCG's Center for Consumer Insight projects that by 2030, another 78 million consumers in these four countries will be considered affluent. The rise of the affluent means surging demand for affordable luxury goods such as cosmetics and high-end consumer durables, as well as 'experential' products such as restaurant dining and overseas travel.
Another major trend is urbanisation, which is accelerating beyond major metropolises into tier-two and tier-three cities. With urbanisation comes a growing demand for convenience and the 'on-demand economy', with goods and services delivered to consumers' doorsteps.
Digital influence versus e-commerce
In South-east Asia's markets, the rates of digital penetration and "digital influence" -- referring to engaging with digital technologies to make purchasing decisions -- are far higher than the market share of e-commerce, which remains underdeveloped. Yet e-commerce is set to grow swiftly, at annual growth rates ranging from 18 per cent to 40 per cent across the region, according to Google and Temasek. In Vietnam, for example, e-commerce revenues are projected to leap from US$400 million in 2015 to US$7.5 billion by 2025, and in Indonesia from US$1.7 billion to US$46 billion over the same period.
Much of the region also seems poised to leap from cash to digital payments, skipping credit and debit cards. The next step is to use this trend to drive digital sales, for instance by partnering Chinese players such as Alipay or regional challengers like GrabPay.
While online marketplaces have been expanding in the region, more established companies have been slow to set up an e-commerce presence. To capture such opportunities, companies need a digital Asean strategy that is not one-size-fits-all, analysing consumer data to identify market segments instead. To encourage the development of e-commerce in the region, businesses can help Asean governments gain a better understanding of the evolving digital economy, and work with them on updating regulations to improve data flows.