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SE Asia nears digital tipping point

News, 21 April 2016

SINGAPORE: Southeast Asia is poised to make great strides in e-commerce, but brands should be aware that there are some unique characteristics to the region as well as a number of hurdles, two leading analysts have said.

Florian Hoppe and Sebastien Lamy, both partners at the Singapore office of management consultants Bain & Company, used an article in the Wall Street Journal to expand on findings from a recent Bain survey of 6,000 consumers in the region.

The survey covered Indonesia, Malaysia, Singapore, Thailand, Vietnam and the Philippines, revealing that 100m consumers have made an online purchase while another 150m have researched products or engaged with sellers online.

According to Bain's findings, online retail is a $6bn market in Southeast Asia, but the penetration level is just 6% compared with 14% in China and the US.

Undaunted, major players are stepping in and, only last week, Chinese e-commerce giant Alibaba took a controlling stake in Singapore's Lazada platform.

But Hoppe and Lamy warned that Southeast Asia still faces many challenges, such as its wide range of ethnicities, languages, consumer preferences and regulations.

For example, the region continues to lack a solid regional payment and logistics infrastructure, which provided the foundation for China's huge digital growth.

Another potential problem revolves around trust, with some consumers concerned about being unable to touch and feel products or encountering problems trying to find the goods they want.

Consumers in Southeast Asia also have some distinct preferences, the research revealed. For example, unlike in many other markets where card payments are the norm, more than a third of consumers in the region's top urban areas prefer to pay cash on delivery.

Similarly, whereas in other markets consumers often go online in search of the cheapest deal, consumers in Southeast Asia find their online experience or the choices available to be more important.

Social media is another prominent feature in the region and the survey found that 80% of digital consumers use platforms such as Instagram to research products or connect with online retailers.

"E-commerce is a fast-moving game and major forces are changing the rules. Forward-thinking retailers are investing to maximise the potential of both physical and digital channels," said Hoppe and Lamy.

"Social-media companies are continually experimenting with expanding the bounds of social commerce. And global players that once stood on the sidelines are now poised to compete in Southeast Asia."

Data sourced from Wall Street Journal; additional content by Warc staff