eIQ Insights: Overlooking Sub-Regions in ASEAN Can Be a Mistake for Companies in These Categories

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A long touted argument about Southeast Asia’s lack of potential as a market for ecommerce has been its severe fragmentation. Indonesia, the region’s largest market may have a population of over 263 million individuals but majority of retail sales comes from the country’s capital, Jakarta (population: 10 million).

The same can be said about Thailand and mega-city Bangkok, the Philippines and Manila, and Vietnam and Ho Chi Minh City.

But new research findings from Nielsen and AlphaBeta show that in ASEAN, ‘middleweights’ are also contributing heavily to revenues and are becoming ‘hotspots’ for retail growth.

The demand for items such as diapers, detergent, chocolate, facial moisturizer is actually witnessing faster growth in small or middleweight regions – places with populations under 5 million.


Source: Nielsen, Rethinking ASEAN 2017


Source: Nielsen, Rethinking ASEAN 2017

Many of the cities and provinces in the list have probably never appeared on the radar for FMCG brands and companies looking at ASEAN and there are plenty of reasons why:

  • Poor infrastructure
  • Lack of financial maturity
  • Limited broadband access  
  • Less spending power

But these were and are the same problems in China but ecommerce companies such as JD and Alibaba have created initiatives such as “Rural Strategy” to cover 485 countries and 25,000 villages across 29 provinces to build up ecommerce in rural areas.

Why so much focus on such small pockets?

Because once urban markets saturate, rural towns will naturally be next.

The Fung Business Intelligence Centre predicts that the transaction value of Alibaba’s rural ecommerce market will surpass that of local urban areas in the next 10-20 years and according to eMarketer, by 2019 China will add 139 million digital buyers coming from less urban areas as internet access expands.

Some companies in Southeast Asia such as online payments company Kudo are already looking outwards and finding success by connecting rural residents to modern day retail. No surprise that Grab acquired them up earlier this year to reach ‘millions of unbanked citizens and provide a solution in the market’.

While everyone is fighting for the ‘rising middle class’, maybe it’s time to take a harder look at areas where the populations are only becoming ‘middle class’. Only then can companies really untap Southeast Asia’s entire market potential.