The Wall Street Journal recently published an opinion article on the fragmented boom of Southeast Asian ecommerce. There has been a recent influx in opinions regarding the setbacks that the region has experienced due to the fragmentation of our landscape, but this has not hindered the growth of the online retail market.
With the recent acquiring of Lazada in Thailand by Alibaba, JD.com’s entry into Indonesia and investments in Tokopedia, Indonesia’s biggest online marketplace, the list keeps growing.
However, Southeast Asia’s online retail penetration level is only at 3%, representing $6 billion in sales. Comparisons keep being made to the US and China, but Southeast Asia is made up of very different smaller countries and is in a league of its own.
The region is making progress, according to a survey conducted by Bain & Company and Google, 100 million consumers in Southeast Asia have made an online purchase and 150 million have researched products or engaged with sellers online.
The nature of the region hinders maximum growth. Below is a summary of the unique challenges ecommerce companies and players face in the region:
- Range of ethnicities, languages and consumer preferences
- Lacking of solid regional payment and logistics infrastructure
- Lack of trust in ecommerce platforms, especially when credit cards are involved
- Technology leapfrogs: In Thailand, 85% of consumers not living in major metropolitan hubs make online payments through mobile phones.
- Consumers frequent a lot of websites, which means they are more likely to head to search engines before checking company websites.
- More than 80% of the region’s digital consumers use social media to research products or connect with sellers as a part of social commerce. Social media makes up 30% of all transactions made.
- The majority of consumers prefer using cash on delivery as a payment method.
- ecommerce is evolving rapidly in the region, and companies are constantly experimenting with pushing the boundaries of social commerce.
- For retailers, succeeding in the region means partnering up with local partners to infiltrate each market segment and location. To optimize the Southeast Asian market, businesses would have to take the long term approach.
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