Written by James Bishop
2 Nov
Southeast Asia’s (SEA) digital economy is facing unprecedented levels of growth. Facebook and Bain & Company’s SYNC Southeast Asia research reveals that since the start of the pandemic, 70 million people have become digital consumers – the equivalent to the entire population of the United Kingdom. It’s a significant achievement for the region and speaks to the success of the online economy that’s become the “new normal”.
The digital transformation happening across the region is only here to stay, with research predicting that by 2026, SEA’s digital consumer population is expected to reach around 380 million, which is 1.4x bigger than it was in 2019. People are feeling increasingly comfortable spending across online platforms. A habit which solidified during the pandemic.
COVID-19 changed not only consumer behaviour but the purchasing journey. There’s been innovation in the way people shop for their groceries all the way to e-payments outgrowing cash. And it speaks to some wider trends that the rest of the world can learn from.
In 2020 alone, there were 40 million new digital users in SEA, with many of the new users coming from non-metropolitan areas in Malaysia, Indonesia and the Philippines. It pushed the total number of internet users in SEA to 400 million – nearly 70% of the population. According to the e-Conomy SEA 2020 report by Google, Temasek Holdings & Bain, of the millions of internet users in the region, 90% of them are connected to the internet via their mobile phones. Access to the internet, and by extension its services, has provided a massive boost to the region’s digital economy.
The ease with which people were able to switch to online commerce is also largely due to the existing technology infrastructure within SEA. It is one of the most digitally advanced regions in the world. In fact, more than 80% of venture capital funds for SEA have been focused on the internet and technology. The vast majority of it is going into the fintech sector, and countries like Singapore are seeing their fintech investments double. With a more readily established fintech sector, it makes it a lot easier for people to make online payments – particularly through e-wallets.
E-wallets have become the most preferred way to pay, overtaking traditional
“king cash”, and seeing a 70% growth in the number of consumers who prefer it for online transactions. The payment method provides a convenient and seamless experience to online consumers, it was commonly used in urban areas for things like ride hailing and food deliveries. But once the pandemic-induced government lockdowns started, they’re being used for a greater variety of purchases.
Rami Cassis, Founder and CEO of Parabellum, explains the connection between the way lockdown was implemented in Asia and the success of digital adoption – ultimately because of the way Asian governments govern.
Cassis acknowledges that Asian economies are already further ahead in their digital adoption curve because they’re already more digitally mature than the rest of the world. But he says, “COVID is obviously the biggest driver behind this [digital adoption] change. An important point to note in terms of COVID, is that most governments in Asia have adopted a zero COVID policy, rendering their lockdowns substantially more severe and prolonged than those in the West, including quarantine periods of up to three weeks in many of those countries. This has created circumstances where digital adoption becomes a necessity.”
The pandemic accelerated and solidified a future-proof digital economy, as the stringent lockdowns and strict COVID protocols actively encouraged digital adoption. With almost zero chances to visit physical stores, consumers became more comfortable not only shopping online but buying a wider range of products online. And it’s a newly formed habit that isn’t going away any time soon.
Digital-centric consumption has dominated SEA, with the region achieving some significant milestones. SEA is experiencing a paradigm shift, one that makes online consumers feel more comfortable.
Taking a closer look at the digital consumers within the region, there are some eye-opening truths about spending habits, purchasing behaviour, and overall digital presence. By the end of 2021, not only will 380 million Southeast Asians be digital consumers, but the average online spending per person is also expected to be US$381.
But not only is there more online spending, people are shopping online for a greater range of items, with the number of categories being purchased in the past 12 months coming up to an average of 8.1. Online consumers are no longer just paying for streaming services or ride hailing apps, it has expanded to fresh groceries, baby care, house appliances and even healthcare. In fact, 52% of online consumers said they purchased their healthcare online for the first time in the past three months.
Social platforms have also become increasingly popular as Yuval Ben-Itzhak, Chief Strategy Officer at CX firm Emplifi, explains. He outlines how the digital shopping experience is reaching a new level with capabilities like, “purchasing directly from the social platform, easy mobile payments [and] ordering online with seamless in-store pickup.”
Social media has become the second most popular shopping format in the region, second only to e-commerce. And it is becoming the number one channel for product discovery, with 22% of people citing social media videos as the top channel for discovery – which is 3x more than last year.
Ben-Itzhak says, “Social media and ecommerce becoming even more connected in the form of social commerce, thanks to live streaming, or video-powered retail. Live streaming enables brands to create a commercial conversation with their audience that’s always available and accessible. It allows brands to extend their reach beyond a specific geographic area and engage with audiences at scale.
“In China specifically, in 2019, approximately 37% of China’s online shoppers made live-stream purchases. China’s live-streaming e-commerce market was worth an estimated RMB 440 billion, according to Everbright. This equals almost 9% of the estimated total e-commerce market in China. Live-stream shopping is also gaining steam in Southeast Asia, the U.S. and other parts of the world.”
Jasmine Ong, Client Operations Director, Singapore, at Kepler Group expects the appetite for digital consumption is here for the long term. One in three consumers of digital services began using a new online service due to covid and 94% of them intend to continue usage beyond the pandemic. She comments on the popularity of certain ecommerce businesses like Shopee, “They have surpassed Lazada, backed by Alibaba, and in terms of market share, one of the huge success factors for them was managing their own logistics and delivery. The future of ecommerce will see consumers purchasing through these bigger ecommerce apps that onboard brands and sellers like Shopee, Lazada and Amazon.”
She also emphasises the reliance of consumers being able to carry “carrying out multiple tasks online within a single app. Also known as ‘Super apps’, they are the gateway to a consumer in key areas such as ridesharing, food delivery, fintech, digital banking and ecommerce.” The convenience of multitasking with a single app is highlight by the significant success of the leading super apps in SEA like Grab, Gojek and Sea.
There is a rough expectation of what we can expect from a post-pandemic economy, with a largely tech-savvy population starting to buy products and services online and a growing reliance on convenient e-payments. But SEA’s digital economy is quickly becoming a competitive battleground and businesses will need to step up in order to stand out from the crowd.
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