Southeast Asia online retail sales to hit $70 B by 2020

MANILA, Philippines – Online retail sales in Southeast Asia are expected to hit $70 billion by 2020, but retailers will have to make investments and find the right partners to be able to take advantage of the growth opportunity in the region, management consulting firm Bain & Co. and Google said.

According to the Bain and Google report titled “Can Southeast Asia Live Up to Its E-Commerce Potential,” online sales in Southeast Asia representing four percent of the region’s total retail market or $6 billion, could grow to $70 billion by 2020.

The report is based on a survey of more than 6,000 consumers in the Philippines, Singapore, Thailand, Malaysia, Indonesia and Vietnam.

“The growth of the Southeast Asian e-commerce market is slow but significant, particularly when you consider that it started from a very small base in 2012 and has doubled every year since,” Sebastien Lamy, a Bain partner and co-author of the report said.

“We believe this region is on the cusp of a digital boom that is beginning to transcend e-commerce and impact sectors from travel and tourism to financial services and payments.  Those that recognize its early potential in spite of persistent complexities will reap the rewards,” he said.

While 100 million individuals in Southeast Asia have already made online purchases and 150 million are already taking the first step of researching products online prior to a purchase, e-commerce in the region is growing at a much slower pace compared to developed and other developing markets.

The report said the biggest hurdle for e-commerce success in the region is the highly fragmented nature of the region with regulations, infrastructure and customer preferences making it difficult to establish a presence and build scale particularly for foreign-owned businesses.

Another challenge to the success of e-commerce is the consumers’ concern over trusting the e-commerce platforms and the difficulty of finding products they want to purchase online.

Despite the concerns, the digitally sophisticated population and growing use of smartphones are seen to make e-commerce broadly acceptable in the region.

For retailers to succeed in the online marketplace in Southeast Asia, the report said there is a need to clearly understand the consumers and their shifting behavior and to use such information in building and investing in a digital strategy.

Choosing the right partner will also be vital for retailers in order to succeed in the online marketplace.