Southeast Asia will be the next major boom market for e-commerce in Asia-Pacific (APAC), Marc Woo, Google’s head of e-commerce, travel, and financial services, told the Bangkok Post recently.
APAC accounted for 40% of global e-commerce sales in Q1 2017, but the vast majority of those sales went to larger or more mature markets in the region, particularly China, but also Japan, Australia, South Korea, and India. That leaves Southeast Asia as the next frontier for e-commerce in the region, Woo said.
Two critical factors — a growing middle class and rapidly expanding internet access — are positive indicators for fast-paced e-commerce growth in Southeast Asia in the coming years:
- The middle class population of ASEAN — an association of 10 Southeast Asian nations — will reach 400 million in 2020, up from 190 million in 2012, according to Nielsen projections.
- Meanwhile, internet access has been expanding at a torrid pace — 130 million people in the region now have smartphones, Woo said. Altogether, he added, about 200 million people in Southeast Asia have some form of internet access, and that will triple to 600 million by 2025.
- Recent research by Google and investment firm Temasek Holdings predicts that e-commerce sales in the region will grow at a 32% CAGR from $5.5 billion in 2015 to $88 billion in 2025, when they will make up 6% of total retail sales.
This promise of fast growth has lured China’s two e-commerce giants — Alibaba and JD.com — to explore opportunities in Southeast Asian countries. JD.com executives recently hinted that the company is looking to expand geographically outside of China, and it's rumored to be considering an investment in Indonesian e-commerce company Tokopedia. Meanwhile, Alibaba paid $1 billion last year for a controlling stake in Singapore-based Lazada, which owns a portfolio of popular e-commerce sites across the region.
In addition, Alibaba is working to set up a “digital free-trade zone" in Malaysia, and has signed a Memorandum of Understanding with the government there and municipal authorities in the Hangzhou region of China to simplify cross-border trade between the two regions. Such moves from these two titans are putting pressure on local players — Sea Ltd., an Indonesian internet company formerly known as Garena that operates a major e-commerce marketplace, recently raised $550 million to rapidly expand its presence in Southeast Asia before the Chinese giants become more entrenched.