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E-commerce market in SEA to exceed US$25 billion by 2020

Adrian M. Reodique | Sept. 1, 2016
The total revenues from business-to- consumers (B2C) retailers will increase at a Compound Annual Growth Rate (CAGR) of 17.7 percent.

The e-commerce revenue in Southeast Asia (SEA) is expected to surpass US$25 billion by 2020.

This is according to the new report titled 'Analysis of the Southeast Asian E-commerce Market' by Frost & Sullivan's Telecommunications and Digital Services (Digital Transformation) Growth Partnership Service programme. The report examined the market and opportunities in SEA countries such as Malaysia, Singapore, Thailand, Indonesia, Philippines, and Vietnam with forecasts to 2020.

Last year, the e-commerce market in the region was able to earn US$11 billion despite several acquisitions, market exits, and struggle to achieve profitability.

"Despite being relatively young, the e-commerce market in Southeast Asia is developing quickly, thanks to the astounding rate of digital adoption in the region," said Cris Duy Tran,  Lead Consultant in e-Commerce, Digital Transformation, at Frost & Sullivan Asia-Pacific, in a press release.

"However, companies pursuing an Amazon-style B2C mass market business model are struggling to turn a profit and there have been several mergers and acquisitions and market exits in 2015," he continued.

"With fewer players in the market, e-commerce players are beginning to compete beyond price points and logistics and moving into new areas such as Online-to-Offline (O2O) e-commerce and loyalty programmes," said Tran. 

Nevertheless, the report found positive projection on e-commerce industry in the region. The total revenues from business-to-consumers (B2C) retailers will increase at a Compound Annual Growth Rate (CAGR) of 17.7 percent.

In 2015, Malaysia and Thailand were the largest e-commerce markets in the region, generating US$2.3 billion and US$2.1 billion revenue respectively; but by 2020, emerging economies including Vietnam and Indonesia are expected to eclipse these markets.

The report also noted the rapid expansion of Chinese e-commerce market adds momentum for growth of e-commerce in SEA.

"In 2015, the e-commerce revenue in China represented 12.1 percent of all retail sales, surpassing the US, Europe, and Japan. Given the massive adoption of e-commerce in China, Southeast Asia is set to follow a similar upward trajectory; even though at present, e-commerce only represents less than 2.5 percent of all retail sales. The region is well-positioned for more M&A activities during the forecast period, and we expect to see more exciting market developments in the near future," said Tran.

Meanwhile, the report cited some factors that inhibit the growth of e-commerce market across the region such as low credit card ownership and logistics.

In most SEA markets - except for Singapore and Malaysia - credit card ownership only stands at less than seven percent. The report added that in some countries, more than 50 percent of population do not have bank accounts which make payment the biggest challenge for online retailers in the region.

In addition, the "complex geography" of countries like Indonesia and Philippines adds challenge to logistics strategies of online companies.


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