Why e-commerce in Southeast Asia will overtake the UK within 3 years
Thailand is among the stars set to lead this growth across the region
The COVID-19 epidemic has made itself felt across the board. As we have changed our behaviour in accordance with the requirements of fighting the epidemic, it has affected all aspects of our lives. It has changed the ways we live, how we work and where we shop, to name a few. In the business world, one of the clear results has been in shopping behaviour: more people are online and shop online.
In fact, an additional 40 million people in Southeast Asia connected to the internet for the first time last year, compared to only 10 million in 2019. And those who purchased accounted for one third of the year’s online commerce.
As these new shoppers discover, shopping online has some clear benefits including convenience (more time to watch Netflix while stuck at home), the ability to better research the available products and general access to a much greater range of choice and variety of products and services. It is therefore no surprise that 9 out of 10 of these shoppers had the intention to re-purchase.
However, not all online businesses have thrived. The travel industry has been hit hard by COVID-19, including their online sales, and it will take some time for them to fully recover. However, if you only focus on online retail, business has been booming as sales have been growing at a rapid rate. And online retail continues to grow – fast.
There are several reasons for this growth. But what is truly remarkable is that by 2025, e-commerce in Southeast Asia is forecast to be worth more than e-commerce in the UK. This is incredibly significant because when looking at the top countries for retail e-commerce ranked by share of sales worldwide, the UK is riding high in 3rd spot with 4.8 per cent worldwide market share (behind the US at 19 per cent and China at 52.1 per cent). Overtaking the UK means Southeast Asia will become a top 3 market globally.
Over the next 3-4 years, growth here will continue to significantly outpace that in the UK. As such, e-commerce has seen a 63 per cent jump in sales in 2020 to US$62 billion, compared to US$38 billion a year ago. It is expected that this will continue to grow at an annual rate of 23% to US$172 billion in 2025, up from previous year’s estimates.
Compared to the 3.5 per cent annual growth rate in the UK projected over the next four years, the difference is significant. By 2025, retail e-commerce in the UK is expected to be worth “only” US$125 billion. In other words, by 2025, retail e-commerce in Southeast Asia is expected to exceed that of the UK by US$ 47 billion.
Focus on Thailand
One of the drivers of this Southeast Asia growth is Thailand, where tech savvy shoppers are increasingly turning to online stores for their purchases. It was not always like this. Just five years ago, only 1.9% of online e-commerce was via online channels.
So what has changed? Research carried out by Lulu Xie, a former student at Thammasat University, revealed interesting findings that e-commerce was previously faltering. Customers were generally only purchasing online when the product was not available offline. They also had preconceptions (and experience) of issues with online shopping. This included trusting the stores to send out what was actually advertised, the returns/exchange processes, negative reviews online and even price.
Anthony Quinn (left) and Jesper Kauth, Managing Partners of Lodestar Marketing.
These issues now mostly seem to be in the past. The present looks better, much better. And the future is even brighter. It is anticipated that over half of Thailand’s population (43.5 million) will be ‘online shoppers’. That is double the number of shoppers in 2017. Total Thai e-commerce is in fact expected to grow to US$12.3 billion by 2025.
This remarkable growth is due to a number of factors that have and continue to play key parts in the Thai success story. Among these, two of the main ones are the entry of Chinese players and the opening of new channels.
The battle of the Big (Chinese) 3
The Thai market is increasingly dominated by large market places competing for market share. Shopee (SEA Group, with Tencent as Investors) has long been taking on the might of Lazada (Alibaba-funded). JD.com recently joined the fray through its joint venture with Central Group and is growing its market share. They all have mighty backers with deep pockets and through the advancement of their marketplace marketing and operations, they have become very visible to Thai consumers. With flexible payment options like Cash on Delivery, they have helped make it easier for shoppers to try out this new type of shopping. This in turn has helped give consumers added confidence in online shopping. At the same time, the platforms have provided brands with an easy place to test their sales online while they develop their own e-commerce capabilities.
New online marketing channels
Not only marketplaces have been emerging but new marketing channels too. At first, brands relied on search and Facebook but now other channels are also becoming valuable. One example is the local growth in affiliate marketing. Affiliate marketing allows websites, apps and other platforms (collectively known as publishers) to promote the products of other online shops directly. They are in return rewarded with a percentage of the sales that they are responsible for. This essentially allows the publishers to make money from their content in a new, much more targeted fashion. It also helps fuel a growth in relevant and useful local websites which in turn enrich the local Thai internet.
Anthony Quinn, Managing Partner of Lodestar Marketing, which specialises in Affiliate Marketing in the region, commented: “The importance of this channel is the reach that publishers [websites, apps etc.] can bring to help elevate trust and purchasing behaviour. Publishers are investing millions in educating new shoppers to the benefits of shopping online as well as encouraging them to return and shop again.”
A good example of an affiliate publisher is Shopback, a site and app that rewards shoppers with cash every time they shop online. There is no cost to the consumer to receive this reward. Another popular platform is iPrice, which helps consumers compare products and find the best price, potentially saving them significant amounts of money as a result.
As for the region as a whole, COVID-19 also accelerated the growth in Thailand to new levels. It set a new overall base level of e-commerce for the country from which e-commerce is expected to continue to grow fast for at least the next four years. As it does, it will be among the leading drivers of the Southeast Asian e-commerce miracle that will make the region a top three e-commerce market worldwide by 2025.