February 18, 2018 Knowledge Center

Why South East Asia is important for Monetha?

E-commerce is one of the fastest growing industries in the world. We have already seen the terrific growth of that 10 years ago in China. The time came for a new area to boom in this field and it is Southeast Asia. In the next 10 years this region will be one of the most attractive for e-commerce. Recent research by Google and investment firm Temasek Holdings predicts that e-commerce sales in this region will grow at a 32% CAGR (compound annual growth rate) from $5.5 billion in 2015 to $88 billion in 2025, which will make up 6% of total retail sales worldwide. Two critical factors for fast growth of e-commerce — a growing percentage of middle class and rapid expansion of internet access — are positive indicators for fast-paced e-commerce growth in Southeast Asia in the coming years.

Let’s get a more in-depth look into the causes of this enormous growth.

1. Two giants – Alibaba group and Tencent groups are entering the new markets. These companies are buying smaller local e-commerce companies in order to be the leaders in these particular markets. This race started only last year when Alibaba acquired biggest share of Lazada, it was like a trigger for taking positions in Southeast Asia. These deals briefly reflect how important this is and that it is only the beginning.

2. Amazon launches in Singapore. Amazon’s entry into “Southeast Asia” was the biggest surprise and non-surprise at the same time. The global e-commerce leader understood specifically that Southeast Asia is a Pandora box. The entry of this giant and “fight” with two more leaders of China will be very hard, though bigger competition leads to faster and higher growth of e-commerce.

3. People in Southeast Asia region favour new technologies and they are tempted to use them on day-to-day basis. Southeast Asia is one of the fastest-growing, emerging smartphone markets. There are currently 642 mln. people living there. The region is poised to reach 480 million internet users by 2020, according to TechCrunch. And smartphones make up the lion’s share of Southeast Asia’s internet population — roughly 90% of Southeast Asia’s internet users are smartphone users. Consumers in Southeast Asia spend more time on the mobile internet than any other market. On average, consumers in Southeast Asia spend 3.6 hours per day on the mobile internet. Thailand leads the pack with 4.2 hours per day, followed by Indonesia at 3.9 hours per day. In comparison, the US spends an average of 2 hours per day on the mobile internet.

4. Fintech and bank accounts – more and more people in Southeast Asia are using banks and want to try digital payments. Cash-on-delivery (COD) still makes up over 70% of all processed transactions. Though, for example, in Indonesia Go-Pay application is thriving amongst online buyers because of the easy use for peer-to-peer transactions. Following the success in Indonesia, Go-Pay wants to expand to neighbour countries such as Thailand, Malaysia and etc.

5. Fast growing economy, increased salaries and better adoption for technologies help people to get better jobs and lead higher quality life in those countries. This process leads nations to higher percentage of middle class population, which can use more money for e-commerce. The middle class population of ASEAN(association of southeast asia nations) — an association of 10 Southeast Asian nations — will reach 400 million in 2020, up from 190 million in 2012.

As we can see, all these reasons are very similar to the situation a decade ago before the super growth of Alibaba and Tencent group. Growing economy and better adoption for hi-tech leads to fast growth for e-commerce. Most important thing to note is that three giants (Alibaba, Tencent and Amazon) are fighting for the best positions in this area, which means that Southeast Asia is incredibly attractive for e-commerce. From 6 bln. USD in 2015 e-commerce market size will grow almost 15x per decade. In 2025, e-commerce is expected to reach 88 bln. USD for the whole Southeast Asia region.