Weekly Focus APAC: SEA E-Commerce Market to Hit £17.92bn

In this edition of Weekly Focus APAC: SEA E-Commerce Market to Hit £17.92bn; Mobile to Outpace Desktop Online Sales; Carousell Deploys Visa Sensory Payment Technology; and Global Trade Wars Threat to APAC Economic Growth.

SEA E-Commerce Market to hit £17.92bn

The Southeast Asian e-commerce economy is projected to generate more than USD$23bn (£17.92bn) in gross merchandise value (GMV) by end-2018, growing more than fourfold since 2015.

Back then, the industry was worth just USD$5.5bn (£4.28bn), according to the latest annual e-Conomy SEA report jointly released by Google and Temasek Holdings. Currently in its third year, the study assesses the total value of the internet economy across six markets (Singapore, Indonesia, Malaysia, Thailand, Vietnam, and the Philippines) encompassing four key service sectors: e-commerce, online travel, online media, and ride-sharing.

The report further noted that the region’s e-commerce industry would grow at a compound annual growth rate (CAGR) of 62% between 2015 and 2018, and reach USD$102bn (£79.45bn) by 2025.

It also pointed to Lazada, Shopee, and Tokopedia as three of the region’s largest e-commerce players, which collectively were estimated to have grown more than sevenfold since 2015.

In addition, the Indonesian market is seeing the fastest growth and expected to hit USD$12bn (£9.35bn) by end-2018, generating more than USD$1 (£0.78) of every USD$2 (£1.56) spent online in the region.

E-commerce also was seeing strong growth in Vietnam, where would will climb to almost USD$3bn (£2.34bn) this year.

Source: Google-Temasek e-Conomy SEA 2018 report

“As the e-commerce sector matures, we expect that the basis of competition and key growth drivers will also evolve. E-commerce players in the region will increasingly aim for leadership in each geographical market, with Indonesia being the primary battleground for both regional and local players”, the report noted. “They will also expand from metro cities to second-tier cities and rural areas, where e-commerce penetration is lower and growth prospects are the highest.”

It added that online marketplaces would compete for key consumer segments such as ‘young females’ and ‘fashionistas’, as well as product categories including apparel and health and beauty.

These online marketplaces also would look to drive monetisation from brands and sellers, providing them with value-added services such as data analytics, logistics, and marketing.

According to the Google-Temasek report, the Southeast Asian internet economy would be worth USD$72bn (£56.08bn) by the end of 2018, more than doubling in value since 2015 and up 37% from 2017. By 2025, it is estimated to be valued at USD$240bn (£186.95bn).

As of June 2018, there are more than 350 million internet users across the six Southeast Asian markets, up 90 million from 2015. The GMV of the region’s internet economy is estimated to account for 2.8% of its gross domestic product this year, compared to 1.3% in 2015, and is expected to climb to 8% by 2025.

Some 35 million consumers in the region currently tap ride-sharing services each month, with eight million rides taken a day across 500 cities.

Mobile to Outpace Desktop Online Sales

Mobile commerce (m-commerce) is expected to be the most popular online shopping platform in Hong Kong next year, way ahead of the projected year of 2023, when the same will be true for the global average.

Mobile is the fastest growing channel in Hong Kong, climbing at a compound annual growth rate (CAGR) of 14% over the next four years, according to payments company Worldpay. Desktop online sales, in comparison, would grow at just 2% over the same period.

Worldpay’s Asia-Pacific general manager and global enterprise e-commerce, Phil Pomford, said: “Hong Kong is renowned as a brick-and-mortar shopping paradise, but our new research indicates that online and mobile retail is the future. Shoppers in Hong Kong are racing ahead of their global peers to adopt m-commerce and, with some of the highest smartphone penetration rates in the world, it’s no surprise that consumers in Hong Kong are eager for more opportunities to enjoy the shopping experiences they love via innovative new channels.”

Cashless payments in Hong Kong would grow at a CAGR of 17%, with e-wallets expected to account for 36.6% of the local e-commerce market by 2022. In fact, adoption of e-wallets currently was the fastest growing in-store payment platform and projected to further increase at a CAGR of 32% over the next four years.

Hong Kong’s total e-commerce industry would expand 38% through to 2022, hitting USD$22.3bn (£17.37bn).

Carousell Deploys Visa Sensory Payment Technology

Singapore-based consumer-to-consumer e-commerce site Carousell has deployed Visa’s Sensory Branding payment technology, tapping sound, animation, and haptic cues to indicate successful transactions.

The sensory technology is enabled on Carousell’s mobile payment platform CarouPay, so buyers will experience the various signals when they pay using their Visa cards. Sellers also will receive confirmation through the technology when the funds are credited into their Visa Debit cards via Visa Direct.

Citing its own research, Visa said 76% of Singapore consumers felt confident paying online, if there were visual cues to indicate their purchases were successful.

Visa’s country manager for Singapore and Brunei, Kunal Chatterjee, said: “Given the growing popularity of e-commerce, it is extremely crucial to ensure we continuously enhance the consumer experience. A research study we conducted recently showed that 65% of online shoppers feel insecure at times when they make a purchase online because they are unsure if their purchases are confirmed.

“We see a positive shift in confidence level if respondents receive a sound or animation cue to indicate that their online payments are successful”, Chatterjee said, noting that 51% of respondents in its study would opt for sensory cues to facilitate online payments, if such functions were available.

Global Trade Wars Threat to APAC Economic Growth

Global trade wars and a slant towards protectionism will significantly threaten Asia-Pacific’s economic growth.

The region was projected to grow by 3.7% next year, driven down by potential risks such as trade conflicts, higher commodity prices, rising interest rates, and volatile capital markets, revealed the 13th annual State of the Region report by the Pacific Economic Cooperation Council (PECC). The study polled 529 regional policy experts on key developments and challenges Asia-Pacific faced.

Some 62.1% cited increased protectionism and trade wars as the biggest risk to the region’s economic growth, while 43.9% pointed to potential slowdown in world trade growth and 43.3% highlighted a possible slowdown of China’s economy. Another 36.1% cited the lack of political leadership and 32.7% pointed to corruption.

However, 49.1% expected Southeast Asia to see stronger economic growth in the coming year, as do 42.3% that anticipated growth for the Indian market.

PECC’s co-chair Don Campbell said: “In the backdrop of what some have called ‘the biggest trade war in economic history’, it is important that political and business leaders recognise the need to manage economic concerns by having clearly defined policies that encourage co-operation and co-ordination with one another. Only then can regional economies successfully navigate the challenges arising from technology and integration.”

With the rise of new technologies, however, alongside Asia-Pacific’s ageing population, 59.2% said there would be skills shortages in science and engineering, while 75% pointed to critical thinking and 71.8% cited complex problem solving.

In addition, 76% said their labour markets and social security systems were not fully prepared to deal with the training, upskilling, and potential disruption from new technologies in their economy. Another 66.7% believed their education system was ill-prepared.

Pedrosa noted: “The report advises that how well economies adjust to technological change will depend on its capacity to match the skills on offer by all available workers with the skills required. Technological advancement is also expected to create significant occupational and structural change, increasing the quality of workforces while decreasing the quantity required. It is important for policy makers to understand the impact of technology on the nature of work and how to enable smooth, seamless transitions.”