Southeast Asian digital population to hit 310M end-2020, spending $53B online

Southeast Asia's digital population will reach 310 million by year-end, five years ahead of an earlier 2025 forecast, and clock a faster online spending growth than markets such as India, China, and the US.
Written by Eileen Yu, Senior Contributing Editor

Southeast Asia will be home to 310 million online consumers by year-end, hitting the figure five years ahead of an earlier 2025 projection. The region's digital population also will spend more online, clocking a gross merchandise value (GMV) growth rate that exceeds markets such as India, China, and the US. 

In fact, 41% had moved online to make most of their purchases, according to the third iteration of a study commissioned by Facebook and conducted by Bain & Company. The "Digital Consumers of Tomorrow, Here Today" survey polled 16,491 digital consumers across six markets in the region: Singapore, Indonesia, Thailand, Vietnam, Malaysia, and the Philippines. These respondents had made online purchases in at least two product categories in the past three months. The online survey was conducted in May 2020. 

The study last year had projected that Southeast Asia would have a digital population of 310 million by 2025 -- a figure that now would be reached by the end of 2020, with 70% of the region's population expected to be online. 

By 2025, the average online spending per consumer also would climb more than 3.5 times compared to 2018, which again would exceed the study's earlier forecasts. As contactless and home-based consumption expected to continue amidst the global pandemic, the region's consumers now appeared more receptive to online purchases across several product categories, including 41% who would buy groceries online. 

Online GMV in Southeast Asia was projected to expand three-fold to $53 billion by end-2020, growing 23% annually between 2018 and 2020. This compound annual growth rate was faster than markets such as China, India, and the US. The average value per Southeast Asian consumer also was predicted to hit $172 by the end of this year. 

In addition, at 79%, the region had a higher percentage of internet users who were online consumers, compared to 20% in India and 75% in the US. 

China and the US, though, remained ahead of the pack in terms of online retail penetration, with the former's six-times higher at 31%, while the US clocked at 17%. In comparison, online accounted for just 5% of overall retail spend in Southeast Asia. 

Pointing to the region's fragmented e-commerce market, the Facebook-Bain & Company report noted the potential for brands to tap the segment and cultivate customer loyalty. The study found that consumers would visit 5.2 online sites before deciding on a purchase, up from 3.8 sites last year. 

Some 42% of online consumers went in search of better pricepoints, while 34% looked for product quality when browsing across the various sites. About 54% said they had changed their most purchased brand in the past three months due to reliability and value. Consumers in Singapore, though, appeared more loyal with just 33% in the city-state switching brands over the past quarter. 

Some 68% across Southeast Asia said they had no idea what they wanted to purchase before shopping online, while 62% learnt about new products and brands via social media platforms. A majority preferred short videos as a media format. 

Online grocery shopping also was seeing mainstream adoption, with 35% to 43% of digital consumers in Southeast Asia heading online for packaged groceries, fresh groceries, and non-alcoholic drinks, the study found. These categories were the most frequently purchased in the past three months, with consumers buying groceries online up to 8.4 times and non-alcoholic drinks up to 6.6 times over the three months before the survey was conducted. 

In fact, the majority of first-time online purchases had been groceries and food delivery, indicating the impact of social distancing measures on consumer behaviour in the region. Other categories including apparels, electronics, personal care, and beauty remained popular, accounting for 50% to 73% of consumers' online purchases. 

Use of e-wallets also climbed 8% over the past year, with 22% of in the region preferring such platforms as a payment mode. In comparison, cash transactions saw the biggest drop of 6% over the past year, with 34% of consumers opting to pay in cash this year. Other payment platforms also saw drops, including credit and debit cards at 23%, bank transfers at 19%, and convenience stores at 2%. 

Praneeth Yendamuri, a partner at Bain & Company, said: "Southeast Asia is a dynamic region and is fast growing to be one of the top growth engines for the global digital economy. The number of Southeast Asian digital consumers has grown exponentially and their consumption habits are shaping today's new norm. Looking forward, online spending is expected to triple by 2025 and reach close to $150 billion."

Facebook's director of digital natives and technology, Dhruv Vohra, added: "The last decade was about bringing consumers online. Now, with the rapid immigration of digital consumers from offline to online, coupled with the evolution of home-consumption habits, we will see more brands shifting their business models beyond the omnichannel option to meet the consumers where they are. What's key is that businesses will need to adapt today's consumer trends as it continues to shape the next normal."


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