Southeast Asia’s digital boom
Southeast Asia’s digital boom By Penny Burtt, Group CEO, Asialink
Southeast Asia is undergoing a rapid and unprecedented digital transformation, driven by rising consumer classes, a strong start-up sector, cheap and accessible devices, and youthful, tech loving populations who have embraced e-commerce and social media. A digital wave is transforming Southeast Asia.
Driven by rising disposable incomes, a strong start-up sector and cheap and accessible devices, the number of digital consumers is surging, and the internet economy is ballooning.
From online retail, to ride sharing services, this digital boom is reshaping almost every aspect of business and social life.
It is helping to plug small and medium enterprises into global supply chains, open-up new industries ripe for innovation, and drive the region’s diverse economies towards closer economic integration.
Southeast Asia’s youthful, tech-loving populations have embraced social media enthusiastically. Collectively, the region has become the largest adopter of Facebook anywhere in the world, and Jakarta, the capital of Indonesia, has earned the crown as the global Twitter capital.
Riding the wave
By 2030, around 500 million people in Southeast Asia are expected to be of working age.
Collectively, the ten-member countries that form the Association of Southeast Asian Nations (ASEAN) - namely Brunei, Cambodia, Indonesia, Laos, Malaysia, Myanmar, the Philippines, Singapore, Thailand and Vietnam –are already equivalent to the fifth largest economy in the world.
They are expected to grow by over 5 percent per year for the next decade, a growth rate that is, well above the global average.
Given these favourable demographics, research by Google estimates around 3.8 million new users across Southeast Asia will continue to come online each month.
The region’s online economy is on track to be worth more than USD$200 billion by 2025, built on the back of around USD$50billion in investment. This impressive e-commerce growth – projected at 14 per cent growth over the next five years – is only matched by India.
Unicorns and rising stars
There are already over 7000 digital start-ups in Southeast Asia, 80 percent of which are based in Indonesia, Singapore or Vietnam.
A rising number are gaining coveted ‘unicorn’ status, attracting the eye of global investors, and joining the exclusive billion-dollar club.
Singapore is home to the region’s largest ride-hailing operator, Grab. Indonesia, the largest economy, now boasts four out of Southeast Asia’s ten tech start-ups: From the more established GoJek, Traveloka and Tokopedia, to the newest edition, online marketplace Bukalapak.
Indonesia’s communications minister is so confident of the country’s digital strengths that he has publicly tipped the country to have its fifth unicorn by 2019, most likely from healthcare or education.
Vietnam’s tech firms are also attracting more venture capital than ever before. While not in the international media spotlight, its home-grown unicorn, the online gaming company VNG, achieved the billion-dollar valuation mark long before some of the region’s more famous examples, like Go-Jek and Grab.
These success stories are inspiring other rising stars. As part of its global forum on ASEAN held in Vietnam in September, the World Economic Forum (WEF) ran a competition to select 80 of region’s most creative start-ups.
Winners ranged from HelloGold, a Malaysian fintech company that produces Shariah-compliant cryptocurrency, to CROWDE, a Philippines-based crowd-investing platform that allows people to invest in farmers on a profit-sharing basis, and Hachi, a Vietnamese agritech start-up that uses internet of things sensors and hydroponics to build smart farms.
Technology leap-frog
This digital boom is seeing a number of Southeast Asia’s economies ‘leapfrog’ technologies.
In the financial services sector, for example, in countries where the take up of bank accounts is still low, companies are finding novel ways to help their customers.
Payments by phone are becoming the norm.
In Jakarta, for instance, ride-share service GoJek now enables its customers to use GoJek’s app-based wallet to pay for everything from a coffee, to a massage or lunch.
In Myanmar, one of Southeast Asia’s least developed economies, the adoption of technology is following a non-linear path, with entire generations skipping traditional retail banking and moving straight to digital finance.
Towards a common market
A less visible element of this digital transformation is the extent to which it is compelling the region towards closer economic integration.
ASEAN is already working towards a common market, known as the ASEAN Economic Community (AEC). Formally launched in 2015, the AEC is a unique model, aiming to establish a free trade zone that takes advantage of the economic diversity of the region – A common market, with distinct country strengths.
As the ASEAN Chair for 2018, Singapore is actively focusing on advancing the digital economy as a way to improve the operating environment for the region’s businesses and enhance global competitiveness.
Currently, Indonesia, Malaysia, Singapore and Thailand have linked to the ‘ASEAN Single Window’, an online platform that expedites cross-border transactions through faster customs clearance.
And while overcoming the digital divide is still a challenge, progress is being made in a number of key sectors. In agribusiness, for example, Singapore’s Olam International has spread ‘smart farming’ across ASEAN and beyond. The agri-conglomerate’s farmer information system - which has already registered more than 100,000 farmers in 21 countries -provides an online platform to collect data from the farmers and help them determine essentials ranging from the appropriate amounts of fertiliser to use, to which types of shade trees to plant.
Sunrise opportunities
Whilst many Australian investors have been slow off the mark, Southeast Asia’s digital transformation is already attracting strong global attention and competition.
Indonesia, for instance, has emerged as a coveted market for the world’s top e-commerce players, including Alibaba Group Holdings and JD.com Inc.
And in Singapore, Grab (the region’s largest ride-hailing operator) is set to raise another $1 billion from investors by the end of this year, building on the $6 billion in capital it has already secured from Japan’s Softbank Group and China’s Didi Chuxing.
Yet with the digital landscape changing so quickly, it can be tricky to assess which trends and developments will inform decision making of the future, and which industries will offer the most promise.
A landmark study released earlier this year by the Australian Commonwealth Science Innovation and Research Organisation (CSIRO) identified the ‘sunrise industries’ of the future – the key emerging digital industries within Southeast Asia that will drive growth.
It focused on synergies with Australia’s strengths, identifying seven areas of opportunity. These ranged from high value nutrition, to Artificial Intelligence, fintech, digital health, digital infrastructure, next gen energy storage and cyber security.
In these sectors, Australia is well positioned to leverage its existing capabilities, be part of furtive innovation, and partner with the Southeast Asian economies on their remarkable digital rise.
Some businesses are already undertaking this journey – Take the Australian IT firm, PNORS, which has partnered with the Indonesian Government to provide highly integrated ehealth solutions to help revolutionise healthcare in rural Indonesia.
But for many Australian and western businesses looking to unlock these opportunities, new ways of thinking and doing business will be required.
Our businesses need to be present; and get better at actively listening to the needs, key developments and aspirations of our Southeast Asian neighbours. At the WEF’s Forum on ASEAN, for example, there was a notable lack of Australian busineses amongst a heavy-hitting global audience.
Accompanying Southeast Asia on its remarkable digital rise will require curiosity and an ability to imagine a new world and think big. As Le Hong Minh, the co-founder of Vietnamese unicorn, VNG group, told the WEF gathering, we need to break away from the ‘normal’ and embrace the ‘magical.’ He said:
“Don’t do the normal stuff because the future is happening with something that today you think is magical, is unimaginable.”
This article originally appeared in Forge Magazine. Forge is a quarterly magazine providing a new spotlight for Australia's economic and entrepreneurial successes
‘Top Tips’ for understanding Southeast Asia’s e-commerce scene. With Donna Webster, Director, Capability Development Asialink Business
Q: What do newcomers need to know to succeed in Southeast Asia’s thriving e-commerce scene?
A: There’s no one blueprint for success. Southeast Asia is an incredibly vibrant, dynamic and diverse region - it’s certainly not a homogenous market. To be successful, you firstly need to understand the landscape. There is considerable diversity between countries, for example, between Myanmar and Singapore, as well as great diversity within many Southeast Asian economies, just look at the region’s biggest economy, Indonesia, which is made up of around 15,000 islands.
So it’s important to recognise this diversity, do your research and careful planning, and employ this to consider which markets you will target and how. Once you have researched and selected your target markets, the next steps are to determine your model then establish and continually maintain your online presence.
Q: Can you give some examples of the largest e-commerce platforms in Southeast Asia?
A: Like other aspects of social and economic life, Southeast Asia’s e-commerce landscape is also incredibly diverse – with great variation in the types of payment methods, categories of spending, and e-commerce platforms used by consumers. For example: In Indonesia, the most popular platforms include online market place Lazada, along with Tokopedia, Bukalapak, Shopee and others. Lazada is also popular in Singapore’s saturated e-commerce market, as well as numerous other local platforms, such as Qoo10 Singapore, Zalora, redmart, and Carousell. In Thailand, Lazada again reigns as a popular choice, accompanied by others including Shopee Thailand and 11street.
The preferred method of payment can also vary considerably. Some countries have adapted innovative ways of paying cash on delivery for online purchases, whilst in others, like Singapore or Malaysia, credit cards or internet banking are most popular.
Q: What are some of the top challenges?
A: Understanding the complexity, staying ahead of market changes and the region’s evolving demographics, and remaining abreast of new technologies. It’s a highly competitive landscape, and with rising consumer demand, it can be tough for exporters with a limited product range to compete. Consumers across the region expect plenty of choice, so smaller merchants who can’t compete on variety may often be better placed to sell through established marketplaces like some of those mentioned above.
Q: What is your top tip?
A: Know your customer. Selling online is still about building and maintaining a relationship. As with any other aspect of doing business in Southeast Asia, it is essential to understand the tastes, expectations, preferences and aspirations of the customers you are building a relationship with.
Many of the Australian and western products that become sought after on Southeast Asia’s e-commerce platforms need to be packaged, presented and marketed very differently, to suit these target markets. To give an example, honey is popular in many Asian countries for its healthy properties, but unlike the popular western preference to spread it on toast, in Asia honey tends to be added to tea or drunk as a warm beverage. Marketing, packaging and product placement need to reflect these different consumer tastes, needs and behaviours.
Creating a quality experience through technology is also a key. Much of Southeast Asia is now mobile-first (and mobile only) when it comes to purchasing online. Consumer expectations are high, and more and more shoppers are seeking a seamless omnichannel experience where they can move fluidly from one type of buying experience to another.
So, arming yourself with customer-centric insights and an understanding of the region’s evolving online marketplaces, consumers and payment platforms will be critical to riding the e-commerce wave.
This article originally appeared in Forge Magazine. Forge is a quarterly magazine providing a new spotlight for Australia's economic and entrepreneurial successes