Philippines and Thailand have the highest eCommerce growth in Asean, but the region’s most populous member Indonesia is seen to have the most potential, according to analysts.
In its analysis dated June 13, 2014 entitled “Is Asean at an inflection point for eCommerce?”, UBS Securities (Thailand) Ltd. said that 2013/2014 is the inflection point for internet penetration and eCommerce in Asean.
The Philippines saw a three-fold increase in smartphone penetration in 2012 alone, while Thailand has increased from 20 percent in 2012 to 35 percent currently.
This is despite a low credit card penetration, inefficient supply chains, inhibitive customs and tax regulation and embryonic internet penetration, which do not bode well for online e-tailing in ASEAN.
But business is thriving, UBS said, adding the region has reached its ‘mobile moment’, with the majority of traffic coming from mobile devices with the rollout of 3G, and more affordable devices.
Thailand and the Philippines have the highest growth in the region, while we think Indonesia has the most potential, the analysis said.
While market data suggests online penetration in Asean could be as low as 62 million users, UBS said its analysis suggests Asean has 199 million internet users (32 percent penetration), rising to 294 million (48 million) within three years.
Currently, there are 180 million active social netizens. Estimates on the size of the e-Commerce market vary greatly, said UBS adding they used proprietary analysis based on Big Data algorithms to model the market from bottom-up perspective.
UBS estimates that B2C eCommerce currently grosses only $0.5 to $1.1 billion (0.2 percent of retail sales), but could increase at least fivefold by 2020, with opportunity set as high as $35 billion. Inclusion of all eCommerce channels could multiply the overall market size.
But beneficiaries of this boom are limited to telcos (data boom), logistics, & warehousing (complex supply chain for e-commerce), and international social media sites (Asean is sociable).
The analysis also noted that online retailing, especially through platform ‘price disruptions’ is a key risk to the traditional ‘bricks & mortar’ retail models. UBS urged retailers to quickly devise a cohesive eCommerce strategy.
Globally, the hypermarket model has come under pressure from eCommerce platforms.
In the Philippines, UBS said SM Investments and Robinsons Retail could be negatively affected due to their dominance in department stores and exposure to specialty stores. Plans of both traditional brick and mortar retailers to launch full-scale online products in two to three years was also considered too late.
Among the countries in the region, Thailand’s Big C hypermarket model would seem at risk yet they arguably have the most advanced eCommerce strategy of any of the traditionals in the region.
While consumer education and ‘trust’ is the key bottleneck to ecommerce growth in ASEAN, a lack of logistics infrastructure is a key impediment to online shopping, at least in terms of next day delivery. This is especially true across the Indonesian and Philippine archipelago, UBS added.
Inefficient infrastructure in Asean is not the only issue; eCommerce supply chains can be significantly more complex than the industrialized pallet model that has been the backbone of the logistics industry. This has led to a number of eCommerce start-ups.
Written by: Bernie Magkilat