Massive Business Opportunities of Southeast Asia E-Commerce

In 1852, the world’s first department store, Bon Marche was born in Paris.

In 1994, the e-commerce giant Amazon was founded in the United States by Jeff Bezos.

Before E-commerce platforms been introduced, shopping activities were generally limited to the same city. Only a few consumers would travel to different cities for shopping, and this phenomenon mostly occurred among shoppers from small towns.

Not every small town afford a shopping mall with the standards of big city.

Shoppers from small towns need to spend a lot of time traveling all the way to the shopping malls in big cities to buy the goods they want.

Despite the time spend on road, expenses on transportation and accommodation are pain for shoppers. Buying a large amount of goods at single trip also brings some unnecessary troubles. For example,shopper has to carry those heavy loads and takes different public transportation to get home if he or she does not driving,

Thanks to the advancements brought by the internet technology and e-commerce platforms, today as long as users are within the logistics coverage, for those users with spending power now branded products that only available in big cities and overseas in the past are at their finger tips. This undoubtedly a great convenience for consumers.

Market never stop evolving.

The iteration of the business model is destined that both shopping malls and e-commerce platforms need to be constantly evolve, rather than competing to replace each other. Or more precisely, e-commerce platforms unable to weed out shopping malls, just like convenience stores and grocery stores that keep up with the changing times.

The gap with China’s Internet Industry is the space to improve and the opportunity for Southeast Asian internet companies.

Recently, after i returned to Malaysia from overseas, in addition to adapting to the hot weather in Southeast Asia, i had to re-download local APP on my mobile phone. Among them, Lazada and Shopee are the main e-commerce platforms in Southeast Asia.

Although I was already a registered user of the platform a few years ago, the e-commerce app had not really been a necessary and continued to remain in my mobile phone. Until recently, the market penetration of e-commerce and user experience have improved, especially after the epidemic that users have formed the habit of buying online from home, and the same things happened among my family members too.

Even in my city, there are still some products that are difficult to find in nearby malls. For example, Oatly brand oatmeal milk that for coffee making. Lazada and Shopee e-commerce platforms helped me solved this need. After adapted the e-commerce platforms for a period of time, I discovered a phenomenon that when searching for a particular category of products on the local e-commerce platform, there are fewer search results choices compared with the Chinese e-commerce platforms. For those who have adapted to the Chinese e-commerce platform they will feel that there is a significant gap in user experience.

China’s e-commerce platforms are not only Jingdong and Taobao, but also a series of e-commerce platforms such as Pinduoduo, Xiaohongshu, and Mogujie.

This is also due to the China has a large number of Internet users and 400 million middle-class consumers. The Internet Industry has entered a stage of refined operation in China after it had entered for 20 years. Each platform created its own unique value for merchants and users in its own market segment. The scale of the digital economy in China has accounted for more than 30% of GDP. Every aspect of life is inseparable from the Internet, and china users are enjoying the convenience brought by the Internet.

Taking Mogujie as an example, users of Mogujie are mainly female users, and the industry served by the platform is specialize in clothing industry. JD.com relies on its high-quality logistics service experience and control of product quality to win 300 million white-collar users. As long as the order amount reaches 100 yuan, the logistics fee can be waived, its a win win for both platform and users. Living in city of china, basically most of the things can be done on the APP, from food delivery to grocery shopping, furniture and electrical appliances, without leaving the house.

The innovation of the effective business model must create better benefits for both users and merchants.

Throughout history, the innovation and iteration of business models are driven by technology. Internet technology has gone deep into many industries and reshaped all aspects.

The products on the e-commerce platform are relatively cheap, to some extent , its due to manufacturers and retailers have save the initial investment of store set up and expensive rental. E commerce model is good for both producers and retailers, its bring down the enter barrier, only a few people and a small team are needed to start business. This flexible approach encourages more small and medium-sized merchants to join the e-commerce platform.

If your products with excellent quality and distinctive features, it can find the target customers on e-commerce platform.

In the past, the manufacturers especially the small and medium-sized industrial practitioners, they could only rely on traditional sales channels to obtain the best efficiency and maximize the coverage of target customers. The level of profit sharing of retailers will be reflected in the price of the end product. The retailer’s sales network is the ceiling of that small and medium-sized industrial practitioners to reach their customers. The influence of the manufacturers especially the small and medium-sized industrial practitioners, could not be compared with those with the big brands. Now as long as you utilize and manage your sales properly on the e-commerce platform, the number of users on the e-commerce platform is the boundary for your products.

Compared with China , there is still room for improvement in product abundance on local e-commerce platform.

The ASEAN countries have a population of 583 million, which is close to half of China’s population, this is an emerging potential market. The e-commerce platform has transformed the entire value chain, and the efficiency of product distribution has become more efficient. Now it takes only a few steps to put products on shelves and reach a larger market with the help of e-commerce logistics.

Compared with the China, the search results deliver a fewer products on the Southeast Asian e-commerce platform. This reflected there is room for improvement in product abundance, especially lack of local brands. Take Malaysia as an example, there are relatively fewer local brand products in Malaysia. Small and medium-sized factories with own brands are mainly come from food, wood and gloves related industries with local resources advantages. In fact, small and medium-sized factories can grab the opportunity of the leap forward of Southeast Asian e-commerce, develop products that cater to the Southeast Asian market, and enjoy the dividends brought by Internet technology. This is not a problem that can be solved overnight, nor by e-commerce alone. Meanwhile, these opportunities are more toward small and medium-sized factories benefit. Southeast Asian e-commerce platforms need a unique models that fit local market.

The epidemic is a booster for e-commerce platforms, helping Southeast Asian e-commerce companies to leap forward.

From Bain & Company’s e-Conomy SEA reports over the years, it can be seen that e-commerce GMV transactions in Southeast Asia have increased from 23.2 billions in 2018 to 62.0 billions in 2020, an increase of 167% or 38.8 billions. Before the epidemic, Southeast Asian e-commerce GMV transactions increased from 5.5 billions in 2015 to 10.9 billions in 2017, an increase of only 98% or 5.4 billions.

The research in the report also shows that the transaction volume of daily grocery has also doubled, and >75% of users said that they will continue to buy daily grocery online after the epidemic. After the user’s online shopping habit is formed, it will be beneficial to the entire value chain in the long run. Not only does Southeast Asian e-commerce gain a leap, it is also a window of opportunity for small and medium-sized factories in Southeast Asia.

Needless to say, e-commerce platforms have brought convenience to users in Southeast Asia and created value for local manufacturers and retailers.

What is worth discussing here is whether adapting overseas model by Southeast Asian e-commerce platforms will face some unexpected challenges when landing local market.

Similar Internet technology is applied behind each e-commerce platforms, but the model can be more local and more in line with the local social and economic reality in order to achieve sustainable development in long run.

Rarely people paying attention to the merchant side of e-commerce platform, and if you explore deep into it you can find out there are business opportunities hidden in each product categories. If Southeast Asian e-commerce can cooperate deeply with other parties to tap the potential of small and medium-sized industries, it will definitely create more social impact for Southeast Asia.

The above are some of my personal observations and opinions on Internet e-commerce in Southeast Asia. Of course its cannot be compared with the experience practitioners in internet industry. This is also the first time that I have published my opinions on the Southeast Asia Internet in the form of articles and i not yet proficient in writing and tabulate content structure. That’s all my sharing and perhaps to get some feedback for discussion here.