There will be 310m digital consumers in Southeast Asia by the end of 2020, from 250m in 2018. Faster than the region’s population growth is the pace of its online spend, which is projected to grow 320% between 2018 and 2025.
According to Facebook and Bain & Company’s Riding the Digital Wave: Capturing Southeast Asia’s digital consumer in the Discovery Generation report, the future of digital spend is “discovery-driven”. The survey involved a total of 12,965 respondents from Indonesia, Malaysia, the Philippines, Singapore, Thailand and Vietnam.
Here are some key findings:
The market size:
- Southeast Asia’s emerging middle class has led to a surge in online spend (expected to grow 3.2 times between 2018 and 2025), which is largely down to the rise in average spend per digital consumer from US$124 per consumer in 2018 to a predicted US$392 by 2025. By country, digital spend is strongest in Indonesia and Thailand. Indonesia will retain status as having the largest digital spend but Vietnam and Thailand will see the strongest expansion over the course of the next few years.
- Southeast Asia online retail only makes up three percent of the global retail market (US$587.5b), indicating plenty of room for growth. Specifically, the report identifies clothing, footwear and accessories as the most sizeable opportunity, given it has nine percent penetration in the regional market.
Who is the digital consumer?
- The report identifies the modern digital consumer as the “Discovery Generation” – those that ‘discover’ new products through “online inspiration and influence”. According to the survey, 76% of consumers report discovering products online, as opposed to offline channels. 54% discover new products online via social media such as Facebook and Instagram. 70% don’t know what they want or where to get it when they browse online.
- High and mid-range spenders make up the majority of online shoppers in Southeast Asia. Singapore (55%) and Vietnam (40%) are home to the highest spenders, while Indonesia (28%) has the lowest.
How do they behave?
- “The Discovery Generation” often buy from multiple brands or express interest in trying new ones, being attracted by interesting products, deals and promotions, and strong user reviews.
- “A very important theme would be ‘experiential ecommerce’. What that means is the shopping behaviour has changed from just browsing and knowing exactly what [consumers] want … to one where it’s similar to the way people go to malls,” said Santitarn Sathirathai, group chief economist, Sea (parent company of Shopee)
- More than 60% of respondents across Southeast Asia said they would buy from multiple brands or are open to trying other brands. In Thailand (58%) and Vietnam (53%) stated they have tried an online store they weren’t familiar with before. Only 36 to 39% are willing to try new online stores across the Philippines, Singapore and Indonesia, who are more conservative.
- The purchase journey is rarely purely online, and mostly driven by comparison. Up to 86% of consumers compare products online, offline or both before making a purchase.
The business strategy
- Focus on boosting loyalty in a fragmented marketplace. Digital consumers shop on 3.8 websites on average. The least loyal are from Singapore and Malaysia, where digital consumers shop at 5.1 and 4.2 websites, respectively. The most loyal consumers are from Philippines and Thailand, with 3.2 websites on average.
- Acquire customers through discounts, but this won’t aid loyalty. Only 46% of consumers surveyed wait until sales or promotions to purchase their product, while the remaining 54% proceed to buy it immediately. Singapore (58%) is the only country where the majority of respondents choose to wait for sales seasons.
- Increase consumer confidence by focusing on what they’re most concerned about. When engaging with brands online, customers are primarily concerned with getting a sense for product quality, getting sufficient product information, returns policy, delivery times, and ability to find products.
- Offer unique products across niche categories, to differentiate yourself from larger players. “People are shopping in direct-to-consumer because they care about the brand and the story, so you need to create a narrative that appeals to them emotionally…how an item is presented, how it’s unboxed… You are appealing not through a retailer or platform, but directly to the consumer through Facebook and Instagram,” said Justin Hall, partner, Golden Gate Ventures.
- Loyalty programmes can boost “stickiness”. Only 41% of surveyed consumers reported being part of a loyalty programme, demonstrating how underutilised they are in Southeast Asia. Thailand had the highest number of participants of membership programmes (54%) while Philippines had the lowest (24%). There is little correlation between average spending and loyalty membership participation.
The report concludes that the majority of growth for consumer-packaged goods will come from e-commerce channels. Brands looking to engage the discovery generation should consider pursuing a “ground up approach”. They should ensure they are visible across all online channels as “brick and mortar tactics will not work”.
“Pick your battles, place your bets. Consider business models outside of ecommerce. Some of these insurgent brands have found success by pursuing direct-to-consumer business models, so their potential for disruption can’t be ignored.”
Lead image: Getty Images
