Turbulent times often give rise to new business models, and the current e-commerce market fragmentation is ripe for consolidation. See the growth of Digital Consumer in business for 2020.

In a survey of approximately 16,500 digital consumers via interviews with about 20 CxOs across six Southeast Asian (SEA) countries (Indonesia, Malaysia, the Philippines, Singapore, Thailand, and Vietnam), the predicted volume of digital consumption in SE Asia originally forecasted for 2025 in 2019 will already be a reality by the end of 2020.

The ‘digital consumers’ surveyed were those who had made an online purchase in at least two product categories in the past 3 months at the time of the joint study by Facebook and Bain & Company.

Citing a heightened preference for contactless transactions and a greater propensity to spending online, the report power looks into the rapid acceleration of the digital economy and how this affects the future of e-commerce in SEA.

Said Praneeth Yendamuri, Partner at Bain & Company: “SEA 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 US$150bn.”

E-commerce here remains fragmented

By the end of this year, the growth of digital consumers in SEA is expected to reach around 310 million. This growth was originally forecasted for 2025 in the 2019 study, indicating a five-year acceleration within 2020 alone. This means that almost 70% of SEA consumers will go digital by the end of the year.

The report also found that the new forecasts for the average spend per consumer in 2025 will more than triple (3.5x) that of 2018’s figure, also exceeding previous 2025 forecasts—with spending patterns between Tier 1 and 2 cities narrowing.

Furthermore, SEA consumers are not just spending more online as forecasted, they are also buying into more categories online. With contactless and home-consumption habits expected to continue despite the easing of physical distancing measures, people are also now more receptive to grocery shopping online, with 43% of respondents in SEA doing so.

Also, the study shows the immense potential to build brand loyalty and growth as the e-commerce market remains fragmented. In 2020, savvy consumers are shop-hopping across 5.2 online sites before making a purchase decision—a notable increase from an average of 3.8 sites in 2019. When browsing across sites consumers are still searching for better pricing (42%) and product quality (34%).

Similarly, an average of 5 in 10 respondents said that they changed their most purchased brand in the three months prior to the study, with reliability and value being the top two reasons for doing so.

Shifting beyond omni-channel to doorstep presence

Discovery commerce and online inspiration remain all-important, with 68% of consumers saying that they still do not know what they want to purchase before shopping online, while 62% (as compared to 50% in 2019) said they learn about new products and brands via social platforms, with short videos being cited as the top format of choice.

Said Sandhya Devanathan, Managing Director of Gaming APAC, Facebook: “With five years of digital acceleration condensed into one, the impact of digital adoption on businesses has never been more apparent. It is vital for businesses to connect with consumers in ways that are frictionless and to replicate in-person interactions through social platforms, messaging and short videos as much as possible to drive discovery and loyalty.” Devanathan added that turbulent times are often the catalyst for the rise of new business models.

According to Dhruv Vohra, Director of Digital Natives and Technology, Facebook: “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 ‘omni-channel’ option to meet the consumers where they are. What’s key is that businesses will need to adapt (to) today’s consumer trends as (they continue) to shape the next normal.”

On what’s to come, the report found that SEA-based venture capital and private equity funds hit a record of US$8.7 billion in unspent capital as of end-2019. This opens doors for internet and technology disruptors to obtain more funding, grow profitably, and compete on a larger scale in the region.

The report suggests that disruption may be more apparent in healthcare, education and online entertainment as the sectors rapidly evolve to adapt to consumer’s home-consumption habits for home-based learning, telemedicine and online streaming and gaming.