Southeast Asian digital trends through to 2025

Increasing choice, better Internet access, and rising affluence will continue to drive more spend online in Southeast Asia, according to Facebook and Bain & Company. The two released a follow-up to the 2018 study on Emerging Middle Class in the region.

The new study, titled Riding the Digital Wave: Southeast Asia's Discovery Generation, looks at how the behaviours of today's digital consumer is reshaping online spend in the region.

The study surveyed 12,965 respondents across Indonesia, Malaysia, Philippines, Singapore, Thailand, and Vietnam, and interviewed 30+ CEOs and venture capitalists in the region. It shows that the emerging middle class in Southeast Asia will account for 70-80% of the growth in digital consumers by 2025.

According to Bain, from 90 million digital consumers in 2015, the region grew 2.8x to 250 million digital consumers in 2018. By 2025, there will be 310 million digital consumers in Southeast Asia. By then, the study estimates, online spending will outpace the growth of digital consumers by a factor of three, with clothing and personal care emerging as two of the leading categories.

Discovery is all-important as 67% of respondents said they do not exactly know what they want to purchase before they shop online, with more than 50% of respondents saying they learn about new products and brands via social platforms. Southeast Asian shoppers showed a strong preference for omnichannel, with over 80% saying they compare prices across online discovery platforms and in-store before they make a purchase decision.

Over 40% have tried an online store they have never heard of in the past year. The top three reasons for making an online purchase were positive reviews from other users, good deals or promotions and interesting products.

"There is no longer just one way to shop and nobody shops the same way twice. The key takeaway is that designing for discovery is absolutely crucial, given that customers engage with a business through multiple channels at the same time. In Singapore alone, 75% of the respondents said that they are either open to other brands or will buy from multiple brands when shopping online. This means businesses of all sizes, including specialty players have a significant opportunity to compete on a larger scale in Southeast Asia," said Sandhya Devanathan, Country MD, Facebook Singapore.

Beyond discovery, the study shows the potential of building brand loyalty and growth as there is no dominant player in the e-commerce market. Southeast Asia's savvy consumers shop-hop across 3.8 platforms on average before they make a purchase decision.

Creating customer rewards through loyalty programmes is therefore an imperative, Facebook and Bain said. In the study, respondents with a loyalty programme indicated they were 1.5x more likely to be a promoter than those without a loyalty programme. Loyalty members were 45% more likely to make recommendations across categories, 25% more likely to have higher purchasing frequencies across categories and 20% more likely to have higher spending across categories.

"Brands need to be very savvy and re-imagine their marketing and trade spend to be in sync with the ever-evolving omnichannel consumer journey. They also need to build new muscles to ensure a positive online shopping experience to their digital consumer," said Praneeth Yendamuri, Partner at Bain & Company.

Google, Temasek and Bain & Company separately released the e-Conomy SEA 2019 report, which shows that the regional Internet economy reached US$100 billion for the first time this year, with 360 million people now online. The report forecasts that by 2025 the regional Internet economy will have tripled to US$300 billion and account for 8.5% of regional GDP, said Stephanie Davis, MD, Southeast Asia, Google in a blog post.

"All Southeast Asia’s Internet industries are growing strongly, but e-commerce and ride hailing are the standouts. More than 150 million Southeast Asians are now buying what they need online. And more than 40 million people now order transport, food and other services on demand, compared with just 8 million in 2015," she said.

Predictions in the report include:

- A new wave of startups operating in sectors like education, health, e-commerce and financial technology.

- Between now and 2025, the Internet economy is forecast to grow twice as fast outside cities as inside them. Today, seven major cities make up more than half of Southeast Asia’s Internet economy.

- A rise in online financial services. Digital payments are set to grow from US$600 billion in 2019 to US$1 trillion by 2025.

"Despite the incredible progress noted in this year’s report, we know there’s still a lot of work to do to ensure Southeast Asia’s internet economy reaches its potential. Whether it’s providing support for small businesses to grow, teaching Southeast Asians digital skills, expanding Internet access through Google Station or advocating for smart policy and regulation, we’re looking forward to helping bring the benefits of technology to millions more people across this amazing region," Davis said.

Google Station is a collaboration between Google and third parties to provide Wi-Fi hotspots.