SEA traders credit digital platforms for keeping them afloat, but high costs are the biggest obstacle

One in three digital trader in six Southeast Asian markets believes he would not have survived the global pandemic without online platforms. However, they stress the need to reduce transaction fees, noting that expensive digital platforms are the main barrier to adoption.

Amid the severity of COVID-19 restrictions in their local markets, 35% of digital traders in the region said their business would not have stayed afloat if they hadn’t been able to sell online, according to the latest edition of the e-Conomy Southeast Asia report. Jointly published on Wednesday by Google, Temasek and Bain & Company, the annual study included 3,036 digital merchants for the first time in the survey, which covered Singapore, Malaysia, Vietnam, Indonesia, Thailand and the Philippines.

The report defined digital merchants as small business-to-consumer businesses with fewer than 100 employees who used digital tools with some skill and had online sales in the past year. These traders were typically in the food and beverage, consumer services, traditional retail, and e-commerce industries.

Some 87% of these merchants agreed that their sales would have declined or wiped out without online platforms during the pandemic, and 88% noted that these platforms brought benefits and opportunities for their business.

Some 82% expected that at least half of their sales would come from online sources in the next five years, and 85% expected that half of their supplies purchases would be made online during the same period. period.

Nine out of 10 digital payments currently accept, with 72% expecting their use of this payment method to increase over the next two years.

However, merchants noted the need for further improvements to facilitate adoption of digital platforms, including more discounts and promotions, lower transaction fees for sellers, and better user interfaces to drive more sales. . Online platform operators are also expected to help better solve problems with customers and provide sellers with more integrated services, such as logistics and payment processing.

More consumers go online, buy more

This year’s e-Conomy Southeast Asia report put the number of internet users in the region at over 440 million, of which 80% or 350 million are digital consumers or individuals who have purchased at least one service online. Some 20 million new digital consumers were added in the first half of 2021 alone.

The Philippines and Thailand had the highest growth rates for new digital consumers, who represented 20% and 18% of their country’s digital consumers, respectively, since the pandemic began in early 2020.

Across the region, digital consumers were spending more on online services, with food delivery and groceries recording the largest increases at 64% and 64%, respectively, since the start of the pandemic. Food delivery, in particular, saw the largest increase in adoption at 41% and, at 71%, was the most adopted digital service.

In comparison, 70% of digital consumers bought clothes, while 65% bought beauty products and 64% each bought in the three categories of electronics, groceries and rideshare services.

The region’s e-commerce gross value of goods (GMV) is expected to reach $ 120 billion by year-end, almost double last year, and could reach $ 234 billion by year-end 2025. Food delivery services would increase 33% year over year to reach $ 12 billion GMV.

Indonesia is expected to account for 40% of the region’s total GMV this year at $ 70 billion, while the Philippines could record the highest growth in GMV at 90% to become a digital economy of $ 17 billion.

By the end of 2021, the region would reach $ 174 billion in global GMV. This figure would continue to rise to reach $ 360 billion in 2025, according to the study, which defines the digital economy as encompassing four main sectors, including e-commerce, transport and food, online travel and online media.

By 2030, Southeast Asia’s digital economy will reach the size of $ 1 trillion, fueled by a rapidly growing base of consumers and digital merchants as well as the adoption of e-commerce and food delivery.

Digital payments are expected to reach over $ 1.1 trillion in gross transaction value by 2025, up from $ 707 billion in 2021.

Singapore’s digital economy is expected to grow 35% to $ 15 billion, from $ 11 billion last year, and could reach $ 27 billion in 2025. E-commerce is believed to account for two-thirds of GMV growth of the country, growing 106% year-on-year. -year.

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