A report recently published by the CIMB ASEAN Research Institute and AT Kearney, a global management consulting firm highlights ways to remove the barriers in the ecommerce environment of Southeast Asia. The report suggests that online retail industry will make a prominent impact on the economic development of the region once the ASEAN Economic Community becomes effective at the end of the year.
According to the report, less than 1% of the total retail sales that take place in South East Asia could be attributed to ecommerce.
This number is significantly lower compared to the China, Europe and the United States where the share is about 6 to 8%. However, the online retail industry in Southeast Asia could rise by a whopping 25% in the coming years, thanks to middle classes spending more, increasing number of ecommerce players and internet becoming more accessible.
In order to surge the growth of the online retail industry in Southeast Asia, the ASEAN Business Club Forum guides the emerging Southeast Asian marketers to take the following actions:
1. Make internet more accessible
ASEAN countries like Malaysia and Singapore are already considered as advanced internet economies with more than two thirds of their population already connected to the World Wide Web. In contrast, only 16% of Indonesia’s population has internet access. The high costs of internet services, the slow speeds and the lack of awareness seem to be the major reasons behind the reduced internet penetration across some of the Southeast Asian countries.
However, in order to address the issues of internet connectivity, ASEAN has produced the ICT Masterplan for 2015. The increasing interest of local businesses and investors has already created a base for a strong mobile and broadband internet infrastructure, but the report suggests that internet coverage could be more widespread with increased government efforts.
2. Support newcomers
Consumers in these ASEAN countries seem to be more attracted towards the foreign online retailers, but the local platforms keep growing nonetheless. From retail giants like Flipkart to niche ecommerce sites like the cosmetic selling Khoobsurati.com, South East Asia is seeing startups rise every day. However, US-based sites such as eBay, Amazon, Groupon and others are still widely used in most of the ASEAN countries. One major reason is skepticism; consumers have not grown to readily trust local ecommerce sites.
There’re quite a few ASEAN supported programs that are working towards improving these issues, like the Malaysian Government supported Multimedia Development Corporation that awards up to USD 25,000 to promising SMEs.
3. Boost online security
The absence of cross-border jurisdiction, gaps in regulations and the increased threat of cyber attacks are some of the reasons that deter consumers from shopping online.
Efforts to share the best practices for region-wide cyber security are not as widespread as they should be in South East Asian countries. The report suggests that the agencies with the different Governments of the countries should share more information to increase the cyber knowledgebase.
4. Facilitating E-payments
Majority of ecommerce payments are still done offline; methods such as cash-on-delivery and ATM transfers are the most popular in the region. The primary reason behind this is that about 70-80% of the consumers in the countries of Philippines, Vietnam and Indonesia do not have bank accounts.
Also, there are regulative barriers and cross-border inconsistency that bar popular online wallets like PayPal and Skrill to operate in full effect.
5. Making Logistics Pleasant
The online shoppers in the ASEAN countries are especially disappointed by the quality of logistics. Apart from the geography of the region, which poses a natural challenge, other factors such as gruesome customs processes, poor transportation, incompetent last-mile delivery and missing warehouse infrastructure adds to the issue.
Most of the ASEAN nations are planning to improve this condition by investing in proper transportation and infrastructure, as other big names pour money into the sector as well. DHL has plans to double its chain of supply by investing USD $180 million in the regional warehouses. All the nations must work together to integrate efficient logistics systems across the regions, which will see the rise of the ecommerce industry in Southeast Asia.
