KUALA LUMPUR – Higher spending power and a heightened preference for contactless transactions will continue to drive the exponential growth of the digital economy, according to Facebook and Bain & Company who released a follow-up to the 2019 study Riding the Digital Wave.
The new study titled Digital Consumers of Tomorrow, Here Today looks into the rapid acceleration of the digital economy and how this affects the future of e-commerce in Southeast Asia.
The study surveyed approximately 16,500 digital consumers and gathered insights from interviews with about 20+ CXOs across six Southeast Asian countries, namely, Indonesia, Malaysia, the Philippines, Singapore, Thailand, and Vietnam. Digital consumers surveyed are those who have made an online purchase in at least 2 product categories in the past 3 months.
According to Bain & Company, the growth of digital consumers in Southeast Asia is expected to reach around 310 million by the end of 2020, with millions more expected to join in the coming years. This growth was originally forecasted for 2025 in the 2019 study, indicating a five-year acceleration within 2020 alone.
This means that almost 70% (about 7 in every 10) of Southeast Asian consumers will go digital by the end of the year and Malaysia has the highest percentage of digital consumers with 83% of its population (15 years old and above), with 48% switching to purchasing mostly online in the past year.
The report also found that online retail GMV in Malaysia is expected to double from US $4 billion to approximately US $9 billion by 2025.
Malaysian consumers are not just spending more online as forecasted in 2019, they’re also buying into more categories online. Malaysians purchased an average of 5 categories in 2020 compared to 3.8 categories in 2019.
With contactless and home-consumption habits expected to continue despite the easing of physical distancing measures, and in line with Facebook and Bain & Co.’s June 2020 research update “Southeast Asia Digital Consumer Trends that Shape the Next Normal”, people are also now more receptive to grocery shopping online with 43% of respondents in SEA doing so. In Malaysia, online groceries recorded the highest growth in online retail penetration in 2020 since 2018.
Also, the study shows the immense potential to build brand loyalty and growth as the e-commerce market remains fragmented. In 2020, savvy consumers in Malaysia are shop-hopping across 4.8 online sites before making a purchase decision — a notable increase from an average of 4.2 sites in 2019.
Consumers are still searching for better pricing (56%) and product quality (34%) when browsing across sites. Similarly, an average of 5 in10 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.
Discovery commerce and online inspiration remains all-important with 67% of Malaysian consumers saying that they still don’t know what they want to purchase before they shop online, while 66% said they learn about new products and brands via social platforms, with short videos being cited as the top format of choice.
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, more brands have shifted their business models beyond the “omni-channel” option to meet the consumers where they are. To succeed in an omni-channel space, businesses will need to adapt today’s consumer trends as it continues to shape the next normal.
Companies will also need to prepare for a fully digital purchasing funnel and develop omni-channel capabilities by partnering or investing to build proprietary assets. With more and more capital available to digital disruptors, large brands can expect to face constant challenges from emerging brands.
On what’s to come, the report found that Southeast Asian-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 it rapidly evolves to adapt to consumer’s home-consumption habits such as home-based learning, telemedicine and the sharp increase in preference for online gaming and live-streaming.
“2020 is definitely the year to hit fast forward. The rise of digital consumers in our region has accelerated at an exhilarating pace, and their discovery habits are changing. Reinforcing brand reliability and standing out from the crowd matters now more than ever, as consumers are more open to switching brands and rely more on e-commerce platforms,” said Gwendolyn Lim, Partner at Bain & Company.