January 27, 2021 
With over 620 million people, 11 countries, seven major languages, Southeast Asia is one of the fastest-growing ecommerce markets in the world. The Southeast Asian region is also a highly attractive launching pad for SMEs and retailers who want to enter cross border eCommerce in Asia.
Entry costs are also lower than other Asian countries like Japan or China. With an eCommerce partner based in SE Asia you can get setup and manage your shop at the price point of a few hundreds of dollars each month. The Chinese market for example might be many multiple times bigger than that of Southeast Asia (SEA) but the Chinese eCommerce market is far more mature and more competitive to penetrate.
Mobile ownership is very high in SEA at almost 90% and internet penetration is rising very quickly in most SEA countries. With competition still low for foreign products it’s still comparatively easier to start selling cross-border in this region. There are still lots of niches and space for eCommerce companies to thrive in the region.
An Overview of Southeast Asia’s eCommerce Market
In 2015, the value of the market was just USD 5.5 billion but the e-commerce market in South East Asia is a $100 billion market today, and a recent forecast by Mashable.com says it could grow to $300 billion by 2025. That’s a mind boggling growth of 90x in just 10 years!
There are other indicators as well, that point to this region being on the cusp of phenomenal period of ecommerce growth. Fast growing economies are dominated by growing young, urbane consumer populations across much of the region. In countries like the Philippines and Vietnam we see large young workforces that are quick to catch on to international trends and want to buy the latest foreign goods.
When we analyze the fastest growing markets within SEA, Indonesia is predicted to see the biggest growth with a gross merchandise value of USD 82 billion in 2025. Vietnam will see a growth from USD 0.4 billion to USD 23 billion. Thailand meanwhile is predicted to hit a gross merchandise value of around USD 18 billion by 2025 while the Philippines will reach USD 12 billion.
One important factor to note for those entering SEA is that credit card penetration is low in this region. As such, Cash-On-Delivery (COD) plays a very important role for online sellers as accepting COD can result in an increase in sales by multiples of up to 1.5x – 3.5x for sellers.
The SE Asia ecommerce industry has shown that it is quick to take advantage of the latest ecommerce innovations and adopt new technologies. Large investments are being made into improving the shipping infrastructure, formation of the AEC is working to remove barriers to increase cross border trade, and companies are trying out innovative new payment methods and ways to either provide Cash-On-Delivery more efficiently.
Top eCommerce Marketplaces in Southeast Asia
Lazada: Lazada is now owned by Chinese eCommerce giant Alibaba. Backed by investors like Kinnevik and J.P. Morgan, Lazada has seen rapid growth and is currently the number one eCommerce website in Southeast Asia.
Lazada is a perfect option for small and medium sellers who want to try the SEA markets. Sellers do not have to pay any initial deposits or service fees for using the platform. There is no need to set up any overseas entity and you can ship your products directly to Lazada’s fulfillment center in Hong Kong.
The fulfillment service is called Fulfillment-By-Lazada (FBL), which has a lot of similarities to the FBA on Amazon model. They manage everything from pick-up at the port, inbound, storage, pick & pack, and shipping. Lazada claims commissions on sales that range from 1% to 4%. Besides, you have to pay transaction fees that typically range from 1% – 2%.
Shopee: Founded in 2015, Shopee has emerged as the biggest regional competitor to Lazada. Starting life as a website enabling customer-to-customer (C2C) commerce, the business model has evolved into a hybrid between C2C and B2C commerce.
In order to gain traction, Shopee offered free shipping and didn’t charge any commissions to use Shopee at first. This strategy was expensive, but it paid off. In 2018, it had 50 million active buyers on its platform and surpassed its competitors in terms of the gross merchandise value listed on its website. It has also become a leader in terms of website traffic volume in most of the SEA countries where it operates.
However, Shopee reported losses in the past few years and has been forced to raise fees to maintain its business. The company has now started to monetize its platform by charging fees for value-added services such as cross-border transactions and seller services like inventory management and fulfillment. Previously, they only made money from paid advertising and transaction fees that are around 1.5%. Since 2019, sellers have to pay commissions of 1% – 2%.
Others: Besides these two regional conglomerates, other websites Tokopedia and Bukalapak are popular in Indonesia, Sendo is a leader in Vietnam, Qoo10 is big in Singapore, and Taiwan has several local companies including PCHome. Tokopedia is the most well-known of the above-mentioned website which was launched back in 2009.
The marketplace is only used in Indonesia but is backed by investors like Alibaba and Softbank as they bet on the rapid growth of the Indonesian eCommerce market. With you won’t find many foreign brands selling there just yet, this will change quickly in the coming years as Indonesians show a greater appetite for foreign products.
The global pandemic has accelerated digital payments growth in what was already a rapidly growing ecommerce market. New entrants to the market can expect a booming market with rich rewards for those who get things right.
