Southeast Asia’s market size and its potential for consumption cannot be ignored. By 2050, the Association of Southeast Asia Nations (ASEAN) will be similar in size to Europe, making it the fourth largest economic zone in the World, after China, India and the United States. Southeast Asian countries will become powerhouses in themselves; Indonesia is set to be the fourth largest economy in the world, while Philippines and Vietnam at 19th and 20th.
Research by Google and Temasek Holdings further highlights the region’s potential, projecting that the ecommerce market could grow from US$5.5 billion in 2015 to US$88 billion in 2025, with Indonesia comprising 52 percent of the market.
The region’s young demographic will fuel this ecommerce tide. “Southeast Asian youths are sophisticated, tapped into social media and are using technology to leapfrog barriers,” says Regina Lim, JLL’s Head of Capital Markets Research, Southeast Asia.
“Consumers have bypassed computers and are using their mobile phones to shop. About 20 to 30 percent of those online in Southeast Asia have bought something via the internet in the last 30 days, a similar rate to the United States or the UK.”
And, it hasn’t gone unnoticed by ecommerce players. Alibaba has just increased its stake in the region’s biggest ecommerce site, Lazada Group, bringing its total share to 95 percent and launched its popular Tmall platform in Malaysia and Singapore. It will also be setting up logistics hub in Malaysia and Thailand.
Luxury ecommerce brand, Reebonz, last month, opened a 200,000 square-foot Ecommerce Hub in Singapore, while Singpost launched a US$131 million Regional eCommerce Logistics HQ at the Tampines Logistics Park in Singapore, last month.
Lim believes that the appetite for ecommerce coupled with a lower cost of production could lead to more manufacturers relocating from China to Southeast Asia. “China wages are now three to four times higher (than before) while minimum local content laws in some Southeast Asia countries are further driving manufacturers to relocate to these countries to serve the growing consumer populations,” she says.
“Our top markets for industrial development are Indonesia and Vietnam. Indonesia’s manufacturing output could accelerate to 6.5 percent over the next five years, from the current five percent. Vietnam stands out with its skilled workforce and relatively low costs.”
Writer: Regina Lim, Head of Capital Markets Research, JLL Singapore