In my last blog post, we discussed how to establish a strategic digital prioritization process in ASEAN. While it’s important to effectively direct investments to the right markets and online channels in Southeast Asia, companies must first develop a deeper understanding of the region’s overall digital advancement and several shared characteristics.
Here are six things to keep in mind:
1. There is a large population base in ASEAN that is young and increasingly connected
With more than 600 million people, Southeast Asia has a population larger than the European Union. The ASEAN-5 (Indonesia, Thailand, Malaysia, the Philippines, and Vietnam) also comprise the world’s fastest-developing internet region, with a five-year CAGR of 14% (2015–2020). A young and increasingly tech-savvy population lays a solid foundation for market growth in e-commerce, social media, and other industrial innovations.
2. Local players are quickly rising in a nascent tech environment, while global investments are flooding in
Southeast Asian tech companies are quickly developing local capabilities. Not only have we seen big national players emerge (e.g., Tokopedia in Indonesia), but a few local companies are also poised to become key players across the entire region, such as ride-hailing app Grab, e-commerce platform Lazada, and digital entertainment player Sea (formerly known as Garena).
Western tech giants such as Google and Facebook already have dominant market shares in ASEAN’s content and social media space. However, with abundant Chinese funding in local platforms, the influence of Chinese players in e-commerce and digital payments has also never been stronger in ASEAN.
3. The e-commerce ecosystem in Southeast Asia is still immature, but is poised to develop rapidly
With 40% of the region’s e-commerce being cross-border transactions, Southeast Asia has a fragmented landscape bearing various local regulations and trade barriers. Nevertheless, ASEAN is experiencing exponential online channel growth with an average e-commerce growth rate of 30+% every year from 2015 to 2025. The supporting infrastructure is also quickly expanding with increasing mobile wallet penetration and improving delivery logistics options.
4. ASEAN’s growing mobile commerce, payment, and other O2O services call for mobile-oriented customer engagement plans
The region’s strong smartphone adoption growth, coupled with an insufficient traditional banking infrastructure, offers plenty of white space for mobile commerce and payment leapfrogging. Mobile ad spending in 2017 grew by 60-100% YOY across the ASEAN-5 countries and will continue to rise rapidly, with more mobile-based O2O services emerging every day. Many companies have started to leverage mobile-oriented interactions in Southeast Asia by increasing advertising and other marketing investments on mobile devices.
5. Social media plays a critical role in influencing consumer and business decisions in Southeast Asia
ASEAN consumers are very active on social media. The region accounts for four of Facebook’s top ten markets globally by user population (Indonesia, the Philippines, Vietnam, and Thailand). With more than 40% of the online population making purchases through a social network, the ASEAN-5 countries are among the biggest social commerce markets in the world. Facebook and Line have both opened social media stores in Southeast Asia to allow for direct e-commerce. In fact, in 2016 Facebook chose Thailand to become its first launch base globally for the Facebook Shop.
6. Digital infrastructure development and supply chain upgrades have become increasingly important on national and regional agendas
Digital capabilities and supporting infrastructure in emerging ASEAN are still insufficient, but are rapidly developing under policy support from national governments. The region’s growing trade and investment integration will also enhance advanced manufacturing capacity, transportation logistics, intellectual property rights regulations, and other enablers of cross-border e-commerce. As digital awareness continues to rise in B2B industries, MNCs will be able to work with increasingly digital-savvy local partners.
This analysis in Localizing Digital Strategy in ASEAN is Part Two in FSG’s two-part series on digital customer engagement in ASEAN, and complements the first report Prioritizing Digital Markets in ASEAN with tailored tactics and case studies. I will be discussing a few localized best practices on digital customer engagement for the ASEAN-5 markets in the next blog post.