UBS Forecasts Bright Future for Asean E-commerce

Electronic commerce (e-commerce) is set for strong growth in the 10-member bloc within the Association of Southeast Asian Nations (Asean) to soar in Southeast Asia as internet penetration in the region achieves critical mass, suggests a report from UBS.

The bank suggests that Asean has a 32% ‘internet penetration rate’ – or close to 200m users – out of a total population of 620m, which is set to rise by 48% to 294m users over the next three years. UBS’s figures contrast with widely-accepted market data, which is cited by the bank, that indicates there are no more than 62m users.

“Asean has reached its ‘mobile moment’,” writes Raymond Maguire, the report’s Bangkok-based lead analyst. Most internet traffic in the region comes from mobile devices, as the traditional PC has been circumvented by the arrival of third generation (3G) services coupled with wider ownership of mobile devices by consumers thanks to lower prices.

The report adds that business is thriving despite the challenges of low credit card penetration, inefficient supply chains and inhibitive customs and tax regulations.

Asean accounts for up to 48% of the world’s internet users and two in three of them are under 35 years of age, meaning that the consumer base for e-tailing sites is vast – and its potential still largely untapped.

UBS says that the potential is best illustrated by Thailand. At the start of 2013 the country – the second largest economy in Asean – was one of few countries in the world without 3G along with North Korea and Cuba. However, internet penetration in Thailand has already reached a level that puts it on par with China in 2009.

Smartphone sales in the first quarter of 2014 in Indonesia, Thailand and Vietnam were up by between 45% and 68%, year-on-year (YoY).

Asean’s e-tail market currently generates between US$548m to US$1.1bn, accounting for just 0.12% to 0.24% of total retail sales, but UBS says this is set to increase five-fold by 2020. The room for growth is immense, with a long way to go before the region matches the 8% and 8.7% market shares of e-tail in China and the US. The main potential obstacle to growth is that household and credit card debt has already reached worrying levels in countries such as Thailand and Malaysia.


Related reading