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  June 6th, 2016 | Written by

Southeast Asia: The Next Big Ecommerce Market

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  • Ecommerce in Southeast Asia is growing at a 32-percent annual clip.
  • Southeast Asia's young population spends a lot of time online.
  • By 2020, Southeast Asia will have 480 million internet users.

Southeast Asia is the world’s fastest growing internet region and is expected to grow in value to more than $200 billion by 2025, according to a report from Google and Temasek, the Singapore sovereign fund. The three key industries driving this growth: ecommerce, online advertising and gaming, and leisure travel.

Of these three sectors, ecommerce is the fastest growing, the report said, with an impressive 32-percent annual growth rate.

Southeast Asia has a young population, and it is growing fast. The Philippines has the region’s youngest population, with 44 percent of the population under the age of 19 and 75 percent under 40. In Indonesia, 60 percent are under the age of 30.

“This is an important demographic as they spend a lot of their time on online and do much more with the internet,” said Rajan Anandan, vice president and managing director of Google, Southeast Asia & India.

By 2025, internet speeds in Southeast Asia are expected to increase from 3.5 megabits per second (mbps) to more than 10 mbps, and penetration is set to reach 70 percent. Singapore and Thailand currently have the region’s fastest internet speeds, at 122.4 mbps and 20 mbps, respectively, for downloads.

Still, the region’s internet speeds remain well below the global average of 23 mbps, indicating a clear opportunity for growth.

As the number of Southeast Asians coming online increases exponentially, more and more will be able to shop online.

“With 260 million users already, Southeast Asia’s countries—Philippines, Indonesia, Singapore, Thailand, Malaysia and Vietnam—are beginning to have a critical mass of internet users,” said Anandan. “We’re seeing an additional 3.8 million new internet users every month. By 2020, Southeast Asia will have 480 million internet users, and that’s a very big number.”

In Southeast Asia, besides Singapore and Malaysia, retail outlets can be hard to come by. “Access to organized retail in remote areas is limited; you simply don’t get access to products. This opens up a huge potential for ecommerce,” Anandan explained.

The Philippines has almost 7,000 islands, while Indonesia has more than 900 inhabited islands. This makes it difficult for organized retail chains to expand to far-flung areas and reach a dispersed consumer base. In order for ecommerce to take full flight regionally however, practical logistical needs will need to be overcome. In Indonesia, logistics costs are one of the highest in Asia.

Southeast Asia is expected to be richer than ever before — and all that extra change may well translate into an online shopping bonanza.

Southeast Asia has a GDP of more than $2.5 trillion, which is larger than India’s. In Indonesia, the number of people bringing home a paycheck could reach 280 million by 2030―up from 109 million in 2010. This is similar to China’s growth in 2009 and almost 1.5 times that of India. Malaysia’s GDP per capita of approximately $11,307 makes the nation the second-highest in the region after Singapore and higher than that of China.

This increased wealth and prosperity will have an inevitable effect on the e-commerce sector. “With more disposable income, online consumption is expected to increase,” said Anandan.