SEA merchants credit digital platforms for keeping them afloat, but high costs top barrier | ZDNet

One in three digital merchants across six Southeast Asian markets believe they would not have survived the global pandemic if not for online platforms. However, they point to the need to lower transaction fees, noting that costly digital platforms are the top barrier to adoption. 

Amidst the severity of COVID-19 restrictions in their local markets, 35% of digital merchants in the region said their business would not have stayed afloat if they were not able to sell online, according to the latest edition of the e-Conomy Southeast Asia report. Jointly released Wednesday by Google, Temasek, and Bain & Company, the annual study for the first time included 3,036 digital merchants in the survey that covered Singapore, Malaysia, Vietnam, Indonesia, Thailand, and the Philippines. 

The report defined digital merchants as small business-to-consumer businesses, with fewer than 100 employees, that operated digital tools with some proficiency and had online sales over the past year. These merchants typically were in food and beverages, consumer services, traditional retail, and e-commerce retail sectors. 

Some 87% of these merchants agreed their sales would have declined or trickled to nothing without online platforms during the pandemic, with another 88% noting that these platforms brought benefits and opportunities for their business. 

Some 82% anticipated at least half of their sales to come from online sources over the next five years, with 85% expecting half of their supply purchases to be procured online over the same period. 

Nine in 10 currently accepted digital payments, with 72% expecting their use of this payment mode to increase in the next one to two years.

However, merchants noted the need for further improvements to ease the adoption of digital platforms, including more discounts and promotions, lower transaction fees for sellers, and better user interfaces to drive more sales. Online platform operators also should help better resolve issues with customers and provide sellers with more integrated services, such as logistics and payment processing. 

More consumers heading online, buying more

This year’s e-Conomy Southeast Asia report put the number of internet users in the region at more than 440 million, of which 80% or 350 million were digital consumers or individuals who had bought at least one online service. Some 20 million new digital consumers were added in the first half of 2021 alone. 

The Philippines and Thailand had the highest growth rates for new digital consumers, who accounted for 20% and 18%, respectively, of their country’s digital consumers since the pandemic started in early-2020. 

Across the region, digital consumers were spending more on online services, with food delivery and groceries seeing the sharpest increases at 64% and 64%, respectively, since the pandemic began. Food delivery, in particular, clocked the highest increase in adoption at 41% and, at 71%, was the most adopted digital service. 

In comparison, 70% of digital consumers purchased apparels, while 65% bought beauty products and 64% each purchased from the three categories of electronics, groceries, and ride-sharing services.

The region’s e-commerce gross merchandise value (GMV) was projected to hit $120 billion by year-end, nearly doubling last year’s figure, and could reach $234 billion by 2025. Food delivery services would climb 33% year-on-year to hit $12 billion GMV. 

Indonesia was expected to account for 40% of the region’s total GMV this year at $70 billion, while the Philippines could clock the highest GMV growth at 90% to become a $17 billion digital economy. 

By end-2021, the region would hit $174 billion in overall GMV. This figure would continue to grow to $360 billion in 2025, according to the study, which defined the digital economy to encompass four main sectors including e-commerce, transport and food, online travel, and online media. 

By 2030, Southeast Asia’s digital economy would expand to the size of $1 trillion, fuelled by a fast-growing base of digital consumers and merchants as well as adoption of e-commerce and food delivery. 

Digital payments were projected to reach in excess of $1.1 trillion in gross transaction value by 2025, up from $707 billion in 2021. 

Singapore’s digital economy was projected to grow 35% to reach $15 billion, up from $11 billion last year, and could hit $27 billion in 2025. E-commerce would account for two-thirds of the country’s GMV growth, increasing 106% year-on-year.

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