DIGITAL CONNECTIVITY IN SOUTHEAST ASIA RIVALS CHINA, BUT ONLINE RETAIL – ONLY 4 PERCENT OF THE REGION'S TOTAL RETAIL SALES – IS PROVING TO BE A TOUGH, THOUGH NOT IMPOSSIBLE, NUT TO CRACK

Bain & Company's new report developed in conjunction with Google finds that local and regional players lead the way with a tailored customer experience

Singapore – 17 March 2016 – Digital media connectivity in Southeast Asia now rivals that of China, as more than 150 million consumers in the region are digitally active, with high levels of product search and engagement. However, while 250 million consumers are now connected via smartphone and 100 million engage in online transactions, e-commerce in the region is proving to be a tough nut to crack due to constraints in Southeast Asia's logistics and payments infrastructure. Online retail represents a U.S. $6B market in Southeast Asia, but with online sales below 4 percent of total retail, the region still lags well behind developed markets and even other developing markets. These are the findings from a new report by Bain & Company and Google, Can Southeast Asia Live Up to Its E-commerce Potential?, released today.

According to the Bain-Google report, which includes a survey of more than 6,000 Southeast Asian consumers across six markets (Singapore, Malaysia, Indonesia, Philippines, Vietnam and Thailand), digital influences just 20 percent of consumer purchases, particularly mobile phones, clothing and laptops. Overall, Bain anticipates online retail sales across Southeast Asia could hit $70 billion by 2020.  While this does not yet match the pace of China – now a more than $500 billion market – multinational retailers are finding it harder to ignore the region's emerging influence.

"The growth of the Southeast Asian e-commerce market is slow but significant, particularly when you consider that it started from a very small base in 2012 and has doubled every year since," said Sebastien Lamy, a Bain partner and co-author of the report. "We believe this region is on the cusp of a digital boom that is beginning to transcend e-commerce and impact sectors from travel and tourism to financial services and payments. Those that recognize its early potential in spite of persistent complexities will reap the rewards."

According to Bain, the biggest hurdle for e-commerce success in Southeast Asia is the highly fragmented nature of the region.  Regionally-specific cultures, regulations, infrastructures and customer preferences make it difficult to establish a presence and build scale here, which is a deterrent for foreign owned businesses. However, local and regional players are thriving simply by providing a highly tailored customer experience. This includes competing on more than just price – more than 60 percent of survey respondents cited both experience and choice as a driver of loyalty. Many local companies are also adapting to varying banking penetration across the region by expanding beyond credit card payment and door delivery and instead offering cash payment and pick-up options.

The Bain report also reveals that region's consumers are still largely ‘site agnostic,' purchasing from a large repertoire of platforms. As a result, search has become a leading source for product research and discovery, led by the use of video, particularly in Indonesia and Thailand. Social is also highly influential in building consumer trust around product quality and seller's credibility – more than 80 percent of consumers use social media and over-the-top content to research products or otherwise connect with sellers.

"Our research is a ‘last chance' warning for Southeast Asian companies," said Florian Hoppe, a Bain partner and co-author of the report. "We've had a front row seat to watch the digital disruption unfold in other markets – first the U.S. and Europe, followed by China and India. With a few regional differences, we know how it will play out here, too, but companies are running out of time to act if they want to stay ahead of consumer preferences and beat the competition."

Editor's Note: To request a copy of the report or to speak with Mr. Lamy and Mr. Hoppe, please contact:

• International media: Dan Pinkney at dan.pinkney@bain.com or +1 646 562 8102

• Southeast Asian media: Juliana Ong at juliana.ong@bain.com or +65 6228 1025

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