In Southeast Asia, few other sectors have seen as many shifts and changes as the retail industry. The e-commerce boom, driven by the region’s rising digital transformation and accelerated the digital presence of businesses, has now mellowed out.
That said, there remains potential for the sector’s continued growth. The Southeast Asian e-commerce market is expected to grow by 22 percent to reach around USD230 billion by 2026. E-commerce, with a gross merchandise value (GMV) of USD139 billion as of 2023, remains the second-largest contributor to the region’s still-booming digital economy.
Moving into 2024, businesses in Southeast Asia need to prioritise growing their user base and increasing transaction volume to stand out amongst their competitors in the e-commerce space.
However, staying on top of mounting customer expectations is proving to be a challenge for retailers across the region, where markets are geographically fragmented.
Here are three key trends for businesses in Southeast Asia to look out for in their pursuit of sustainable, long-term growth.
AI’s pioneering role in omnichannel shopping engagements and experiences
In the dynamic landscape of Southeast Asian e-commerce, a prominent trend emerges — the heightened demand for omnichannel shopping experiences. Consumers across the region are exhibiting a shift in shopping behaviours, with 61 percent preferring to see products in-store before ordering them online. In Singapore, the rise of omnichannel is particularly evident, accounting for 57.6 percent of retail spend in 2022, and poised for a further 21.2 percent increase by 2026.
Businesses are reacting by ramping up their presence across online and offline channels. It is for good reason – companies with a strong omnichannel strategy reportedly see a 9.5 percent year-over-year increase in annual revenue, compared to 3.4 percent for companies without one.
The integration of interactivity and personalisation remains central to the omnichannel shopping experience. Customers would like to shop with brands that are able to cater to their individual needs over those that offer generic, one-size fits-all experiences.
One of the ways retailers are taking personalisation to the next level is leveraging AI-powered technologies to offer customised product recommendations and targeted promotions.
For instance, a fashion brand in Vietnam utilises an AI-powered marketing platform to gain insights into customer behaviour. This allows the e-commerce brand to offer more tailored product recommendations on its website and app.
In fact, more merchants have already begun exploring these technologies to bridge the gap between physical and online businesses. In 2023, an Augmented Reality (AR) activation programme was launched in a few selected shopping malls in Singapore as part of Lunar New Year promotional activities. Shoppers were invited to use a mobile app to play a treasure hunt game and collect rewards at AR zones.
As omnichannel shopping continues to gain traction, technological innovations in the Artificial Intelligence (AI), Virtual Reality (VR), and Augmented Reality (AR) space are key to helping brands bridge the gap between the physical and digital and online spaces for a more seamless customer experience.
Diversified mode of digital payments helps businesses to scale beyond borders
If one thing is for sure, it’s that digital payments are the future. In Southeast Asia, digital payments now make up over 50 percent of overall transaction value, and the market is set to grow by 14.42 percent to reach a staggering USD397 billion by 2027.
One notable trend is the growing emphasis on real-time cross-border payment systems, facilitated by the increase in adoption of digital wallets across the region. These unified cross-border digital payment methods not only enhance convenience for shoppers, but also streamline order fulfilment for retailers – particularly those expanding their presence across channels and borders.
Shoppers aren’t the only ones who stand to gain. Merchants open to embracing new digital payment modes not only enjoy increased sales from higher transaction values, but also an expanded customer base. Businesses are also more likely to be able to anticipate consistent revenue streams throughout the year. This in turn allows them to better optimise their logistics operations. This could be through enhanced inventory management or timely restocking strategies during higher volume sales periods like 11.11 and 12.12.
As the digital payment landscape continues to evolve, these trends underscore the pivotal role of financial innovation in shaping the future of Southeast Asian e-commerce.
Digitalisation the way to go
Businesses in Southeast Asia will have to contend with balancing profitability with meeting consumer expectations. The confluence of advanced technologies and streamlined logistics not only addresses operational efficiency, but also aligns with the broader consumer preference for convenience and cost effectiveness.
For retailers looking to stay ahead of the curve and thrive in this ever-evolving market, investing in digitalisation and staying open to change will be the way forward.
This op-ed piece is authored by Tracy Liu, sales and marketing director at J&T Express Singapore.