First came the US-China trade war, and now the COVID-19. How is the eCommerce industry in Southeast Asia coping, and what are the implications? The US-China Trade war caused uncertainty in financial markets in 2018-19, which created a knock-on effect on worldwide investor confidence. One of the objectives of the trade war was to bring manufacturing jobs back to US citizens, so inevitably it has disrupted supply chains, mostly in the technology sector. This, in turn, encouraged China to become more self-reliant and achieve its own standards in important sectors, including technology. 

In Southeast Asia, Vietnam has emerged as the country which has benefited most from the trade war—having seen a growth in outside investment, including from China. Singapore’s manufacturing industry has, however, felt the negative impacts, especially in the demand for chipmakers. 

What we have seen since the trade war began is a slow decoupling of the US and China—as the two become rivals in trade and technology. The Coronavirus outbreak, beginning in China in December 2019, has disrupted supply chains further and has given us a glimpse of the possible implications of the US-China rivalry. 

COVID-19 and the economy of Southeast Asia 

In a report examining the economic vulnerability of countries due to the Coronavirus outbreak, Sri Lanka, The Philippines and Vietnam were named as the most vulnerable. Economic ties with China, high numbers of confirmed cases, as well as travel and visa restrictions, put these countries at the top of the list. Cambodia, Laos, and Myanmar are also very vulnerable due to trade and investment links to China, and Thailand because of tourism links to the country.

Singapore’s retail and food and beverage sectors are suffering as a direct result of the COVID-19 pandemic. This, coupled with the trade war and competition from eCommerce, means it is a big blow. 

Although it is harming many sectors, due to restrictions on movement and people staying home, there might be a silver lining. The aftermath of COVID-19 could be a ‘defining moment’ for Singapore, in which it navigates the decoupling from China’s supply chains and relocation of manufacturing industries away from China.

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Most of the Southeast Asian countries, which rely heavily on China’s economy, now face a dilemma. They must retain economic ties with the giant, which has been exposed both by the trade war and COVID-19, leading to negative consequences, especially in the tech sector. At the same time, they must adapt to a restructured global supply chain if they are to maintain a place on the world stage.

Trends in eCommerce amidst COVID-19 in Singapore

In February 2020, several Singaporean eCommerce companies, particularly those who deal in groceries and other household goods, witnessed a surge in orders. This was due to the country raising its disease response level to orange, the second-highest level. Panic buying took over, and eCommerce firm Lazada’s grocery outlet RedMart saw an increase in its weekly average order of more than 300%. 

NTUC Fair Price, a Singaporean supermarket chain, reported similar boosts in online orders. They reportedly almost reached full capacity for delivery, and February became their busiest month to date.

NinjaVan, a parcel delivery service operating in the island city, reportedly delivered triple the number of parcels from the health and pharmaceutical sector, compared to the previous month. Country Head for NinjaVan Singapore, Ray Chou, claimed that he witnessed customers who do not usually ship health and medical products starting to become consumers of this sector.

eCommerce is one of the sectors that has undoubtedly benefited from the coronavirus crisis. Whilst any increase in sales is positive for their bottom line; some eCommerce retailers are struggling to keep up with the sudden increase in demand.

Challenges for eCommerce retailers in the region

Fast delivery is crucial to the marketability of any retail eCommerce business. Panic buying can very quickly disrupt normal business operations though, and in this instance, deliveries began to take longer than usual. 

RedMart became so inundated that some customers had to wait around seven days for their order to be delivered. According to James Chang, CEO of Lazada Singapore, deliveries are back to normal. However, the increase in customers has them looking for solutions to increase capacity, and he sees this as the company’s most significant challenge. NinjaVan fared better with the bout of panic buying. Chou claims that the company “has the experience, technology, and infrastructure to scale up operations quickly to meet demand.” 

If these short term trends persist, eCommerce in Southeast Asia looks set to benefit from the disruption caused by COVID-19. Although the crisis has highlighted many Southeast Asian countries’ economic reliance on China, it has also introduced an opportunity to reassess supply chains and maybe save money and increase employment in their countries.

Retail eCommerce is not the only sector to benefit during the outbreak. Everyone’s new best friend is the internet, and it makes “social distancing” much more comfortable and easy. The necessity to continue to function while being in isolation has seen a rise in remote working, online medical consultations, streaming, gaming, ordering food, and many other tasks which would typically be done ‘in person’. Therefore, COVID-19 could be a catalyst for eCommerce growth in the region. However, we would have to wait and watch the long-term repercussions of this global crisis on the world economy, including Southeast Asia.