As the world resets and enters recovery mode following the devastating impact of COVID-19, access to the internet has become more crucial than ever. It has become such a powerful force in the global economy and an integral part of daily life in Southeast Asia that the region looks set to see its digital economy reach $1 trillion USD by 2030.
Despite the turmoil, the internet economy continues to grow, with the global online population expected to reach 3.6 billion by 2020, seeing regions such as Southeast Asia enter the digital decade.
This growth results from the rapid expansion of connectivity, increasing to 2.3 billion people by the end of 2019, adding 250 million more users to the 2018 number. The internet economy in Southeast Asia has flourished as, according to a new e-Conomy SEA report, 40 million new internet users came online in 2021 in the region. This increase now sets the internet penetration levels in ASEAN at 75%, well above the global average of 60%, with a total of 60 million new users coming online since the start of the pandemic in 2020.
The rise of eCommerce in Southeast Asia
Before the global health crisis, eCommerce in Southeast Asia was increasing rapidly. In 2019 93% of the region’s consumers searched online for products and services, and 88% visited eCommerce websites. However, only 83% purchased on the internet, with the majority of these sales, 69%, completed by mobile phone.
Southeast Asia’s digital economy is driving payment evolution
With the onset of the pandemic and the resulting lockdowns and movement restrictions, people turned to the internet to purchase more of their daily needs. This drive towards eCommerce saw an estimated 70 million increase in online shoppers in six SEA countries.
Now, 8 out of 10 of SEA’s internet users are digital consumers, with Singapore leading the pack at 97%. However, it is not just new users who are bolstering the online economy. Those who regularly purchase from eCommerce sites have increased their spending and the frequency of completing transactions. Much of this increase in spending results from people wishing to minimise Coronavirus infection by avoiding shopping in person.
One of the biggest winners in the move to online purchases was the food and beverage industry. With restaurants and bars closed or restricting hours or services during lockdowns, consumers had to embrace ordering through the internet. This need to stay at home led to around 26% of the region using food delivery services for the first time during the pandemic.
Another sector to see a massive increase in online spending was the grocery industry. With people still requiring food and personal hygiene products in lockdown, this sector grew massively. New consumers reached 47%, with 34% of those who previously used grocery delivery services, increasing their reliance on them during the pandemic.
Rise of digital services spending
It wasn’t just tangible goods that increased online sales. Digital services such as entertainment, education and fintech all saw increased activity in the past 18 months, with many consumers stating they used them four times more than previously.
This increased digital services consumption trend is set to continue post-pandemic, with 8 out of 10 consumers saying they are satisfied with the services they have received and a retention rate of 9 out of 10 new users from 2020 to 2021.
As people adjust to society’s new functionality, even more will use online banking services, such as eWallets. Already The Philippines, Malaysia and Vietnam have seen exponential growth in digital wallet usage with gains in digital wallet adoption, at 133%, 87% and 82%, respectively. This growth is likely to continue as the impact of the pandemic begins to recede.
Impact on business
When the COVID crisis began, many businesses, mainly the bricks and mortar stores, faced unimaginable challenges to stay afloat. Indeed, some sectors such as the entertainment and travel industries were decimated by the loss of revenue. The travel industry expects to lose approximately $4.5 billion USD due to the lack of tourism activity. The movie industry was equally hard hit, seeing a 72% reduction in revenue globally in 2020 from the previous year.
With businesses suffering, they had to quickly pivot and embrace the online world in the hope to survive. Moving to internet business models was easier for some sectors than others, but even tourism and entertainment could claw back some losses by offering digital services.
As the world dusts itself off and prepares to enter the digital decade, the internet economy in Southeast Asia is likely to continue its growth trajectory with an estimated gross merchandise volume (GMV) of $174 billion USD expected this year. This upward trend shows the digital economy increasing to $360 billion in 2025 and growing to $1 trillion USD by the decade’s end, great news for the emerging economies of Southeast Asia.