Interoperability in eCommerce has become vital to the sector’s growth in the Association of Southeast Asian Nations (ASEAN). Generally, the term “Interoperability” refers to the ability of machines, systems, or software to communicate or exchange data, which the user can access, interpret, and use for a particular purpose.
For example, in Platform-as-a-Service (PaaS) solutions, a user can have a cloud-based platform with several apps and software installed, communicating and exchanging data for an intended result. Thus interoperability is one of the emerging eCommerce trends in Southeast Asia as it increases productivity and efficiency, lowers costs, saves time, maximises economic benefits, and helps consumers by sharing data with other platforms they are using. Moreover, it supports businesses and enables startups to overcome cross-border trade constraints.
5 steps on how to build an ecommerce business in Southeast Asia
According to Statista Research, the region will have a compound annual growth rate (CAGR) of 11.7% from 2023-2027. eCommerce revenues this year are expected to reach USD 124.40 billion, with a user penetration of 58.1%. By 2027, user penetration is predicted to reach 68.5%, for a total of 485.6 users. The projected eCommerce market volume will hit USD 194.30 billion by 2027.
Current state of eCommerce in Southeast Asia
According to the East Asia Forum quarterly report, Asia’s Digital Future Vol. 14, published in August 2022, ASEAN’s eCommerce market was likely to be among the fastest-growing markets in the world. It also earmarked The Philippines, Indonesia, and Vietnam as potentially among the top five global eCommerce markets.
Southeast Asia’s eCommerce benefited significantly by adopting digital solutions after the COVID-19 pandemic spread and the presence of a large, young, and tech-savvy population. It has developed a vibrant eCommerce ecosystem powered by financial technology (fintech) and logistics solutions. Furthermore, East Asia Forum notes the presence of Super Apps—companies like Grab, which provide delivery, ride-hailing services, and more—as a contributing factor for eCommerce growth in the region.
Regional governments have also played a significant role, changing laws and policies to promote the growth and sustainability of eCommerce and connected trade services, such as logistics. In addition, leaders have sought partnerships with other ASEAN partners and the larger Asia-Pacific (APAC) region.
A study conducted by the Electric Power Research Institute (EPRI) and commissioned by the US International Trade Administration (ITA) on clean energy standards adoption found that ASEAN must work on its smart grid interoperability standards. The region is investing heavily in green technologies but needs to cooperate to strengthen its energy security and boost its power trade across borders.
Concerns for eCommerce in ASEAN
Despite its rapid growth, eCommerce in Southeast Asia still needs to overcome many challenges. According to the East Asia Forum, there needs to be more interoperability in many sectors, with digital payments significantly problematic. For example, cross-border transaction costs are often high, payment regulations differ for each country, and customer protection laws prohibit trades from completion.
Secondly, interoperability between data protection and privacy is another significant concern for ASEAN. Each country has its own laws on collecting and processing customer data. The adoption of data localisation policies to safeguard customers is limiting cross-border eCommerce. Therefore, implementing a digital framework or standards across ASEAN is crucial for eCommerce growth.
China remains a large market for Southeast Asia; unfortunately, it spent a substantial amount of time locked down to prevent the spread of COVID-19. While it is now opening up, there remain obstacles in the logistics sector. The war in Ukraine has further enhanced supply chain problems and triggered higher energy costs. As such, eCommerce in Southeast Asia must adapt to these challenges to meet the consumer’s needs.
Integrating blockchain solutions can lower costs, improve efficiency, and facilitate verifiable and faster transactions. However, laws governing blockchain and other digital currencies still need to be developed.
Enhancing interoperability in eCommerce in Southeast Asia
ASEAN must enhance its eCommerce interoperability if the sector is to grow and develop to its true potential. The region is lucky to have a tech-savvy population seeking more digital services and solutions that are convenient, safe, and efficient. Setting up a robust and interoperable ecosystem will lower business costs, provide customers with more affordable goods and services, navigate complex supply chain challenges, and save time.
Adopting interoperable systems will streamline operations, enhancing productivity and efficiency. It will also provide access to software that addresses different challenges—for example, tracking transactions or logistics in real-time. Due to eCommerce having a global element, cross-border regulations on payments and logistics require standardisation to be impactful.
While eCommerce trends in Southeast Asia show a robust and growing sector, regional governments must work together and join other stakeholders to support eCommerce businesses throughout ASEAN. Fixing some of the challenges above and increasing interoperability in eCommerce will create a more inclusive ecosystem for startups and smaller firms to thrive.