Southeast Asia lags behind the rest of the continent in e-commerce. Despite increased focus from the authorities, it will be some time before e-commerce in ASEAN reaches the level of other places in the region. The majority of ASEAN countries are doing poorly according to a report from CIMB’s research institute.

For the sake of comparison, only the ASEAN 6 (Singapore, Indonesia, Malaysia, Philippines, Vietnam, and Thailand) are mentioned in this article. This is because the other 4 countries of Cambodia, Laos, Myanmar, and Brunei barely have any e-commerce to speak of.

The e-commerce retail market in these 6 countries is estimated to be worth around US$7 billion. However, this figure compares poorly considering Southeast Asia’s large population. With only 29% of people in ASEAN having access to the internet, the potential for growth is enormous. Among this 29%, research has shown that consumers shop as often as those in more developed countries such as Japan and the United States.

InvestAsian has further categorized the barriers to e-commerce into two types: real and perceived challenges. The two real challenges are a direct causation of the perceived ones, so they will be mentioned first.

 

1. Poor Connectivity and Infrastructure

ASEAN is still behind on infrastructure with many countries not having full internet coverage. Online connectivity within ASEAN is relatively low.

The only country in Southeast Asia which has strong online connectivity is Singapore. Research shows that over 26% of its population has fixed broadband connection while 100% has mobile. In Vietnam, Philippines, and Indonesia, less than half of people have access to mobile internet. Less than one-tenth have fixed broadband access.

A trend to note is that mobile broadband access will be the key driver of e-commerce development. Businesses and governments realize this and have taken steps to develop mobile infrastructure.

 

2. Lack of Talent for E-Commerce in ASEAN

One key barrier stopping brick and mortar firms from going online is that they’re unable to find qualified workers. Many retail platforms are simple to use, but the workforce lacks knowledge about online transactions and tech. This is especially true of ASEAN’s small and medium sized businesses (SMEs).

In addition to the real challenges posed to e-commerce in ASEAN, here are also two perceived challenges.

3. Skepticism About Ability to Compete

SMEs lag behind the rest. During surveys, they said they’re able to take their business online but won’t because they think the costs outweigh the benefits. SMEs in Asia believe much of the hype around e-commerce is overrated. This is despite researchers concluding that e-commerce players have as much as 41 times more traffic than brick and mortar shops.

Of course, the lack of competition is a good thing for established e-commerce firms in Asia. But governments need to promote the benefits of e-commerce to help solve a broader issue.

 

 

4. Uneasiness About Online Payments

Customers and retailers alike are wary about any transactions done online in Southeast Asia. Many are shying away from e-commerce because of this. They’re still more comfortable with the traditional way of handing over cash for every purchase.

Governments have developed rules to improve data protection, prevent cybercrime, and encourage online purchases. But their efforts haven’t been enough so far.

In short, ASEAN still lags behind the rest of the world in e-commerce. There are two types of challenges which hinder the sector – real and perceived challenges. However, ASEAN could develop a prosperous e-commerce market if nations work to overcome these problems.

About Reid Kirchenbauer

Reid Kirchenbauer is the Founder of InvestAsian. He's experienced with trading stocks and buying property in Thailand, Cambodia, and elsewhere. He's been featured in publications such as Forbes, Nomad Capitalist, Property Report, and Seeking Alpha. Download his free investment guide by clicking here.

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