In the modern world where every transaction imaginable can be done online, Southeast Asia still lags behind the rest of the continent. More analysis found that there are two problems which hinder progress of e-commerce in Asia – especially in ASEAN.

Despite increased focus from the authorities to overcome such barriers, it will be some time before ASEAN will be able to reach the level that the other giant e-commerce countries are at. The majority of ASEAN countries are doing poorly according to a report from CIMB’s research institute,

For the sake of comparison here, only the ASEAN 6 (Singapore, Indonesia, Malaysia, Philippines, Vietnam, and Thailand) are mentioned here. 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, a figure that compares poorly when considering the size of the population in question. With only 29% of ASEAN’s huge population having access to the internet, the potential for growth is enormous. Among this 29%, research has shown that consumers as enthusiastically and often as shoppers 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 real challenges are a direct causation of the perceived ones; therefore, they will be mentioned first.


1. Lack of Connectivity and Infrastructure

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

The only country in Southeast Asia that has comparable online connectivity is Singapore, with research showing that over 26% of its population has fixed broadband connection while 100% has mobile. In Vietnam, Philippines, and Indonesia, less than half of the population has access to mobile internet and less than one-tenth has fixed broadband access.

A trend to take note of here is that mobile broadband access will be the key driver of e-commerce development. Many businesses and governments have recognized this and have taken initiatives to develop mobile infrastructure, making sure that mobile broadband access will be available.


2. Lack of Skilled Digital Talent for E-Commerce in Asia

One key barrier stopping brick and mortar firms from going online is that they are unable to find qualified workers who can work on the digitization of their businesses. Even though many online retail platforms are simple to use, there is still some knowledge required about online transactions and technology that ASEAN still lacks. This is especially true of ASEAN’s SMEs which make up the majority of businesses.

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


3. Skepticism About Ability to Compete

Many SMEs which were surveyed said that even though they are able to take their business online, they would still not be willing because they do not think the benefits outweigh the costs. They believe that the much of the hype around e-commerce is overrated, even though many researchers concluding that e-commerce players have much more traffic (as much as 41 times more) than brick and mortar shops.

To overcome this issue, governments will be required to promote the best practices and benefits of e-commerce so that traditional sellers may change their minds.


4. Uneasiness About Online Payments

In Southeast Asia, customers and retailers alike are cautious about any transactions done online. Many are shying away from e-commerce because of this. They are still more comfortable with the traditional way of handing over/receiving cash for every sales transaction made.

To overcome this, governments have developed and implemented rules to improve e-commerce data protection, prevent cybercrime, and encourage more online transactions.

In short, ASEAN still lags behind the rest of the world in terms of e-commerce development. There are two types of challenges which hinders development – real and perceived challenges. However, ASEAN may develop a prosperous e-commerce market if its many governments work together in overcoming these issues.

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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