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Jul, 2021     

Takeaways from “GZ5: Internet Economy on the cusp of wave 2”

The SEA Digital Economy is expected to multiply more than 3x in 5 years, reaching $ 365 Bn by 2025


1. Retail to undergo transformation: New models will emerge following consumers evolving shopping patterns/preferences

E-tailing to grow at 24% CAGR over next 5-year horizon to become a USD 195 Bn market in ASEAN.

Some emerging models to look out for –

  • Digitally Native brands have strong resonance with evolved consumers. These brands tend to have a vertically integrated play and understand consumer pulse very closely
  • Vertical play will evolve into specialization in specific categories with supporting experiences as horizontals dominate the generic categories already – higher potential for super verticals
  • Omnichannel to drive growth in categories where touch and feel is important by offering consumer experiences such as click & collect, endless aisle etc
  • Quick Commerce: Consumers are looking for faster delivery for products – hyperlocal players are well placed for offering this; eCommerce horizontals also strengthening instant delivery capabilities

SEA e-tailing GMV , USD Bn, 2020-2025

2. Democratisation of financial services to play out “massive opportunity to drive customers up the affordability ladder and provide working capital support to SMEs”

The are 150 Mn+ unbanked Adult consumers in SEA and another 70 Mn+ underbanked consumers. These users are digitally active as evident from active internet usage levels.

Fintech players who started off with payments are now extending their offerings towards BNPL, Credit and other financial services to help these consumers move up the affordability ladder.

SMEs contribute a significant portion of GDP in countries like ID, PH & VN. They also typically operate in cash flow intensive sectors and need working capital support. Traditional financial institutions weren’t able to effectively tap into this need due to challenges around process, no credit history, lack of customization among others.

FinTech players are however solving for this currently by streamlining and digitizing processes and introducing more curated products and services.

Note: Bubble Size represents the underbanked Population size

3. Sustainability/Circular economy to gain more prominence

Circular economy approach as opposed to a linear approach is making waves among influential consumer cohorts. There is an increasing focus on Make Use and Recycle (as opposed to discarding).

Some of the ways in which Digital economy can contribute here is by
a) enabling the sharing economy (which is already happening in the form of ride hailing, rentals etc)
b) acknowledging conscious consumer mindset and re-thinking processes and environmental and social impact (E.g. Packaging)
c) empowering the Pre Loved Economy

Sustainability investments are picking up in the region and some sectors to watch out for include alternative meat, fashion for good, pre-loved Market (Auto classifieds, General classifieds etc).

4. The SEA Digital Economy is expected to multiply more than 3x in 5 years, reaching $ 365 Bn by 2025

SEA’s USD 114 Bn market (across 6 countries of consideration) is expected to multiply more than 3X to reach USD 365 Bn figure by 2025.

eHealth, EdTech, eB2B to see stronger growth. All sectors show robust growth prospects over the next 5 year horizon. Rebound in Travel and hospitality, Ride-Hailing also expected as pandemic eases out.

SEA digital Economy size, USD Bn, 2020-2025P

Note
1) We have included ID, VN, SG, PH, MY and TH in the figures
2) Online media and gaming includes Advertising, Gaming, Video on Demand and Music on Demand

4. Selected verbatims from our Panel discussion