Southeast Asian e-commerce revenues are likely to exceed $25 billion by 2020, Frost & Sullivan has predicted.
This is more than double the $11 billion revenue in 2015, which the analyst firm said was achieved despite many setbacks as acquisitions, market exits and retailers' struggles with profitability.
New research, however, shows that growth will continue as the industry evolves.
In 2015, Malaysia and Thailand were the largest e-commerce markets in Southeast Asia in 2015, generating revenues of $2.3 billion and $2.1 billion, respectively.
Frost & Sullivan's study, however, noted that both of these markets are expected to be eclipsed by emerging economies in Southeast Asia, including Vietnam and Indonesia.
Meanwhile, total revenues from business-to-consumer (B2C) e-commerce in the six largest Southeast Asian countries - Indonesia, Malaysia, the Philippines, Singapore, Thailand and Vietnam - are projected to increase at a compound annual growth rate (CAGR) of 17.7%.
“Despite being relatively young, the e-commerce market in Southeast Asia is developing quickly, thanks to the astounding rate of digital adoption in the region,” said Cris Duy Tran, lead consultant in e-commerce and digital transformation, at Frost & Sullivan Asia-Pacific.
He said though that with fewer players in the market, e-commerce firms are beginning to compete beyond price points and logistics and moving into new areas such as Online-to-Offline (O2O) e-commerce and loyalty programs.
Meanwhile, services such as Carousell, Tokopedia, and Shopee are aggressively pursuing a ‘mobile first’ strategy, and Frost & Sullivan expects to see more sector-specific services in areas such as travel, food delivery, and luxury goods.
Challenges, however, remain such as low credit card ownership that stands at less than 7% in all Southeast Asia markets (except for Singapore and Malaysia).
In some countries, more than 50% of the population does not have bank accounts, making payment the biggest challenge for e-commerce companies in the region. Logistics is another issue hampering e-commerce growth, especially in areas with complex geographies such as Indonesia and the Philippines.
"The region is well-positioned for more M&A activities during the forecast period, and we expect to see more exciting market developments in the near future,” concluded Tran.