Consolidation
will benefit the region’s major players such as Shopee and Grab.
[SINGAPORE]
E-commerce in South-east Asia has reached profitability in 2024, with regional
sales expected to more than double from US$184 billion last year to US$410
billion by 2030 – a 14 per cent compound annual growth rate over the period.
This was one of
the key findings of the DBS Nextwave Southeast Asia 2025 report that was
released on Wednesday (May 14). This report is the first edition in a series
exploring Asia’s digital economy and was developed in partnership with market
data and insights firm Cube.
The report noted
that e-commerce sales in the region today has increased from US$4 billion to
more than US$180 billion between 2012 and 2024, as more consumers embrace
e-commerce as their preferred mode to purchase goods.
It added that
the likes of Shopee, Lazada and Grab were among the key winners of this growth
as they achieved profitability, as increased consolidation among the top
platforms in recent years have seen them gain market share from the smaller
competitors.
These larger platforms
currently command more than 70 per cent of total online sales in South-east
Asia, with many smaller firms shutting down due to competition and market
dominance.
The report said
the factors contributing to the e-commerce giants’ profitability include
greater consolidation, commission fee increases and a greater prioritisation of
core business offerings.
“Several also
invested in vertical ‘e-commerce-adjacent’ business models – such as
warehousing and last-mile delivery – to drive operational efficiency and
improve customer service,” the report said.
“There is now a
class of profitable and entrenched winners who guarantee greater stability
while simultaneously making it harder for new entrants to compete.”
Over in China,
major players such as Alibaba experienced declining market shares from 2015 to
2024 due to stiff competition from newer entrants such as ByteDance and
Pinduoduo.
And in the US,
which is seen as a more mature e-commerce market, top platforms such as Amazon
and MercadoLibre largely maintained their market shares, while smaller entrants
provide specialised e-commerce experiences to cater to a more diverse set of
preferences from consumers.
According to the
DBS report, the US is where advanced digital infrastructure and consumer
preferences have shaped a more diverse online landscape.
“Convenience-focused
platforms Amazon and Walmart share the market with a long tail of omni-channel
players and specialised e-tailers. The US market offers a clue that South-east
Asia’s consumers may seek a more diverse set of e-commerce experiences over
time,” the report said.
What future
entrants should be aware of
Investors prefer
more sustainable business models and realistic projects to provide their
funding to. This is even as they conduct more rigorous due diligence,
suggesting a greater difficulty in attracting funding for new entrants.
The report said
that investors prefer companies with proven business models, such as
personalised shopping experiences, to grow customer loyalty, which shows future
growth potential in their market shares.
Chua Shih Guan,
head of Digital Economy Group, Institutional Banking at DBS, said: “As the
region’s e-commerce sector matures, we are seeing a shift from simply offering
promotions and discounts to more innovative and differentiated customer
experiences.”
“We believe
these platforms will grow profitably and play a crucial role as conduits for
the next wave of South-east Asian innovation,” says DBS’ Chua Shih
Guan. PHOTO: DBS
Entrants should
also focus sustainable growth such as seeking balanced capital structures with
a focus on credit-backed growth to lower the cost of capital.
For example,
utilising credit reduces costs compared to equity due to more tax-deductibles
and the use of credit not diluting existing shareholders’ equity.
Other tools that
can be capitalised are new lines of financing such as term loans to finance
specific projects and revolving credit which provides companies to a line of
credit that can be drawn as needed.
“We believe
these platforms will grow profitably and play a crucial role as conduits for
the next wave of South-east Asian innovation. This evolution may also
require founders to pair fundraising with credit solutions earlier on in their
journey,” said Chua.
Source: The
Business Times (published 14/5/2025)
June 26, 2025
