Comprising six main economies, the region is expected to be the fourth largest in combined GDP by 2030, outpacing the overall APAC region. So, what is driving this growth and what is the future looking like?
The prospect of the Southeast Asian markets may or may not be on your radar today. After all, there are plenty more regions that are currently taking the lion’s share of e-commerce revenue. Excluding China, which generates over 50% of total global e-commerce, the US, UK and Japan are the current leaders with robust and mature digital markets.
So, what’s the attraction for affiliate marketers?
The digital economy exceeded $200B in Southeast Asia in 2022 and it is projected to continue to grow at 20% per year going forward, reaching $330B by 2025. And the growth does not stop there. The region is set to continue to grow towards 2030 and beyond as favorable demographics continue to fuel a consumer boom.
Already, the Southeast Asia region is the third most populous market in the world, following China and India. It is also seeing strong real GDP growth with 5.1% projected in 2023, compared to 1.3% in the US or even the 4.7% projected for China. However, this growth only tells part of the story. Age is another factor. The population is fairly young and in many cases about to enter the workforce. This demographic boost combined with the overall growth is expected to create 51 million new middle- and upper-class households in Southeast Asia by 2030. This combination of a growing working population and more higher income households will ensure household consumption growth will far outstrip the GDP growth in the region and supercharge consumer spending.
This increased consumption will in turn help to grow the digital economy. Online retail still only accounted for 11% of total retail in 2022, compared with China, for example, where it is already at 37%. But the share is growing fast. It was 9% in 2021 and the share is set to continue to grow as the region is catching up to China. Over 400 million digital consumers are projected in the region by 2027, accounting for 88% of all 15+ year olds.
This outlook makes Southeast Asia a highly attractive market. The current digital economy of $200B is clearly only the beginning in a region that is fueled by a demographic boom. Businesses have responded to the opportunity in kind with foreign direct investment (FDI) in the region in 2021 four times higher in Southeast Asia than in India and 1.2 times higher than in China. But there is still plenty of opportunity to come onboard for the ride.
What is the Southeast Asia market?
The main economies in Southeast Asia consist of Singapore, Malaysia, Indonesia, Thailand, Vietnam, and the Philippines. These are also the six driving economies of the Association of Southeast Asian Nations (ASEAN). However, not unlike the EU, each country is very different. This is also the case when it comes to e-commerce and shopping behavior. Factors such as spending power, payment options and even understanding where and how people shop differ and need to be taken into consideration when doing business there.
Looking among the six main markets, Indonesia is the awakening giant. With a fairly young population of 280 million people, its already significant digital economy is poised for further growth. In fact, nearly 50% of the regional growth in the coming years is expected to come from Indonesia. Its digital economy is expected to reach $130B by 2025 and somewhere around $300B by 2030. Among the other fast-growing markets are Thailand and Vietnam. They are expected to reach $53B and $49B respectively by 2025, with the Philippines not far behind.
However, all of these markets are all developing and not necessarily the easiest places to start your growth journey in the region. For that, a lot of companies turn to the market with the most developed digital economy and the highest GDP per capita: Singapore. Over 95% of Singaporeans over the age of 15 have already shopped online. They have the highest spending power in the region and they primarily speak English. Credit and debit card penetration is the highest and the import of goods process is highly efficient, taking just three hours to clear items according to a Statista Singapore Country Report in 2021 (compared to the region average of over 64 hours). In addition, a PayPal report published in 2021 also stated that 78% of Singaporean online shoppers purchase from international websites – that’s a huge number!
As launching in all six countries at once can prove very challenging, Singapore with its digital economy expected to be worth $29B in 2025, is often selected as the launch point of a growth journey in the region. This is probably also part of the reason why 80% of all VC funding in Southeast Asia in 2021 went to two markets, Singapore, and Indonesia. The entry market and the growth driver.