From browsing to booming: 5 insights into SEA’s ecommerce sector

Picture this: You’re at your laptop, browsing flights for your next holiday and comparing airline prices. While deciding between Bali and Bangkok, you place your weekly grocery order through an e-grocery app. As you’re checking out, you receive a notification from a logistics provider saying that the blouse you purchased will be delivered within the day.

This scenario is likely familiar to almost everyone as ecommerce has become a part of everyday life in Southeast Asia.

“Over the past decade, Southeast Asia’s ecommerce sector has transformed from a nascent market into a regional powerhouse, driven by rapid digital adoption and mobile-first consumers,” says Chua Shih Guan, head of the Digital Economy Group at DBS.

Chua Shih Guan, head of the Digital Economy Group at DBS. / Photo credit: DBS

The region’s ecommerce sector has grown tremendously, with regional annual ecommerce sales ballooning from US$4 billion in 2012 to more than US$180 billion in 2024.

But what has this evolution looked like, and what’s coming next for the sector? A whitepaper titled “A new golden age? What’s next for Southeast Asia tech after ecommerce reaches profitability,” produced by DBS and ecommerce market insights firm Cube, answers these questions, providing a clearer picture of what’s in store for Southeast Asia’s ecommerce space.

Here are five key insights from the whitepaper.

1. Ecommerce has a far-reaching impact

The whitepaper describes ecommerce as the region’s first “killer app” – a force that would drive sustained innovation beyond itself.

This is apparent in how it has supported development in many other verticals such as logistics and fintech, which have become key industries propelling Southeast Asia’s growth.

Ecommerce has also sparked new adjacent industries like ecommerce enablers, which help businesses sell their products online and tap into the digital opportunity.

2. Consolidation is the name of the game

A variety of channels were at play during the early days of ecommerce in Southeast Asia. Among them were online retailers and conversational commerce through apps like WhatsApp. But then the region witnessed consolidation, with much of the current landscape dominated by platform players.

Photo credit: Kitreel / Shutterstock

Names such as Shopee, Lazada, and even Grab lead in Southeast Asia, especially on the quick commerce front. According to the whitepaper, the consolidation is rooted in the benefits that platforms offer, such as:

• A varied and complete assortment of goods, including those from known brands and merchants
• Attractive promotions and subsidies
• A convenient and frictionless shopping experience, often combining software with physical infrastructure in ways that did not exist before

While this has benefited consumers, it has also created obstacles for smaller players that are fighting with these giants for a slice of the pie.

This challenge is also evident in several ecommerce-adjacent sectors.

Logistics startups, for example, are feeling the heat as platform players invest in their own logistics solutions. However, opportunities remain, particularly in areas like AI and financial services.

3. Ecommerce hit profitability in 2024, marking a significant milestone

The whitepaper highlights 2024 as a milestone year where several leading ecommerce platforms reported profitability.

Lazada logged its first profitable month of operations, while both Grab and Shopee parent firm Sea announced profitable quarters for their ecommerce businesses.

Photo credit: Shopee

This is an important breakthrough: Profitability has become a key area of focus for Southeast Asia’s tech scene. It’s because it indicates the long-term viability not only of these platforms but also of the ecommerce sector as a whole.

According to the whitepaper, this profitability is rooted in four main areas:

• Increased consolidation: As discussed above, this has allowed these players to dominate the ecommerce landscape
• Rising take-rates: Ecommerce platforms have hiked their selling fees, aiding platform profitability
• Operational efficiencies and focused investments: Platforms have pared back investments in exploratory pursuits in favor of fine-tuning their core business
• Limited disruption: New players have emerged, but no one has challenged these platform firms at a significant scale or posed a threat beyond a specific vertical. For example, TikTok Shop’s disruption has largely been confined to the beauty and fashion categories.

4. Disruption could be on the horizon

Southeast Asia’s ecommerce scene looks fairly stable, but there remains potential for disruption.

Taking reference from markets such as China, the US, and Latin America, the whitepaper identifies some potential challenges and opportunities ahead.

A scenario of “low disruption” – where current winners maintain leadership and continue consolidating market share – seems most likely. However, one cannot discount the potential for a shake-up.

Overseas players like Amazon could make a bigger push into Southeast Asia. Meanwhile, new players such as Shein and Temu could give existing incumbents a run for their money.

AI, too, could create significant disruption. Although its initial value appears more indirect – such as aiding product tagging to improve search – it could also transform the customer experience.

AI-powered recommendation engines are just one opportunity. The rise of large language models could further create shifts in the way users buy and interact.

5. Startups will seek out new forms of capital

The evolution of Southeast Asia’s ecommerce sector, as well as that of its larger tech ecosystem, will affect capital structures in the region.

While startups in Southeast Asia have typically viewed equity financing as the main mode of funding, shifts toward profitability and a more cautious investor sentiment will require alternative funding sources.

Photo credit: Rawpixel.

To that end, the whitepaper posits that more startups will turn to credit for funding. Credit can take several different forms, such as:

• Term loans: Often used to finance specific projects or acquisitions and have fixed repayment terms
• Revolving credit: Often used for working capital needs, providing companies with access to a line of credit that they can draw on as needed
• Venture debt: Works best for firms with strong growth potential but limited current profitability, as it allows them to access capital without significant equity dilution

Generally speaking, credit offers startups the funding they need with greater flexibility, a lower cost of capital, and better preservation of equity. These benefits are all crucial in the present state of the tech ecosystem.

For the long haul

The emergence of new technologies, as well as a closing digital divide, will enhance the growth of Southeast Asia’s tech ecosystem.

No one can say for sure what the future of the region’s ecommerce scene looks like. However, one thing is certain: It’s here to stay, and it will continue to develop hand-in-hand with Southeast Asia’s digital economy.

“As the region’s ecommerce sector matures, we are seeing a shift from simply offering promotions and discounts to more innovative and differentiated customer experiences,” says Chua. “We believe these platforms will grow profitably and play a crucial role as conduits for the next wave of Southeast Asian innovation.”

The DBS Digital Economy Group provides comprehensive capital solutions that are uniquely tailored to help new economy companies flourish across their lifecycle. ​

Gain insights into the future of Southeast Asia’s ecommerce landscape by downloading its whitepaper, “A new golden age? What’s next for Southeast Asia tech after ecommerce reaches profitability.”

DOWNLOAD WHITEPAPER

This content was produced by Tech in Asia Studios, which connects brands with Asia’s tech community. Learn more about partnering with Tech in Asia Studios.