Beyond digital: Lessons learned from the pandemic

The Covid-19 pandemic has served as a vital reminder that a health crisis cannot be viewed in a vacuum. Months since it was first detected, the coronavirus has left its mark across the globe and exposed far-reaching socioeconomic inequalities.

Across developing and developed markets in Southeast Asia, divides in access to digital infrastructures and disparities in digital literacy have continued to grow. This comes on top of existing challenges such as the lack of financial inclusion, with many unable to access adequate financial support during this time.

Most importantly, however, these issues have significantly affected the region’s burgeoning ecosystem of small and medium-sized enterprises (SMEs) – the backbone of Southeast Asia’s fast-growing economy. With lockdown measures in place, 47% of consumers are spending less offline, while 30% are spending more online, a report by Facebook and Bain & Company found. It’s a trend that’s here to stay: A majority of the consumers (83%) that were polled for the report said that they are likely to continue spending more online even after restrictions are lifted.

As a result, Southeast Asia’s traditional and often offline-based SMEs have had to quickly come to grips with digitalizing their operations in order to survive.

Adapting and learning

There are signs that entrepreneurs in the region have actively adapted to and transformed in the midst of these challenges. Sea Insights – Sea’s research and public policy unit – recently launched its Singapore Youth Report, which found that during the pandemic, almost 30% of local entrepreneurs increased their use of ecommerce – of which 81% said that they’d continue to use online marketplaces even after the impact of the coronavirus diminishes over time.

This partly reflects the massive shift of young Singapore consumers online. About 56% have increased their use of ecommerce during this period – the highest growth in the ASEAN region.

“While the shift online by SMEs was not easy by any means, the data suggests that usage of digital tools such as ecommerce is very sticky once [SMEs] familiarize themselves with it,” says Santitarn Sathirathai, group chief economist at Sea. This is partly due to the economic benefits that digital tools offer, he says, which include “increased efficiency, new markets, and new income streams.”

Santitarn Sathirathai, group chief economist at Sea / Photo credit: Sea

That said, poor digital infrastructure could make it more difficult for SMEs to make the shift. In Indonesia, for example, costly and unreliable internet access, a lack of digital literacy, and difficulty in accessing funding are some of the more binding constraints that SMEs face in their attempts to digitalize and work remotely.

While Covid-19 has acted as a catalyst for these challenges, the need for digitalization extends beyond the pandemic. It enables entrepreneurs to better future-proof their business models and operations as a whole, so these strategies need to be employed with sustainability and longevity in mind.

“Digital transformation is an ongoing journey,” Sathirathai says. “Sustainable approaches involve diverse areas of a business, spanning ongoing employee upskilling and education, keeping track of the latest digital tools and infrastructures, as well as operational considerations pertaining to product development, inventory, and fulfilment.”

Tapping on support schemes

Thankfully, there’s help to be had: Governments across Southeast Asia have established programs to support entrepreneurs and small-business owners. For example, in Malaysia, a program co-funded by the Malaysian Digital Economy Corporation and regional ecommerce platforms helps eligible micro enterprises and SMEs make the shift toward business digitalization. The participating platforms provide training, subsidies, and sales support.

Similarly in Singapore, Sea’s research found that government funding has played a pivotal role in alleviating cash flow issues during this time, with almost 50% of surveyed respondents citing a reliance on such aid programs. One initiative, the SME Go Digital Program, gives participants access to pre-approved digital solutions, as well as grants and bonuses.

And it’s not just local governments who are extending a helping hand. Sea is offering educational and financial support to SMEs via its ecommerce platform, Shopee, as well. Its Seller Support Package offers an array of initiatives – ranging from onboarding assistance to consultations on long-term strategies that can enable SMEs to better maintain their presence online.

While it may be tough to make the transition, there’s a light at the end of this tunnel. “Traditional SMEs in Thailand with existing offline businesses saw a 130% increase in total revenue on average after adopting ecommerce,” says Sathirathai. “This increase could be as much as 370% for merchants whose online sales account for over 80% of their total sales.”

In Singapore, over 60% of entrepreneurs actively adapted by exploring new business models like ecommerce, illustrating the power of digitalization in driving business agility amid changing circumstances. In fact, traditionally offline SMEs found that their total revenue across online and offline operations increased by 67% percent by digitalizing their operations.

Such efforts have been largely complemented by government initiatives to encourage cashless payments, such as nationwide QR-code systems. For example, ShopeePay integrated Indonesia’s new Quick-Response Indonesia Standard (QRIS) code system, allowing users to securely complete payments from home while simultaneously enabling traditionally brick and mortar businesses to easily facilitate digital transactions across a wider range of consumers.

A training workshop conducted by Shopee for small business owners / Photo credit: Sea

By diversifying revenue sources, such businesses are able to better weather economic shocks, which is key to building long-term business resilience. Additionally, the transition to ecommerce has enabled businesses to expand beyond borders. Sea’s research shows that before ecommerce, only 36% of SMEs sold goods and services outside of their own region. After digitalizing their operations, 67% of them were able to do so.

An ongoing process

It’s crucial for businesses to keep pace with technological developments to remain relevant to younger consumers, says Sathirathai. According to Sea’s findings 87% of Southeast Asian youth increased their usage of at least one digital tool amid the pandemic. In developed markets such as Singapore, this number was even greater – standing at 95% – specifically across activities such as virtual meetings, ecommerce, food delivery, and online education.

“Businesses need to persist in this drive in spite of the growing pains,” Sathirathai reiterates. “Cultivating a growth mindset and digital resilience are key.”

Digital transformation was already taking place prior to Covid-19, but the pandemic has thrust its importance onto center stage. In order for businesses to minimize and mitigate the impact of unpredictable circumstances, they must enact forward-thinking plans such as rethinking supply chains to make sure that they are suitable for local conditions and building ecosystem partnerships to enable a capital-light business model.

“Ultimately, digitalization is not the goal in and of itself,” Sathirathai says. “Instead, the key for SMEs to thrive in the new normal lies in cultivating a mindset that is open, flexible, and agile – all the while employing digitalization as an enabler for future-proof transformations.”

Find out more about what the post-Covid-19 future holds for Southeast Asian markets on Sea’s Insights page.

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.