10 trends that will shape Southeast Asian ecommerce in 2015

Moursalien is the head of corporate communications at aCommerce, a regional ecommerce service provider on a mission to break the logistics bottleneck of Southeast Asia.

While solving ecommerce in Southeast Asia is not tantamount to transcending the space-time continuum, Cooper’s quote in the movie Interstellar gives us a moment’s pause when reflecting on the state of the region. “Our greatest accomplishments cannot be behind us, because our destiny lies above us.” Cheesy, but it holds water. Major strides were made in the past year, but the region is still only at the beginning of its online retail journey.

With US$249 million from Alibaba into SingPost, $100 million into Indonesia’s Tokopedia, and Lazada’s $250 million bid of confidence, Southeast Asia in the past year saw some of the largest injections of financial capital in the emerging markets.

“We are seeing more US$100 million deals in the last month in Southeast Asia than we have in all internet funding to date,” says Ardent Capital CEO Adrian Vanzyl.

But despite the influx, a few predictions failed to come to fruition. Mobile commerce, for example, did not explode as expected even after the promising results of the Line flash sales last January that saw items sell out online within minutes. A new sales channel was born for many Southeast Asians, but our business intelligence unit says that the rates of purchasing versus browsing through mobile were still largely skewed towards the latter. Singapore for aCommerce proved to be too saturated and not as lucrative as other markets, such as Indonesia and Thailand.

But the time for brushing off our knees and patting our backs is over. It’s time to look forward (or up). Here I present to you the top ecommerce predictions in Southeast Asia for 2015. The conclusions were gathered through a mix of primary sources (investor and executive interviews, as well as internal data) and secondary sources (articles and reports) from January 2014 to December 2014.

1. The year of M&As: consolidation will rise in the B2C ecommerce space

If 2014 saw unprecedented capital driven into the region, 2015 will be the year that startups begin to run out of their own steam or capacity to tap the mass organic growth potential in Southeast Asia. Why? Because business-to-consumer (B2C) retail, especially in archipelagos like Indonesia and Philippines, is capital intensive and margins are achieved through economies of scale. We expect these requirements to drive consolidation in the B2C space in 2015 and beyond. Secondly, with the continued influx of capital, B2C companies will be required to accelerate their growth by acquiring or merging with peers in the space. The B2C ecommerce space is still fragmented but early entrants such as Lazada are, thanks to deep pockets, pulling far ahead of the game and making competition for smaller players much harder.

Alliances will form. We witnessed the start of an ecommerce coalition in Thailand with companies such as Whatsnew, Wear You Want and MOXY among others teaming up to remain competitive. It’s only a matter of time before these partnerships consolidate. Another example: Lazada moved into fashion with their LZD white label brand. What stops them from joining forces with Zalora? Imagine the economies of scale and the savings by driving marketing to a single site and activating a single member base (disclosure: Lazada Thailand and Wear You Want are clients of aCommerce. The latter is a subsidiary of Ardent Capital).

“With so much cash floating in the market, bigger players will look to buy.” – Paul Srivorakul, Group CEO aCommerce and executive chairman at Ardent Capital

2. Digital agencies will adapt or go extinct

Digital marketing agencies have known for years that ecommerce is a booming market but will continue to struggle with developing ecommerce products and services for clients. Agencies lack the right incentive structures, culture, and talent to make this happen, as detailed in Sheji Ho’s 5 Reasons You Should Fire your Agency. Digital agencies will try to make up for this by moving down the value chain as WPP has been doing in China with acquisitions of Taobao Partner companies – agencies that manage and operate Taobao and Tmall stores for brands such as Nike and L’Oreal. aCommerce witnessed this first hand when Huawei selected its marketing division over more traditional agencies, or when Uber and Kiehl’s partnered with this ecommerce agency (disclosure: Kiehl’s is an end-to-end client of aCommerce). Note that acquiring standalone companies versus truly integrating them into your end-to-end value chain are two very different things.