SEA’s tech titans face revenue ceiling despite steady growth

Southeast Asia’s tech giants such as Grab and Sea Group are poised to continue growing steadily, analysts say, even as the Covid-led surge in digitalization subsides.

Maybank Research noted that the total addressable market (TAM) across ecommerce and on-demand services such as food delivery and ride-hailing in the region is projected to jump at a compounded annual growth rate of 15% to reach US$416 billion by 2030.

But for food delivery, market watchers warn that take rates – the fees or commissions charged by platforms for their services – are unlikely to be raised as customers become more concerned about affordability and price inflation.

Meanwhile, the ecommerce sector is moving towards rationalization even in competitive markets such as Indonesia.

Spurring growth

The engines for regional growth in gross merchandise value – or the total value of merchandise sold on a platform – include an expanding middle class and behavioral shifts in Southeast Asia, industry watchers pointed out.

“Currently, we estimate about 200 million households in the region, of which about only 20% to 30% actively use some sort of ecommerce or food delivery platform,” said Jonathan Woo, senior research analyst at Phillip Securities Research.

Even accounting for low per capita income in Southeast Asia, Maybank Research estimated that penetration levels at the higher end of the region’s economic strata are still half of more developed markets such as the US and China.

“We expect ecommerce and on-demand gross merchandise value to grow by double-digit levels in evolved markets like the US and China, suggesting an even bigger growth impetus in ASEAN,” Maybank Research analysts Hussaini Saifee and Etta Rusdiana Putra said in a recent report.

Inflation woes

Rising prices, however, could get in the way of growth.

A consumer survey by Maybank Research found that some 53% of respondents did not use online food delivery services as they found it expensive. Around 75% who did use such services said they were cutting down due to price increases. Respondents who get online food delivery daily also expected to reduce their frequency of ordering.

This makes increasing take rates from food delivery harder, noted Phillip Securities’ Woo. As part of efforts to improve monetization, take rates from advertising will likely be increased instead, he said.

“By our estimates, food delivery take rates within Southeast Asia are hovering around 20 per cent, while take rates for Uber Eats and DoorDash in North America are only around 15%,” he said.

The way Woo sees it, the biggest challenge facing Grab’s food delivery service now is boosting profitability while decreasing its take rate.

Image credit: Timmy Loen

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