E-commerce gross merchandise value (GMV) may grow 15% a year between 2022 to 2030 to exceed US$400 billion ($536.49 billion), says Nathan Naidu, industry analyst for technology at Bloomberg Intelligence.
Naidu was speaking on the technology landscape and trends in Southeast Asia at Bloomberg’s 2H2023 outlook for the region.
In his presentation, the analyst notes that large e-tailers will still be able to stand against social e-commerce such as TikTok shop.
For now, shoppers are using the latter for product discoveries, which explains why e-commerce sites tend to retain more than half of their transactions compared to 20% for social media videos. However, social media platforms such as Facebook, Instagram and TikTok may test these e-tailers’ market share amid rising live streaming videos.
Naidu also notes that there is a sizeable opportunity in online grocery sales with sales in Southeast Asia growing by 17% a year over 2022 to 2030 to reach US$180 billion, referring to a study by Bain.
At present, only 2% of transactions for groceries are done in the region compared to the 10% seen in China and the US. Yet, groceries account for over half of Southeast Asia’s retail sales, Naidu points out.
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On ride hailing platforms, the analyst sees the Grab and GoTo near-duopoly as a model that works despite new entrants that are seeking to penetrate the market
Southeast Asia’s ride-hailing GMV may grow by 25% a year in 2022 to 2030 to pass US$30 billion with Grab expected to retain at least around 70% of the region’s ride-hailing GMV.
GoTo would have a market share of above 20%.
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According to Naidu who was speaking with Grab not long ago, the group says that the competition with new entrants is not much of a concern to them yet as there may be a longer wait time for vehicles from their competitors due to their smaller network.
Grab and GoTo’s faster services also ranges on a wider network, which both platforms have taken the time to build, notes the analyst.
However, AirAsia, which is seeking to enter the ride-hailing space in Singapore and Malaysia, could heat up the competition within the sector. As a result, Grab and GoTo could cede more market share to AirAsia Ride, which has attained GMV shares of 40% and 15% in Malaysia and Thailand respectively after the acquisitions of Dacsee in Malaysia and GoTo’s Thai operations.
Southeast Asia’s digital bank revenue may climb by 13% a year from 2021 to 2025 to reach US$20 billion.
This, says Naidu, is likely to be mainly driven by lending and payments.
Based on his estimates, Singapore is most likely to drive most of the region’s revenue in the medium-term with Indonesia, the Philippines and Vietnam showing brighter prospects in the longer-term with a younger demographic and a higher underbanked population.
Singapore-founded and New York-listed Sea Limited also looks set to see a quicker full-year breakeven compared to its peers, Grab and GoTo.
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“Sea's faster-than-expected progress in cost cutting should enable it to net a profit for FY2023, while rivals Grab and GoTo could achieve a full-year breakeven in 2025 or later, based on consensus’ estimates,” says Naidu.
“Sea appears to have the best cash-liquidity position, with cash enough to sustain the company's average quarterly operating cash flow needs for 21 quarters, versus Grab's 17 quarters. GoTo’s can last 10 - 12 quarters if it achieves its cash-burn reduction goal,” he adds.
Finally, Southeast Asia looks poised for a strong comeback in travel with online travel being the fastest growing sector in the digital economy pie thanks to the recovery from the pandemic.
The recovery itself is going to see a pretty strong momentum, says Naidu, not just with tourists from China but also with outbound tourism from netizens in Southeast Asia to regions beyond.
One of the leaders in this space is Traveloka, due to its dominance in Indonesia given the country’s large population size.
“Traveloka's market share and scale should help its gross merchandise value (GMV) climb faster than other Southeast Asian online travel agencies, while a pivot to focus solely on travel will help lift profitability ahead of a potential initial public offering (IPO),” says Naidu.
Meanwhile, the narrowing network-infrastructure and smartphone-ownership gaps with more mature markets such as China, India and Japan will help to boost revenue particularly for flight and hotel bookings, he adds.
