350 million internet users are living in the region of Southeast Asia. Since 2015, more than three million Southeast Asians have gone online for their first time every month. Google and Temasek just recently raised their estimation for the size of the digital economy from an initial $200 billion after seeing the region reach “an inflection point”. (Source: Google report - Southeast Asia’s accelerating internet economy)
These numbers are indicators of the continuously growing potential of the digital market in Southeast Asia. The following text will present both, the high potential segments of the SEA online market and fastest growing regions.
Where is the highest potential?
Southeast Asia cannot be seen as one region with the same potential in every country. The following chart shows the different values of the online media markets in Southeast Asia in 2020.
Source: Statista - Value of the online media market in Southeast Asia in 2020
Indonesia, Thailand and Vietnam show the highest market value in the region, undermining that the importance of online purchases is rather increasing in upcoming markets than in established countries like Singapore.
Indonesia, the world’s fourth largest country by population, is forecasted to hit a market size of $100 billion by 2025, ahead of Thailand ($43 billion) and Vietnam ($33 billion), with strong growth forecasts across the board. Indonesia and Vietnam in particular, have seen their respective digital economies more than triple since 2015. (Source: Techcrunch - Google report: Southeast Asia’s digital economy to triple to $240 billion by 2025)
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The digital economy in Southeast Asia is looking stronger than ever, with nearly all indicators signaling continued growth despite the challenges that are currently ongoing, which are a low skilled workforce and a rural infrastructure, as well as external issues like the COVID-19 pandemic and geopolitical issues.
A third of the current digital users in SEA went online for the first time during the Covid-19 pandemic, out of which 90% intend to continue using digital services. Southeast Asians are using digital services to maintain vital access to their daily needs within the crisis. Therefore, it can be said that the Corona virus is a growth accelerator of the digital market.
(Source: Indonesia AHK - Southeast Asia digital market continues to surge)
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Thinking of potential digital markets, mainly China’s market comes in mind. While China’s internet economy has a GDP penetration of 10 % it only had a growth rate of about 16% in 2019. This shows that the market may be maxed out in a few years.
The thriving internet economy of Southeast Asia is directly in the shadow of China. The average growth rate since 2015 is 33% per year, while countries like Indonesia and Vietnam are picking up speed. Indonesia’s digital market, with a growth rate of 49%, and Vietnam with a growth rate of 38% combined with a still low GDP penetration of around 4-5% are showing a high potential for investments due to easier market entry opportunities. (Source: Google - e-Conomy SEA 2019 report)
There are opportunities in various segments within the SEA internet economy. The following chart describes the development of the SEA internet economy market size in billion U.S.$.
(Source: Techcrunch - Google report: Southeast Asia’s digital economy to triple to $240 billion by 2025)
The enormous increase within just 10 years shows the growing importance of the digital economy in Southeast Asia representing a huge opportunity to expand business to the region without the need of establishing an own physical presence on the ground.
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Melchers Group has multiple branch offices across Southeast Asia.
For more information about how Melchers can help stepping into the Southeast Asian market please contact us at: contact@melchers.com
