PH internet economy is the fastest growing in SEA

CONTINUED shifts in consumer and merchant behavior, along with strong investor confidence, paves the way for Southeast Asia into its “Digital Decade.” Last week, Google, Temasek and Bain & Company released the sixth edition of the e-Conomy Southeast Asia (SEA) Report — “Roaring 20s: The SEA Digital Decade.” Vietnam, Thailand, the Philippines, Malaysia, Singapore and Indonesia were the six countries covered in this report. The 10-year outlook highlights a forecast of a $1-trillion digital economy by 2030. Over 350 million internet users or 80 percent are digital consumers, i.e., internet users who have bought at least one online service. Since the pandemic began, SEA has added 60 million new digital consumers, of which 20 million joined in the first half of 2021 alone. Gross merchandise value (GMV) calculations of the internet economy or the digital economy cover four sectors: e-commerce, transport and food, online travel, and online media. Thailand and the Philippines have had the highest proportion of new users during the pandemic.

New digital consumers reached 12 million in the Philippines since the start of the pandemic (up to first half of 2021) of which 63 percent are from non-metro areas. This holds true in SEA, where non-metros comprise most new joiners to the internet economy, of which 99 percent plan to continue using these services. The pandemic has been a catalyst for existing digital users to adopt new online services and increase their frequency of use and spend in these services. Those who used the services before the pandemic have consumed an average of 4.3 more services since the pandemic began and 95 percent of pandemic consumers are still consumers today. Despite increased growth in the last 18 months, there remains significant headroom. Having the lowest digital consumer penetration in the SEA, only 68 percent of internet users are consuming online services.

In the inaugural feature on Southeast Asian SMEs, the report profiled around 3,000 digital merchants across six countries. One in three believe they would not have survived Covid-19 without digital platforms. The severity of local restrictions influenced the number of digital merchants who shared this sentiment. But 30 percent of those in markets with less severe lockdowns like Vietnam and Indonesia felt the same. Digital merchants mentioned they were highly satisfied with their digital platforms. Top reasons merchants recommend using digital platforms to engage customers include the simplicity of the platform’s navigation; ease of transaction on the platform; large customer base the platform provides; and it is a trusted brand among consumers.

Beyond retail platforms are the informal e-commerce. Formalized e-commerce, or simply “e-commerce,” refers to the goods and monetary transactions facilitated directly through retail platforms. In contrast, informal e-commerce is initiated through social media and messaging apps, but the exchange is never recorded on a retail platform. Informal e-commerce exists across SEA and is particularly popular in Thailand and Vietnam. It makes up additional volume that is by nature difficult to quantify and not included in the e-commerce GMV calculation. A recent purchase for my coffee farm equipment led me to Shopee or Lazada, but the slow customer service response was unacceptable. Considering the value of the order, I needed to be sure of the specifications. A quick Google search provided their Facebook page and their phone number, which led to a seamless transaction. For sure, the GMV is unreported from the various hyper-local markets on Instagram and Viber, except if using digital wallets.

While most have a positive view of digital platforms, profitability remains a top concern. Digital financial services in the Philippines witnessed a very rapid growth this year, not only from e-wallets but also from the national payment rail. Of the digital merchants surveyed, 97 percent now accept digital payments, while 67 percent have adopted digital lending solutions. Overall, the digital economy is growing 24 percent in compounded annual growth rate that is likely to reach $40 billion in value by 2025.

“Google is committed to helping Filipinos maximize the opportunities of going digital and helping the country shape an internet economy that is equitable, safe, and inclusive through programs and products that improve lives,” said Bernadette Nacario, country director, Google Philippines.


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