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aCommerce

Ecommerce Themes in Southeast Asia: A Guide for Retailers

October 2015

Full Service Ecommerce Solutions Provider in ASEAN

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Theme 1: We Are in the Perfect Storm for Ecommerce in Southeast Asia

• Ecommerce shopping makes up just 1-2% of total retail sales in SEA. This compares with 16% in Korea, 9% in the U.S. and 8% global

average

• At this exact moment, ASEAN is at the infliction point of ecommerce, with the largest growth about to happen relative to population growth and GDP. With 8% of the world’s population, 3% of the global GDP, and only .5% of global online B2C retail, there is a huge opportunity for ASEAN

• ASEAN’s market potential is massive. A.T. Kearney forecasts a theoretical ecommerce market size of USD67 – 89 billion for ASEAN in the future, with Thailand, Indonesia and Malaysia, having biggest growth potential

• The bottleneck for offline retailers going online is being relieved, with internet penetration (36% now in SEA) and basic regulations in place and companies, such as aCommerce, helping to solve all other logistics and payment processing roadblocks

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Theme 2: Mobile is the Future and Critical for Retailers in Southeast Asia

• Every single major Southeast Asian country is above the global average in mobile phone penetration (SEA average of 118%), with many averaging more than one phone per person due to the decrease of smartphone and tablet prices in the region, a growing middle class, and a mobile first outlook

• 56% of the online shopping source comes from mobile in Southeast Asia vs. 44% globally

• In just one year, Lazada’s mobile traffic grew from 13% of total traffic to 49%

• Still a very big growth potential as smartphone penetration increases and users are able to utilize apps to complete mobile purchases:

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Theme 3: Social is the Foundation

• In Southeast Asia, 34% of the total population are active social media users compared to just 29% globally

• Interesting statistics from mobile communications app,

LINE: 600M+ users worldwide from 0 in 2011 3 of the top 10 countries are in SEA with Thailand

having 33M active users 7% of APAC adult internet users use LINE monthly 1.8 billion stickers sent per day with 250K per month

minimum charged on each sponsor stickers account

• Interesting Facebook statistics from Thailand: Thailand has the 3rd largest Facebook population in

the world with 35 million users Bangkok has more Facebook users than any other

city in the world with 20 million Users spend an average of 2.35 hours per day on the

site 94% users return to Facebook every month Recently rolled out Instagram advertisements in

Thailand, now 7.1 million active users/month

• Internet has surpassed TV in most of Southeast Asia as the most popular daily media outlet with 50% of people using mobile devices while watching TV

• People use Facebook as a discovery tool to shop with 52%

of people aged 16+ in SEA reporting they use Facebook to first hear about a new product, brand, or service

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Theme 4: Demographic Shift: Millennials Lead the Way

• In Thailand, browsers ages 65+ browse the least but have the highest conversion rate (2%) • In Indonesia, millennials browse the most (42% of sessions) and convert the highest (1.9%) • More than 67% of the ASEAN population is under 35 years of age:

Implications for retailers: general distribution and purchase behavior is consistent across every product category. Once an online shopper, always an online shipper. Retailers should focus on attracting ALL generations of consumers at the earliest stage possible with an emphasis on deals and promotions in Southeast Asia.

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Theme 5: Urban vs. Rural: Do Not Neglect Rural Buyers

• Despite Southeast Asia having over 54 million people in major cities, most purchases still happen outside of major capital cities, with cash on delivery being a major component for rural purchases

• 70% of purchases in Thailand happen outside of Bangkok, with 66% of purchasers using cash on delivery (COD) as their

preferred payment method • 66% of purchases in Indonesia happen outside of Jakarta with 50% using bank transfer and 30% using COD as their

payment method

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Theme 6: Challenges for Incumbents

• Sales cannibalization of offline operations • Discounted prices and margin pressure • Offline store-opening opportunity overstated • Channel integration will be a major challenge • Profit focus can be a disadvantage • New online ventures will initially be loss-

making • Out of 130 companies with a 1 billion (USD)

valuation this year, 30 are from Asia, and 13 from ecommerce:

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So What’s Next for Ecommerce in Southeast Asia?

Southeast Asia is BIG (2x bigger than US), young and getting richer, internet and mobile focused, extremely social, and growing fast. Global competitors have not yet flooded the market leaving adequate funding for ecommerce startups and regional retailers.

All sources from: • aCommerce Internal Data and Business Intelligence • Euromonitor, BofA Merrill Lynch’s eCommerce Report as of May 2015 • A.T. Kearney Analysis Report 2015, Euromonitor • CLSA report Sept 2015 • We Are Social, Euromonitor, East Ventures, 2015 • Global web index, We Are Social Report Mar 2015 • Nielsen 2014 Asian Mobile consumer report • http://www.socialmediatoday.com/social-business/adhutchinson/2015-08-08/facebook-releases-new-data-south-east-asian-market-report • UBS report “ASEAN E-commerce” / Global Demographics 2014

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Thailand 946 Dusit Thani Building, 4th fl., Rama IV Rd. Bangrak, Bangkok, Thailand 10500

Indonesia PT Acommerce Solusi Lestari, Sahid Sudirman Center lantai 17 A Jl Jend Sudirman no 86 Jakarta Pusat 10220

Singapore 74B Duxton Road Singapore 089533

Philippines Bldg 1A Rey Marketing Compound C. Raymundo Ave, Pasig, 1609 Metro Manila, Philippines

aCommerce is Southeast Asia’s leading ecommerce solutions provider delivering customized ecommerce solutions for over 140 brands such as L’Oreal, HP, LINE, and Groupon among others, and is on a mission to break the logistics and ecommerce bottleneck of Southeast Asia. Founded in June 2013, aCommerce has offices and distribution centers in Indonesia, Thailand, Philippines and Singapore. The company provides end-to-end ecommerce solutions to bring global and local brands into online retail including platform design and development, order fulfilment and warehousing, delivery and logistics, customer service call centers, content production, performance marketing, and channel management. aCommerce is one of Southeast Asia’s fastest growing tech companies and is excited to be part of the region’s rapid ecommerce movement.

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