More Singaporeans turn to virtual stores for shopping
Revenues are predicted to hit S$4.4b by next year
[SINGAPORE] More Singaporeans are opting to buy things like clothes, electronic goods, books and even groceries online instead of going to a physical store. And this shows in the e-commerce sales numbers.
Research agency Frost and Sullivan says Singapore was the largest e-commerce market in South-east Asia last year, generating revenues of US$1.7 billion. This is confirmed by a recent survey of shopping habits here by Japanese e-commerce giant, Rakuten. Singaporeans are expected to spend 30 per cent more on online shopping than offline shopping by 2020, the survey says. Today, Singaporeans are spending twice as much time shopping online as compared to five years ago.
Yet another study by Merger Alpha shows that e-commerce revenues in Singapore are predicted to hit S$4.4 billion by next year, driven by rising Internet penetration, smartphone adoption, and a growing affluent middle class. Mobile e-commerce is also taking off in Singapore, with anticipated revenues of S$3.1 billion by next year according to PayPal.
Singapore Economic Development Board (EDB) assistant managing director Thien Kwee Eng says that as an e-commerce market, Singapore is interesting to brands and retailers because of its diversity and high digital adoption. "This makes Singapore a desirable test-bed location for businesses to design and iterate new e-commerce solutions quickly and efficiently. These ideas can then be adapted and rolled out to other markets in the region," Ms Thien notes.
Singapore's strengths, like being business friendly, having a strong IT infrastructure and a global transport hub also helped, noted SingPost senior vice president for e-commerce Marcelo Wesseler. Broadly agreeing, Rakuten also found Singapore's vibrant and sophisticated entrepreneurial climate a good fit with its company culture, making Singapore a desirable gateway for it to interact with the region's start-up firms.
"Singapore's solid infrastructure, high Internet and mobile penetration, and proximity to our businesses in Thailand, Indonesia and Malaysia makes it easier and more effective for us to do business in the region," said Rakuten Asia vice president for regional business management group, Masaya Ueno.
Such traits are useful at a time when e-commerce across South-east Asia is still in a very nascent stage and, as observed by SingPost's Mr Wesseler, sites that concentrate on a single country do not make financial sense for many brands.
That is not to say that South-east Asia is not attractive.
Frost & Sullivan projects that South-east Asia will be one of the world's fastest growing markets for e-commerce this year. The total revenues from B2C (business-to-consumer) e-commerce in the six largest South-east Asia countries (Indonesia, Malaysia, the Philippines, Singapore, Thailand and Vietnam) reached US$7 billion last year. This is expected to grow at a compounded annual growth rate (CAGR) of 37.6 per cent to reach US$34.5 billion by 2018. By that year, Indonesia is expected to be the largest South-east Asian e-commerce market generating over 40 per cent of regional revenues.
Other than having a burgeoning middle class and rising affluence, South-east Asia is an attractive market because brand owners have not fully penetrated this large and diverse space, says EDB's Ms Thien. And there is potentially a big advantage for the early winners.
She adds: "E-commerce represents a unique channel for brand owners and retailers to access the South-east Asia market. If we succeed in establishing Singapore as a hub from which companies orchestrate their e-commerce strategies and operations, we believe this will reinforce Singapore's position as a regional hub for business and trade."
Singapore checks the boxes for being a trusted location.
"E-commerce companies who operate through Singapore can benefit from our well-established reputation as a leading financial hub," Ms Thien says. "This branding is reinforced by companies such as Visa who have chosen Singapore as a base from which to test and develop new technologies to enhance the security of online electronic payments."
Over the next five years, Singapore will continue to position itself as the centre for brands and retailers to access the growing regional and larger Asia consumer market through e-commerce.
"Singapore will also continue to deepen capabilities in areas such as consumer insights and analytics which will be key enablers for further innovation in e-commerce," says Ms Thien. "If we succeed, this will benefit Singapore in the form of new economic investments and the creation of good jobs for Singaporeans. Our aim is that our efforts will result in the creation of up to 2,000 jobs in e-commerce by 2020."
Local e-commerce operators are upbeat about their prospects here. Roger Egan, co-founder of e-grocer Redmart, says that the company has grown at a rate of 20 per cent month-over-month since it was launched in October 2011. "Customer adoption or demand has not been an issue for us. In fact, we have sometimes struggled to build capacity quickly enough to meet the demand and we continue to build," Mr Egan says.
He's upbeat about his company's prospects. "The Singaporean grocery market is about US$6 billion. We are not looking to service a niche, rather we will have a superior product offering to brick-and-mortar stores as we are not limited to the physical shelf space available in a store. Instead, we fulfil orders out of a much larger warehouse."
