OTS Technologies White Paper Digitalization And E-Commerce Growth In Southeast Asia
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OTS Technologies White Paper Digitalization And E-Commerce Growth In Southeast Asia: In collaboration with Aalto University, Helsinki School of Economics This information is consolidated from various media sources to illustrate the synergies between e-commerce growth and digitalization of general public media.
OTS Tech White Paper
Digital Transformation In Southeast Asia
1. Table of Contents
1. Table of Contents……….……….……….……….….……….….……….….……….….……..…2
2. Foreword…….……….……….….……….….……….….…….……….….….……….….….……..3
3. About Southeast Asian E-Commerce.……….….……….….……..……….….….….…4-5
4. Facts about online shopping and internet usage in Southeast Asia….…….……6
5. E-Commerce challenges in the region.….……..……….….……….….………………6-7
6. E-Commerce opportunities in the region……….….……………….….…………..…7-8
6.1 Deals and promotions
6.2 CPC business model in online aggregation
6.3 Supporting low-cost smartphones and slow connections to internet
6.4 Agile test-and-learn cycles in product development
7. Predictions for 2018.….…………………………………….….…….….……………….….……8
8. Southeast Asia breakdown in E-Commerce metrics………….….…….….………….9
9. About digitalization in public mass media….….…….….………….….…….….………11
10. Industry context.…….….………….….……………….………….….…….….………….…12-13
10.1 Market trends
10.2 Technology trends
11. Future horizons……………………………………………..…………………………………14-19
11.1 Personalization and contextualization
11.2 Partnerships and industrialization
12. Endnotes.……….….….………………………………………………………….….….……..20-25
2 March 2018OTS Tech White Paper
Digital Transformation In Southeast Asia
2. Foreword
In this White paper document we have summarized opportunities the Southeast
Asian market inholds regarding the e-commerce segment, and the synergies
digitalization throughout industries can establish. Changes towards digital
economy in the retail industry and Media industries, are creating demand for
partnerships and collaborations in order to cater the needs of the consumer in
both industries. The demand for accurate, curated content is increasing, when
the availability of content is limitless online.
3 March 2018OTS Tech White Paper
Digital Transformation In Southeast Asia
3. About Southeast Asian E-Commerce
Southeast Asia is now the world’s third largest region for internet users — with more people
online than the entire U.S. population — and internet is having a bigger impact on the region
than originally thought, according to a new report co-authored by Google.
Alibaba’s entry into Southeast Asia served as social proof for many entrepreneurs and
businesses that they were onto something big, which led to a year of exuberance for
ecommerce in the region.
“We’re just at the beginning, [the Alibaba-Lazada deal] will kickstart the whole cycle. It will attract
more global investments into the region, and attract more entrepreneurs who now see this region as
a great place to start a business.” — Stefan Jung, founding partner at Indonesia-based Venturra
Capital in an interview with Tech in Asia
(Alibaba invested USD 1 billion to raise its stake in Lazada from 51% to 83% in 2017.)
Online travel remains the biggest segment for internet-based spending — jumping to $26.6
billion in 2017 from $19.1 billion in 2015 — but e-commerce and ride-hailing saw the highest
growth.
4 March 2018OTS Tech White Paper
Digital Transformation In Southeast Asia
E-commerce, and this does not include second-hand/consumer-to-consumer sales, grew at a
compound annual rate of 41 percent to cross $10 billion for the first time in 2017. E-commerce
in Southeast Asia is expected to go on to hit $88 billion by 2025 and become the most lucrative
segment.
5 March 2018OTS Tech White Paper
Digital Transformation In Southeast Asia
4. Facts about online shopping and internet usage
in Southeast Asia
Facts about online shopping and internet usage in Southeast Asia
• 3.6 hours on the mobile internet every day. Southeast Asians spend more time
on the mobile internet than anyone else on the planet. Thailand is top of the list with 4.2
hours per day, with Indonesia a close second at 3.9 hours per day. To compare, the U.S.
spends 2 hours per day, the U.K. 1.8 hours per day, and Japan 1 hour per day on mobile
internet.
• 140 minutes shopping online every month. Southeast Asians spend almost twice
as much time as Americans in e-commerce marketplaces. The region will have an $88.1
billion e-commerce market by 2025.
• More than $12 billion raised by Southeast Asian startups since 2016. At 0.18
percent of GDP, the amount of investment into Southeast Asian startups is on par with India’s
and a vote of confidence in Southeast Asia’s huge internet potential.
5. E-Commerce challenges in the region
In most of emerging Southeast Asia (excl. Singapore and Malaysia), credit card penetration rates
are in low single digits and most people don’t even have a bank account. Cash-on-delivery (COD)
still makes up over 70% of all processed transactions according to data by ecommerceIQ.
Competition is getting tighter in attempts of consolidation as Alibaba, JD, Tencent, Amazon are
beginning to enter the region through strategic partnerships and acquisitions.
Zalora, Rocket Internet’s once star fashion ecommerce venture, has struggled in Southeast Asia
since launching in 2012. Zalora Thailand and Vietnam were picked up by Thai retail
conglomerate Central Group for pennies on the dollar while the Philippines entity was partially
sold off to the Ayala real estate group.
There were even rumors of Zalora Indonesia exiting to local retailer MAP, which were
swiftly denied.
6 March 2018OTS Tech White Paper
Digital Transformation In Southeast Asia
A few factors contributed to the company’s difficulties: 1. Price and product variety
competition with merchants selling on Facebook, Instagram and LINE, 2. Control of brands
by one or two retail conglomerates like Central in Thailand, MAP in Indonesia, and SSI Group
in the Philippines.
These two factors made it difficult for Zalora to pivot to an ASOS-style premium brand
marketplace.
A shell of its former self, Zalora’s challenges left a void that is increasingly being filled by
more nimble, mobile-first fashion marketplaces that see an opportunity in a space dominated
by mass-market, general ecommerce platforms like Lazada and Shopee.
Those that survive 2018 will have to find a niche for themselves, such as in fashion or home,
because there isn’t much room left for another horizontal ecommerce player.
6. E-Commerce opportunities in the region
Deals and promotions
Major retailers are using aggressive promotions and OFF-priced campaigns to lure in
new customers across South East Asian markets.
CPC business model in online aggregation
Cost-per-click business models for driving traffic across leading fashion retailers in
the Southeast Asian region. Due to the cultural nature of consumers using online- and
offline retailers simultaneously (e.g checking prices online and purchasing offline or
vice versa) capturing significant affiliate revenues through cost-per-action model
might turn out to be more challenging.
Supporting low-cost smartphones and slow connections to internet
The overwhelming majority of consumers in Southeast Asia use low-cost smartphones as
their primary connection with the Internet. Tightly compressed websites or platforms and no
requirement for actual App downloads are efficient ways in signing up users at scale.
7 March 2018OTS Tech White Paper
Digital Transformation In Southeast Asia
Agile test-and-learn cycles in product development
Southeast Asia’s e-commerce sector is a moving target. As such, success requires the ability
to pivot quickly. Companies need to develop Agile capabilities for innovation not only in how
they develop products or services but also in how they interact with consumers and new
channels. Winners are fast to use test-and-learn approaches to get products out into the
marketplace.
7. Predictions for 2018
• Marketplaces will move toward private label brands and offline distribution.
• Brands will also feel increasingly cornered, facing a damned-if-you-do-damned-if-
you-don’t situation.
• Those that will survive 2018 will have to find a niche because there isn’t much room left
for another horizontal ecommerce player.
• Others will be tempted to take risky shortcuts like raising money through ICOs.
• Tencent—not Alibaba or a local company—will emerge as the winner in mobile
payments in Southeast Asia.
8. Southeast Asia breakdown in E-Commerce metrics
8 March 2018OTS Tech White Paper
Digital Transformation In Southeast Asia
9 March 2018OTS Tech White Paper
Digital Transformation In Southeast Asia
10 March 2018OTS
9. Technologies
About White
digitalization Paper
in public
Digitalization
mass media And E-Commerce
Growth In Southeast Asia:
In collaboration with Aalto University,
Helsinki School of Economics
“I don’t think our business models are keeping
pace with the changes taking place in consumer
behaviour.” – Kevin Tsujihara, Chairman and Chief
Executive Officer, Warner Bros. Entertainment”
This information is consolidated from various media
sources to illustrate the synergies between e-commerce
growth and digitalization of general public media.OTS Tech White Paper
Digital Transformation In Southeast Asia
10. Industry context
A digitizing economy
With a younger population, growing affluence, and people that are increasingly tech-savvy,
the internet population in Southeast Asia is expected to swell from 260 million to 480 million
between 2015 and 2020.
More and more business is being done online in the region – and as a result, it is estimated
that by 2025, the digital economy in Southeast Asian countries will be worth a hefty $197
billion.
That’s an impressive 640% increase over the size just a decade prior.
1.1. Market trends
According to proprietary data from Google and investment company Temasek, the most
interesting sectors to watch in the region should be in e-commerce, digital entertainment,
online travel, and digital financial services.
Est. growth in market size (%)
between 2016-2021
Greater Southeast Asia U.S. China
E-commerce 261% 23% 196%
Digital entertainment 145% n/a 54%
Online travel 90% 15% 172%
12 March 2018OTS Tech White Paper
Digital Transformation In Southeast Asia
E-commerce, which is expected to grow by 261% between 2016 and 2021, is one of the region’s
most explosive sectors. With a lack of physical retail stores and limited choice of goods in
Southeast Asia, rapidly-growing access to the internet provides a new means for people to
shop.
1.2 Technology trends
• A combination of demographic, consumer and technology trends is dramatically
remodeling the media landscape.
• From buying a newspaper to opening a news app on your tablet, from renting a DVD to
streaming your favorite television series on a smart TV, from buying a cookbook to getting
customized recipe suggestions on your smartphone, it’s undeniable that the digital
transformation of the media industry has already begun.
• The digitalization of the media industry has been driven by changing consumer behavior
and expectations, especially among younger generations who demand instant access to
content, anytime, anywhere.
13 March 2018OTS Tech White Paper
Digital Transformation In Southeast Asia
11. Future horizons
Ecosystem challenges
As the media industry adapts to the changing habits of its customer base, we have seen a
number of significant changes to the landscape of the media sector.
• Startup disruptions. Talent, access to technology and a ‘change the world’ attitude are
allowing startups to bloom across the world, creating new businesses and lean models.
Once this breed of company reaches scale, it invests both in raising the quality of its
content and in offering new services, putting competitive pressure on traditional
media companies.
• Everybody is a content creator. A diverse set of brands and organizations now assume
the role of broadcasters competing for consumer attention (for instance, Unilever and
Intel through their partnership with Vice Media).
• Access to financial resources. Creative people are finding novel ways to fund new
products and services. Content creators are bypassing traditional media companies
and turning instead to innovative sources of financing such as crowdfunding
platforms.
The transformation of work. Digital transformation is likely to have a significant
impact on employment, creating demand for some highly skilled digital roles, while
making some job categories redundant. As the workforce adapts to the digital
economy, there is likely to be a need for lifelong learning to keep pace with the
evolution of technology.
14 March 2018OTS Tech White Paper
Digital Transformation In Southeast Asia
The increase in mobile and Internet penetration has made being connected a way of life for
younger generations of consumers. This presents media businesses with opportunities to fuel
the continuous conversations that this connectivity allows. Alongside this increase in
connectivity, technology now allows access to content anywhere, anytime.
Meanwhile, the growing availability of open-source and free software enables startups to
build new businesses and innovative products in record time. And finally, through the
widespread availability of cheap sensors, connected devices and cloud computing, we are
witnessing the birth of the Internet of Things, a network of connected machines delivering
smart services, which will offer the media industry a whole range of opportunities to create
seamless, personalized services.
Against the background of these broader technological advances, there are a number of
technological trends that we believe will be central to the digital transformation of the media
industry.
• Data analytics and real-time content management. Data collection and analytics
enable companies to get consumer insights across many channels and devices,
allowing them to deliver relevant and meaningful experiences. This real-time use of
data analytics is particularly important as media organizations no longer just provide
content but experiential services built around that content.
• Mobile and social. The power of mobile and social is transforming how media is
consumed and perceived.³ Continuous and instant access, particularly through sharing
on social media, empowers users to promote or destroy brands and institutions.
Overnight stardom or instant reputational crises are new phenomena that need to be
managed from business and technology perspectives.
15 March 2018OTS Tech White Paper
Digital Transformation In Southeast Asia
2. 1. Personalization and contextualization
Every day we create 2.5 quintillion bytes of data23 and upload 300 million photos to Facebook.
24 Every minute we upload 300 hours of video to YouTube.
Having great content is no longer enough to stand out amid the overload of information that
internet users face. The initiatives in this theme all relate to presenting consumers with
content and advertising in engaging ways.
Media organizations, whether broadcasters, publishers or advertisers, have to present
content in a way that's relevant to users and helps them discover new and related content.
The algorithms behind personalized content are still in their infancy but improving them
will be crucial if publishers or broadcasters want their users to remain loyal and active.
Personalized content is becoming increasingly important as traditional advertising is
becoming less effective at engaging consumers, especially younger ones.
A study by ComScore found that millennials, who collectively have substantial purchasing
power (estimated at $170 billion a year), are less attentive, less likely to find advertisements
interesting and more likely to find them irritating than older generations.
Network Marketers are improving their tracking of consumers’ digital activities. The first
wave was web-based, using traditional, static metrics (such as age, sex and income).
We are now in the second wave of analytics, built on mobile technology and social media.
Advertisers can now pinpoint users’ location from their smartphone, and identify users’
friends and interests from their social media activity.
Brands need to be smart and embrace “enhanced-pull advertising”.
They need to apply creativity and innovation in communicating a product or brand’s value
proposition without actually advertising it, through content marketing, word of-mouth
referrals, customer relationship management, and sales promotions and discounts.
An enhanced version of content marketing includes use of branded content to entertain
consumers and entice participation with the content, use of expert reviews and articles of
bloggers, and other strategies to foster conversations around a product.
16 March 2018OTS Tech White Paper
Digital Transformation In Southeast Asia
2.2..Partnerships and industrialization
In this cluttered digital space, consumers need a trusted filter or personal guide that can
separate the signal from the noise and deliver personal recommendations to the user.
Contextual information is very important, as users can have very different tastes or needs
depending on the time of day, where they are and what they are doing.
This guide or curator needs to understand the consumer’s historical consumption patterns,
cultural tastes, location, time of day and also take account of the user’s feedback on the
recommendations it produces. On top of this, the guide will need to incorporate ratings for
content from reliable sources to try to offer the most meaningful and appealing information
to the user. Above all, the recommendations need to be presented elegantly, in a clean,
seamless user interface.
“We want to be part of our audience’s world and their daily habits. We have adapted versions
to many channels like YouTube, Facebook or Snapchat.” – Spencer Baim, Chief Strategy
Officer, Vice Media
The media enterprises that have the biggest opportunity to benefit from offering
personalized content will be content aggregators, who can encourage users to spend more
time on their platforms through enhanced recommendations of related content.
However, there will also be opportunities and implications for advertisers, advertising
companies, content creators and rights owners; for instance, how to make their content as
attractive as possible for the recommendation engines to pick up.
17 March 2018OTS Tech White Paper
Digital Transformation In Southeast Asia
“Many media companies do not have the technological background to build their solutions.
The business is getting extended with new entrants like start-ups.” – Fernando Bleichmar,
Chief Strategy Officer, Cengage Learning
18 March 2018OTS Tech White Paper
Digital Transformation In Southeast Asia
Drawing on the trends outlined in this white paper, we have identified three digital themes –
personalization and contextualization, content fragmentation, and partnerships and
industrialization – that will underpin the digitization of the media industry over the next
decade.
19 March 2018OTS Tech White Paper
Digital Transformation In Southeast Asia
12. Endnotes
https://ecommerceiq.asia/10-southeast-asia-ecommerce-trends-2018/
https://techcrunch.com/2017/12/12/google-southeast-asias-internet-economy-is-growing-
faster-than-expected/
http://www.bain.com/publications/articles/so-you-want-to-win-in-southeast-asia-
ecommerce.aspx
https://techcrunch.com/2017/06/28/alibaba-ups-its-stake-in-southeast-asias-lazada-with-1-
billion-investment/
http://www.businessinsider.com/southeast-asias-set-for-explosive-e-commerce-
growth-2017-5
https://www.techinasia.com/southeast-asia-ecommerce-startups-giants
https://www.statista.com/outlook/243/126/ecommerce/thailand#
https://www.statista.com/outlook/243/126/ecommerce/singapore#
https://www.statista.com/outlook/243/126/ecommerce/philippines#
https://www.statista.com/outlook/243/126/ecommerce/hong-kong#
https://www.statista.com/outlook/243/126/ecommerce/vietnam#
https://www.statista.com/outlook/243/126/ecommerce/indonesia#
https://www.statista.com/outlook/243/126/ecommerce/malaysia#
https://aseanup.com/overview-of-e-commerce-in-southeast-asia/
https://www.bangkokpost.com/business/news/1249798/asean-the-next-frontier-for-e-
commerce-boom?
20 March 2018OTS Tech White Paper
Digital Transformation In Southeast Asia
http://www.oecdobserver.org/news/fullstory.php/aid/3681/An_emerging_middle_class.html
http://www2.deloitte.com/content/dam/Deloitte/global/Documents/About-Deloitte/gx-
dttl-2014-millennial-surveyreport.pdf
http://www.un.org/en/development/desa/population/publications/pdf/ageing/
WorldPopulationAgeing2013.pdf
http://www.un.org/en/development/desa/news/population/world-urbanization-
prospects-2014.html
http://variety.com/2015/film/news/broken-hollywood-the-bizs-top-players-call-out-ways-
industry-needs-to-change1201416866/
https://www.accenture.com/us-en/pulse-of-media
http://marketingland.com/ad-blocking-report-nearly-200-million-users-22-billion-in-lost-
ad-revenue-138051
https://www.youtube.com/user/PewDiePie/about
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https://www.accenture.com/us-en/pulse-of-media
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http://www.businessinsider.com/social-medias-big-data-future-2014-2?IR=T
21 March 2018OTS Tech White Paper
Digital Transformation In Southeast Asia
https://zephoria.com/top-15-valuable-facebook-statistics/
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Strategies-for-Advertisingto-Millennials
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ad-revenue-138051
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industry-1426765357
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Facebooks-homeground/articleshow/480809
http://www.inmobi.com/company/press/inmobi-says-no-to-traditional-mobile-ads/
http://bits.blogs.nytimes.com/2015/03/11/inmobi-plans-to-stay-independent-dismissing-
rumors-of-talks-withgoogle/?_r=0
http://www.businessinsider.com/whatsapp-64-billion-messages-24-hours-2014-4?IR=T
http://www.theguardian.com/media-network/media-network-blog/2013/may/31/science-
online-contentrecommendations
22 March 2018OTS Tech White Paper
Digital Transformation In Southeast Asia
http://www.forbes.com/sites/maggiemcgrath/2015/02/05/pandora-plummeting-more-
than-20-on-revenue-miss/
http://www.theverge.com/2013/8/1/4578544/youtube-wins-first-emmy-for-video-
recommendations-you-cant-resist
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https://datacoup.com/docs#how-it-works
http://www.technologyreview.com/news/524621/sell-your-personal-data-for-8-a-month/
https://www.cisco.com/web/about/ac79/docs/innov/IoT_IBSG_0411FINAL.pdf
http://mashable.com/2015/01/26/nfl-super-bowl-stadium-app/
http://www.bloomberg.com/news/articles/2015-06-18/wimbledon-follows-u-s-open-golf-in-
banning-live-videostreaming
http://time.com/3986185/virtual-reality-headset/
http://www.google.com/landing/now/#cards
23 March 2018OTS Tech White Paper
Digital Transformation In Southeast Asia
http://www.nbcnews.com/tech/internet/netflix-wants-eventually-stream-200-countries-
including-china-n290556
http://uk.reuters.com/article/2015/06/18/us-twitter-project-lightning-
idUKKBN0OY2LC20150618
http://www.pewinternet.org/files/2015/01/PI_SocialMediaUpdate20144.pdf
http://expandedramblings.com/index.php/pinterest-stats/
http://www.businessinsider.com/snapchat-daily-active-users-2015-5
http://www.ft.com/cms/s/0/f434c66c-c840-11e4-8fe2-00144feab7de.html#axzz3i1dT9GCn
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comedy-central-video/
http://www.l2inc.com/the-end-of-advertising-as-we-know-it/2015/blog
https://www.techinasia.com/wechat-549-million-active-users-q1-2015/
https://www.techinasia.com/tencent-just-unleashed-a-secret-weapon-for-wechat-that-
will-scare-the-daylights-outchinas-adjective-app-stores/
24 March 2018OTS Tech White Paper
Digital Transformation In Southeast Asia
http://www.globalwebindex.net/blog/the-impact-of-vpns-on-spotify-and-netflix
http://fortune.com/2015/07/07/netflix-vpns/
http://www.theguardian.com/technology/2015/jan/09/why-netflix-wont-block-vpn-users
http://freakonomics.com/2012/01/12/how-much-do-music-and-movie-piracy-really-hurt-
the-u-s-economy/
http://www.bbc.co.uk/news/world-europe-33634657
https://www.youtube.com/user/ERB/about
https://www.indiegogo.com/projects/the-crystal-maze-a-live-immersive-experience#/story
http://www.nytimes.com/2014/04/07/business/media/voxcom-takes-melding-of-journalism-
and-technology-to-nextlevel.html
http://www.epagogix.com/index.html
http://techcrunch.com/2015/01/04/cognitive-networks-ces/
http://www.neo-metrics.com/webnm/forward/to/reconocimientos?lang=en
http://www.forbes.com/sites/gregsatell/2013/08/19/is-big-media-trading-digital-dollars-for-
analog-dimes/
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