However, we think the Asean e-commerce scene is about to change significantly, thanks largely to the recent entry of Chinese tech giants into the region. China tech-related investments through companies such as Alibaba, JD.com and Tencent have surged in 2017 – the number of deals quadrupled and value rose approximately 3 times. These tech giants bring with them capital and know-how, while also easing constraints on logistics and e-payment adoptions that has been holding back e-tailing.

Chinese e-commerce companies can help ease the region’s logistics constraints in two ways. First, they have a track record of using warehouse automation technology to drive efficiency, and can bring this know-how to drive greater efficiency in Asean.

Second, the entry of deep-pocketed Chinese players will likely raise pressure to scale up e-commerce markets.

We think countries with less severe physical infrastructure constraints such as Malaysia and Thailand are better positioned to benefit from this import of foreign logistic know-how.

Lack of familiarity with e-payment is another key constraint. ‘Cash-on-Delivery’ methods, which are risky for merchants and costly for consumers, still account for 65 per cent to 80 per cent of e-commerce transactions in Indonesia and Thailand respectively.

We see two potential catalysts that together could help boost e-payment adoption in Asean. Firstly, the entry of Chinese e-commerce giants into Asean could bring in the wealth of experience that they have in successfully transforming customer culture and adoption of e-payments.

These digital players often use their services including online games, e-commerce market place, and ride hailing to ‘cross-sell’ |consumers on their payment platforms.

Secondly, some Asean governments have recently made a big push to promote e-payment adoption. Singapore and Thailand have introduced services allowing inter-bank transfers between individuals using just mobile numbers or individual ID card numbers (PayNow in Singapore and PromptPay in Thailand).

In Thailand’s case, the scheme reduces bank transfer fees. Both PayNow and Promptpay will be expanded beyond individuals to businesses, with plans to also link both platforms together to facilitate cross-border transfers.

Thailand and Singapore are each developing their own QR code standards, with plans to also implement a National Digital Identity system.

Implications for the economy and impact on retailers and financial institutions:

We see Asean e-commerce taking off, with e-tailing growth outpacing offline retailing 6-10 times over the next few years, compared to 6 times in the past two years. Indonesia has the best long-term market potential given its large and rapidly growing middle class and young consumer market.

Although Thailand is a less obvious choice for e-commerce growth in the long run, we see a good chance that it could experience a surge in e-commerce activities over the next two years, with many ingredients coming together to enable its e-commerce to take off in the near term.

First, there have been high-profile alliances formed between Chinese e-commerce giants and large Thai business groups with extensive offline distribution network.

Second, Thailand already has decent infrastructure connectivity, and there have been significant rise in the number of e-commerce logistics enablers. Third, the government is proactively pushing for e-payment adoption via “Promptpay” scheme and use of QR code. Fourth, Thailand has one of the highest smartphone penetration rate in Asean.

E-commerce will no doubt transform the retail industry. We expect the rise in e-commerce to potentially benefit the brand owners but bring mixed effects for convenience stores and negative effects for department stores.

The negative impact on retail distributors could be larger than anticipated if tech firms use e-tailing as a hunting ground for customer data.

Large e-commerce players could lower the prices of goods and associated services more aggressively to gain volume and grab valuable data that would allow them to monetize in the future by offering high margin financial services.

This ‘cross subsidisation’ could drive significant downward pressure on margins in the retail sector with a greater negative impact on pure retail players.

Financial institutions focusing on micro loans are likely to be more exposed to competition from these tech players as the latter focuses on the underbanked population. Banks could be more impacted by the reduction of fee income partly because various governments are promoting e-payment adoption.

In conclusion, we believe that e-commerce has significant untapped potential in the Asean region.

We think the recent surge in investment by Chinese e-commerce giants will be the game changer for the region’s e-commerce industry.

Thailand may offer interesting opportunities in the near term as it has many catalysts coming together including Chinese investments, high smart phone penetration and the government push to promote e-payment adoptions.

This article was co-authored by DR SANTITARN SATHIRATHAI, Head of Emerging Asia Economics Research, Credit Suisse and MICHAEL WAN, Economist, Credit Suisse

Source: http://www.nationmultimedia.com/detail/Economy/30338037