Cross-border e-commerce in Southeast Asia is heating up

As global trade continues to deepen, the cross-border e-commerce market in Southeast Asia is gradually becoming a new hot spot in the global e-commerce industry. In this article, we will take you to a deeper understanding of the unlimited potential and unique challenges of the Southeast Asian market. Through rich data and real cases, the article reveals how Chinese merchants can use this emerging market to achieve brand leapfrogging and business growth.

Right now, domestic e-commerce platforms are entering the most critical period of mid-year promotions, and the atmosphere of sprint is everywhere.

Overseas, cross-border e-commerce is also changing from the dull first half of the year to the peak season of the year. In Europe, the European Cup and the Paris Olympics are becoming rare promotion opportunities for local cross-border e-commerce platforms; in Southeast Asia, the most important promotion nodes of the year will be September 9, October 10, Singles’ Day, and December 12.

Taking the 9.9 promotion in 2023 as an example, the number of merchants participating in the event on the TikTok Shop platform increased by 780% compared with the previous year's 9.9, the number of paid orders increased by 923% compared with the previous year's 9.9, and the paid GMV increased by 553% compared with the previous year's 9.9. Many new brands have successfully deepened their brand image and built brand voice through this promotion node.

For this reason, countless cross-border sellers are looking forward to making a comeback and achieving leapfrog growth during the big promotion period in the second half of this year.

At the same time, as a shortcut to going overseas, cross-border e-commerce is also attracting more and more domestic e-commerce sellers and traditional foreign trade companies to settle in, in order to find new overseas business opportunities.

In fact, cross-border e-commerce is becoming a powerful force in the development of my country's foreign trade. According to relevant data from the Ministry of Commerce, in the past five years, the scale of my country's cross-border e-commerce trade has increased more than 10 times, and the number of cross-border e-commerce companies has exceeded 120,000. In the first quarter of 2024, cross-border e-commerce imports and exports amounted to 577.6 billion yuan, an increase of 9.6%, of which exports amounted to 448 billion yuan, an increase of 14%.

Among them, Southeast Asia is becoming an important destination for cross-border merchants seeking overseas growth due to its close trade relations with China, close geographical location and the e-commerce dividends being released. However, the Southeast Asian market is naturally different from the domestic market. It is geographically dispersed, has different consumption customs, and stricter market compliance. For merchants who intend to expand in Southeast Asia, the challenges are also increasing again and again.

01 Cross-border e-commerce is still releasing dividends

At the beginning of 2024, the popularity of cross-border e-commerce is visible to the naked eye:

At the beginning of the year, many merchants would always pay attention to the latest developments of TikTok Shop first when attending industry exhibitions to learn about the latest developments in cross-border e-commerce. At the end of January, at a forum surrounding TikTok Shop, Zhulang’s enthusiasm was also very obvious at the scene, "Many merchants even crowded in the corridors and aisles to listen." A Shenzhen seller described to Xiaguangshe.

At a TikTok Shop cross-border e-commerce event at the beginning of the year, it was crowded with consulting merchants

The reason behind this is that cross-border merchants have an increasingly strong demand to go overseas.

"Going overseas" has been the hottest word in the business circle in the past two years. From industry giants and large enterprises with a scale of trillions to individual businesses with a turnover of less than 10,000 yuan; from the most cutting-edge digital technology innovation companies to traditional factories and small commodity operators behind the production lines, they are all jumping out of the domestic market in different ways, going overseas, and integrating into the new globalization.

Cross-border e-commerce has built a convenient platform for enterprises to go overseas. The biggest feature of cross-border e-commerce is that it breaks geographical restrictions, which is very suitable for products to enter overseas markets in the early stage, directly facing overseas C-end users, and increasing product premiums.

In fact, global cross-border e-commerce has been flourishing since last year. According to the research organization ecommerceBD, global retail e-commerce sales will reach US$6.3 trillion in 2023, US$800 billion higher than the US$5.5 trillion in 2022; by 2025, this figure will exceed US$7 trillion; by 2026, it is expected to reach US$8.1 trillion.

In China, cross-border e-commerce has become a highlight in my country's foreign trade. Customs data show that in 2023, my country's cross-border e-commerce imports and exports will reach 2.38 trillion yuan, an increase of 15.6%. Among them, exports will reach 1.83 trillion yuan, an increase of 19.6%.

More and more Chinese companies are choosing to explore overseas markets through cross-border e-commerce. It is estimated that by 2025, the transaction volume of cross-border e-commerce in my country will reach 2.5 trillion yuan, bringing new opportunities for Chinese companies and brands.

In overseas markets, the emerging market of Southeast Asia is attracting the attention of Chinese enterprises and businesses with its unique charm and potential.

China and Southeast Asian countries have had close trade relations for a long time, and the trade volume is growing. At present, ASEAN and China have become each other's largest trading partners. The total trade volume between China and ASEAN has increased from 443.6 billion yuan in 2013 to more than 6.4 trillion yuan in 2023, accounting for 15.4% of China's total foreign trade.

In January this year, the fifth round of negotiations on the China-ASEAN Free Trade Area 3.0 version opened. On the basis of the existing China-ASEAN Free Trade Agreement and the Regional Comprehensive Economic Partnership (RCEP), the China-ASEAN Free Trade Area 3.0 version will further enhance the level of trade and investment liberalization, expand pragmatic cooperation in emerging areas such as intermediate goods trade, digital trade, cross-border e-commerce, standards, and green and low-carbon development. Among them, the most noteworthy change is the addition of cross-border e-commerce cooperation.

In fact, the development of cross-border e-commerce in Southeast Asia is indeed remarkable. Market research company eMarketer once released the "Global Retail E-commerce Forecast Report", which shows that the revenue of Southeast Asia's e-commerce market will be US$113.9 billion in 2023, and e-commerce sales will increase by 18.6%, far exceeding the average growth rate of 8.9% of global e-commerce.

The development of cross-border e-commerce in Southeast Asia, on the one hand, has benefited from the rapid economic recovery of Southeast Asian countries after the epidemic. In 2023, the total GDP of the ten ASEAN countries will exceed US$3.8 trillion, making it the world's fifth largest economy. The growth of ASEAN's economy is mainly driven by local consumption, tourism, and demographic dividend (680 million). On the other hand, Southeast Asia's digital economy is developing at a high speed. According to a research report by Great Wall Securities, the scale of Southeast Asia's digital economy has maintained a double-digit growth rate in recent years. It is expected to exceed US$295 billion in 2025, with a compound annual growth rate of 16% from 2023 to 2025.

While Southeast Asia's e-commerce industry is developing rapidly, the supply of the industry's upstream is in short supply. For Chinese merchants, this is undoubtedly a bonus that is being released.

In this e-commerce dividend, the content e-commerce trend represented by TikTok Shop is becoming the most obvious variable.

In February this year, Xiaguang Society visited Southeast Asian countries. When communicating with many merchants, they all said that more and more friends around them are paying attention to content e-commerce, "whether consumers or merchants, they are trying this emerging e-commerce model."

Even more perceptive are the livestreamers in China. Three Sheep Network, which has the top livestreamer “Crazy Little Brother Yang”, has also accelerated its pace of selling goods overseas this year. Since the beginning of this year, it has tried livestreaming in Singapore, Malaysia, Thailand and other markets, and once ranked first in the GMV ranking of TikTok Shop in Singapore.

02 Looking for small but beautiful opportunities in Southeast Asia

As domestic merchants and anchors accelerate the development of Southeast Asia's cross-border e-commerce market, they should also note that Southeast Asia is not a unified large market, but a region consisting of more than a dozen countries.

Because there are many ethnic groups here and people have different customs and needs, if you want to deeply penetrate the Southeast Asian e-commerce market, you need to grasp the consumption trends of different countries more carefully and find small and beautiful opportunities.

On January 9 this year, TikTok Shop Southeast Asian e-commerce released the 2024 Southeast Asian e-commerce product selection trends on its official WeChat platform.

In the consumer electronics industry, practical and portable electronic small commodities are gradually becoming the favorites of consumers in this market. For example, consumers pay more attention to portability and comfort when it comes to headphones, and often prefer small and rounded styles; for accessories such as mobile phone holders, charging cables, and mobile phone cases, consumers prefer brightly colored and co-branded styles; practical and portable small appliances such as handheld fans and portable emergency lamps are also very popular.

In the fashion industry, women prefer basic and versatile styles, solid-color and cool-toned tops, as well as simple tote bags, macaron-colored small wallets and large-capacity canvas bags suitable for commuting; in addition, sweatpants continue to be hot-selling in Southeast Asia.

In the fast-moving consumer goods industry, the hot and humid climate has led consumers to prefer beauty products with strong oil control and strong waterproofing, and women are also very fond of contouring and false eyelashes products; when choosing skin care products, consumers here prefer those with whitening, moisturizing and sun protection functions; in addition, facial cleansing products such as facial cleansers and blackhead removal patches have become trending products.

Finally, in the daily necessities industry, paper towels and detergents account for a large proportion of household care product consumption; when choosing office stationery, they prefer black fountain pens and colored markers with refills; for bedding, consumers prefer bedding with bright colors and cute patterns;

Surprisingly, people in Southeast Asia continue to pay more and more attention to pets, and mid- to high-end priced dog and cat food are hot-selling items, and have long been on the list of hot-selling products.

Taking several countries in Southeast Asia with relatively large cross-border e-commerce market scale and potential as examples, we analyze the industry categories and business opportunities that are popular in each country's cross-border e-commerce platforms.

Let's look at Malaysia first. Malaysia is the third largest economy in Southeast Asia, with a young consumer group and a preference for cross-border shopping. Similarly, the Chinese market in Malaysia has great potential, likes Chinese products, and values ​​cost-effectiveness. From 2024, the Malaysian government will impose a 10% low-priced goods tax on low-priced imported goods sold online that do not exceed RM500. Therefore, high-value cross-border goods are more suitable here.

Islam is the national religion of Malaysia, and people like traditional clothing and costumes, so consumers have a high demand for traditional Muslim clothing, robes and headscarves; in addition, shoes are the first choice for shopping in Ramadan; Malaysia has many festivals, and festival-related products are more popular; cost-effective electronic products and accessories are also popular, and there is also a market for fashion technology products such as dresses, mobile phone accessories, smart watches, sweeping robots, vacuum cleaners, etc.

Live broadcaster

Next, let’s look at the Philippines. The Philippines has a population of over 100 million, and young consumer groups and the middle class are the main driving forces of the Philippine e-commerce market. The Philippines also has the longest Christmas season in the world (nearly 5 months), which is the peak season for cross-border e-commerce in the Philippines, so Christmas products and children’s toys are quite popular.

In addition, Filipinos love to use their phones, so there is a huge market demand for electronic products and mobile phone accessories. Locals love basketball, so sports equipment is also very popular in the country. For women, Filipinos have a brown complexion and prefer European and American makeup. Eyeliner, eyebrow pencil, contouring and other eye makeup products are very popular in the market.

Third, Thailand. As cross-border e-commerce sweeps across Southeast Asia, Thailand is considered one of the most promising markets in the region. Thailand has a young consumer group and a growing middle class, and young users aged 17-36 are the main force in the e-commerce market. They focus on product quality and authenticity, and emphasize brand image, but are sensitive to price and are more likely to accept affordable products. Consumers here are highly dependent on social media and are willing to try products recommended by online celebrities and bloggers.

Consumers here have a high demand for electronic products such as mobile phones and peripherals, as well as home appliances; in addition, the younger generation pays attention to fashion trends and personal image, and there is a large market for beauty, skin care and fashionable clothing; in terms of household items, Thai consumers prefer cute and creative products such as lighting, as well as home care products.

Fourth, let's look at Vietnam. In the first quarter of 2024, Vietnam's e-commerce market sales reached US$2.777 billion, a year-on-year increase of 78.69%, showing vigorous vitality. Vietnam has a young population structure, which brings strong purchasing power to the consumer market. Due to the low per capita income in Vietnam, consumers prefer low- and medium-priced goods when shopping online, and have a high acceptance of Chinese products. In terms of categories, Vietnamese consumers continue to lead in consumer spending on beauty, household products and women's clothing. Sports and tourism products also grew rapidly last year. In addition, consumption of home appliances, mobile phones and tablets is shifting from offline to online.

Finally, let's look at Singapore. Singapore is an international financial center with a per capita GDP of $82,700, the highest in Southeast Asia. The high income gives residents strong spending power. Consumers have high requirements for products and services, prefer branded products, and also pay attention to green organic products and health-related products. 74% of Singapore's population is Chinese, and their needs are similar to those of Chinese consumers. There is a huge market demand for the sale of goods during festivals such as the Spring Festival.

In this market, computers and electronic products are categories that consumers pay close attention to and focus on product quality; in addition, beauty products are one of the fastest growing categories, especially lip makeup and eye makeup.

In fact, due to the large number of Southeast Asian countries and diverse demands, this brings diverse opportunities to merchants. However, if merchants want to develop cross-border e-commerce in Southeast Asia, they still need to complete the necessary question of refined operations.

03 Refined operations become a must-answer question

With the help of cross-border e-commerce, Southeast Asia will still be the e-commerce market with the fastest growth rate in the world in 2024.

At the same time, the Southeast Asian e-commerce market has also entered a standardized and orderly stage from its early expansion. Not only have various countries introduced relevant policies for cross-border e-commerce, but consumers' demands for e-commerce products have become more diversified and they pursue higher quality.

This means that if merchants want to expand into Southeast Asian e-commerce, they need to improve their competitiveness. Refined operations, compliance, and branding capabilities have changed from optional questions for merchants to mandatory questions.

In terms of refined operations, since the market faced by cross-border e-commerce is very different from that in China, the consumption habits, payment environment, and logistics infrastructure they face are all different.

For example, most Southeast Asian consumers have little concept of saving and prefer impulse purchases with high cost-effectiveness. This requires novice merchants to be more familiar with e-commerce operation strategies. For content e-commerce, it is very important for merchants to find suitable and reliable experts. However, Southeast Asian expert anchors have greater work freedom, and they cannot cooperate with merchants as smoothly as domestic anchors in terms of live broadcast time and content creation. This makes it difficult for novice merchants to find reliable anchors locally.

A host is showing clothes

In addition, the popularity of local bank cards in Southeast Asia is limited, online payments are not well developed, and financial fraud is frequent, which hinders the confidence of some consumers in e-commerce shopping; due to the large number of islands and backward transportation, the development of logistics in Southeast Asia is also quite different from that in China. The cross-border logistics in Southeast Asia has high package loss and damage rates, and there is great uncertainty in customs clearance. Moreover, the last-mile delivery here is not satisfactory, with an average delivery time of about three days.

Merchants are almost powerless to do anything about the inherent deficiencies in infrastructure such as payment and logistics. Only through the joint efforts of local governments and platform companies can these conditions be improved.

In terms of compliance and branding, Southeast Asian countries are increasingly paying attention to compliance, which requires businesses to be clear about the local market's trade rules, religious customs, and business norms.

In addition, influenced by the brand culture of Europe, America, Japan and South Korea, Southeast Asian consumers attach great importance to the brand image of products. However, Chinese merchants did not pay attention to brand building in the past and lacked sufficient experience in brand management and brand maintenance, especially in overseas markets. This lack of ability will become a big challenge for many novice merchants to operate and develop in the long term.

Therefore, if Chinese merchants want to keep up with the dividends of Southeast Asian cross-border e-commerce, they must not only choose the right market and categories, but also urgently catch up on operations, compliance and branding.