Southeast Asia’s Grab, Sea and GoTo face slowest internet growth in the region since 2017 as e-commerce expansion decelerates: report

Total online spending in Southeast Asia will rise about 11 per cent this year to US$218 billion, reaching its lowest growth rate since at least 2017
The region’s internet economy is now on track to reach US$295 billion by 2025, down from a previous forecast of US$330 billion

E-commerce

Bloomberg

Published: 3:53pm, 1 Nov 2023

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Southeast Asia’s internet economy will log its slowest growth on record this year, a group of researchers said, as they slashed near-term e-commerce spending estimates for the region by 13 per cent.

Total online spending in Southeast Asia will rise about 11 per cent this year to US$218 billion, down from 20 per cent a year earlier, reaching its lowest rate since at least 2017, according to research from Google, Temasek Holdings and Bain & Co.

The biggest category, e-commerce, is set to reach only US$186 billion in 2025, rather than the US$211 billion the researchers estimated previously.

Consumers in the region of more than 650 million people are curbing spending to cope with elevated inflation and interest rates.

The Shopee app is displayed on the smartphone of an employee at the company’s headquarters in Singapore. Shopee is the e-commerce subsidiary of Southeast Asian tech conglomerate Sea. Photo: Bloomberg

The region’s internet economy is now on track to reach US$295 billion by 2025, according to the report, down from a previous forecast of US$330 billion.

This is the second time estimates have been revised downward in the companies’ annual study, which covers Singapore, Indonesia, Malaysia, Thailand, Vietnam and the Philippines.

Even as more people in Southeast Asia come online, a bulk of the region’s spending still comes from relatively wealthier consumers in major cities.

The top 30 per cent high-value users account for more than 70 per cent of digital economy transaction values, signalling internet companies are struggling to attract potential customers in more remote regions, the report said.

TikTok’s global e-commerce expansion hits roadblock after Indonesia shopping ban

Still, competition in the region is intensifying.

Global giants like Amazon.com and Alibaba Group Holding, as well as regional players Grab Holdings, Sea and GoTo Group are vying for a slice of the vast regional market from online retailing to food delivery and ride hailing.

Private funding of companies in Southeast Asia has dropped to its lowest level in six years, slowing sharply from pandemic highs as investors become more choosy and capital becomes more expensive. The number of deals involving tech companies in the region shrank by more than half to 564 in the first half of 2023 from the year-earlier period, according to the report.

Investors in the region, many of whom started funds in the middle of the last decade, are facing mounting pressure to deliver returns in a challenging market for public listings. Funds in Southeast Asia started in the past five to seven years have only returned 4 per cent on average, compared with about 50 per cent for China and 40 per cent for the United States, according to the study.

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