The e-commerce market in Singapore has the best chances to continue its current success story in the future, with smartphones being the preferred device for ordering online – no wonder mobile payment has more than doubled since 2013 and e-wallets are very widespread.
“We can together become Singapore unlimited. Unlimited by our geography, unlimited by our size, unlimited by our resources. We can only be limited by the scale of our ambition and drive.” Singapore Trade and Industry Minister Chan Chun Sing could not have been more right when he uttered these words.
Despite Singapore’s relatively small size, which is around half the size of Los Angeles, and its tiny population of only 5.6 million, the country has become one of the flagship examples of progressive ideas, sustained economic growth and technical progress. Today, according to the World Bank, the city-state is ranked as one of the top ten countries with the highest GDP per capita worldwide. For companies, it therefore represents an interesting opportunity to invest in.
Within the worldwide growing e-commerce market (see the figure below), Singapore can be considered a hidden champion. Here are a few reasons why.
1. Singapore is the third largest B2C e-commerce market in Southeast Asia – and there is still much room for growth
A small size can’t stop a nation from achieving impressive things. This is especially true for Singapore. In contrast to its limited geographical size, Singapore’s B2C e-commerce market has become the third largest in Southeast Asia, after the much bigger countries Indonesia and Malaysia. This is supported by two conditions. Firstly, high internet connectivity – in 2018, 86% of the population had internet access, a crucial infrastructure for e-commerce. Secondly, higher online spending compared to regional peers –, while Singaporeans spent an average EUR 1,651 online, their Indonesian counterparts spent just 1.7% of this amount.
When comparing the state to mature markets like the US or the UK, there’s still more room for growth. In 2016, online retailing only accounted for 5% of the total retail sales in Singapore. In comparison, the share of online sales made up 15% in the UK and 10% in the US of the total retailing sales, according to yStats paper “Singapore B2C E-Commerce Market 2018”.
So what does this all mean? For one, the healthy economy and the high online spending rates signify a promising basis for profitable investment opportunities. In addition, there is much room for growth for Singapore’s commerce. This means that there is still much untapped potential in the country’s economy and by extension, greater opportunities for companies looking to invest in the country.
In addition, loyalty programs build strong and profitable relationship: An example of a company that has already seized such opportunities is Berjaya from Singapore’s northern neighbor Malaysia where many Singaporeans love to go shopping. Berjaya launched the reward app B Infinite which thanks to a variety of loyalty and couponing functions, offers a multi-faceted capabilities to its users. For example, functioning as a mobile marketing platform to find out about the latest local merchant flash deals, payment gateway and redemption service for its members. In addition, users get a detailed real-time overview of their loyalty points, balance and purchases, allowing them to have better control and convenience over their own rewarding experience. In addition to this, users have the ability to manage their own omnichannel experience through B Infinite. For example, members can personalize the app through filtering merchant offers by category of interest.
2. High willingness of local consumers to shop across various touchpoints
Because of Singapore’s established position, the country’s shoppers have a variety of means to conduct purchases.
Surfing and ordering with a smartphone is a common practice in Singapore. Around nine out of ten internet users use their smartphones to go online. In fact, the mobile phone was the preferred device for online purchases in 2017. Though, the average online order value via a mobile device was lower compared to orders made via a desktop.
With the existence and easy access to a number of shopping malls across the islands, consumers are easily able to adopt an omnichannel shopping experience. Research found that almost half of the internet users in Singapore conducted digital research while shopping at a brick-and-mortar store.
Singaporean online shoppers have also become Asia’s top cross-border shoppers. According to yStats, 51% of online shoppers made purchases from out-of-country sellers. While the government recently introduced a Goods and Service Tax (GST) for cross-border digital services, there has not been much impact on cross-border online shopping yet.
3. Strong growth projections for B2C growth in the region
While online retailing only accounted for 5% of the countries retail sales in 2016, forecasts predict that these sales will have increased at a CAGR of 20% in 2020. In fact, yStats predicts that online B2C sales will reach EUR 2.0 billion two years from now. So yes, while these growth opportunities sound impressive in theory, the numbers point towards a highly convincing growth potential.
4. A functioning ecosystem in place
For e-commerce to thrive, there needs to be an active ecosystem where both suppliers and consumers are participating. As we’ve covered earlier, consumers have actively been using Singapore’s high connectivity to conduct their purchases. But it’s also because the suppliers have shown a strong willingness to introduce new payment options. All of this is likewise aided by government regulations which enable these systems to thrive.
An example of a company that’s expanded their payment options is IKEA Southeast Asia. Through their collaboration with Wirecard, IKEA offers various payment options for online purchases. The advantages are highly visible for both the company and customers alike. Customers can enjoy a relaxed and satisfying shopping experience instead of always having to visit the physical store, while the easy higher customer satisfaction promotes the IKEA online shop launch in Southeast Asia.
Paying with debit or credit – that’s not a problem anymore: With the increasing integration and simplification of online payment transactions, cashless offline payment transactions are also progressing. Andaz Luxury Hotel is an example of a merchant who has been able to incorporate a seamless payment experience. The hotel is now able to accept a wide range of credit or debit cards. Furthermore, Dynamic Currency Conversion (DCC) allows international guests the convenience to pay in their home currency.
5. Two in One – the transformation of the mobile phone into e-wallets
We’ve all been there before. Its early in the morning, you’re rushing to catch the bus while you’re simultaneously on the phone with your mother (she is telling you that you do not call her enough). You’re on the way to work, but you desperately need that cup of coffee. You reach into your pocket and you realized you’ve left your wallet at home. So what do you do?
For the 22% of the Singaporean population who make their payment through their mobile phones, this little incident isn’t a bother all. All in all, mobile payment has more than doubled since 2013.
In the past year, there have been many different providers that are making mobile payments possible. Singapore’s largest phone carrier, Singtel, has also stepped into the game to offer such a service. Together with Wirecard, they rolled out Singapore’s first Visa virtual card for Singtel’s mobile wallet Dash. Users can pay transport fares, shop, remit money or pay their coffee fuss-free to help cope with a stressful morning – making it Singapore’s most popular all-in-one mobile wallet.
But it isn’t just businesses that are stepping up in this area. Public organisations are also increasingly supporting mobile payments. For example, students at Nanyang Technological University are now able to pay in canteens by scanning the SG QR code with their Singtel Dash app. This allows an easy payment within seconds.
6. Easy Access to goods – everything you want can be ordered online
If you want something in Singapore, chances are you could probably order it online. Whether it is conventional consumer goods, tickets, laundry or weekly groceries, everything can be purchased online and delivered. Customers can choose between several shipping options that vary by costs and length. For instance, customers which are a member of Lazada’s loyalty program LiveUp, can benefit from the fastest available delivery option for free.
Fast deliveries are also especially convenient when it comes to groceries. In 2015, Lazada Group acquired Redmart, an online supermarket. The company provides a platform that enables customers and manufacturers to connect directly. The additional value for the manufacturers comes from data analytics and new marketing capabilities provided by the digital platform.
Who shapes the competitive landscape? Some of the biggest e-commerce players are Giosis Group, Lazada and Amazon. Other popular e-commerce platforms are eBay and EZbuy, Shopee or Zalora, which specialized in clothing.
To conclude, despite its size, Singapore is a fascinating country characterized by its enthusiasm for digitalization, love for innovation and wealth of business opportunities. That creates several positive factors for the e-commerce to thrive. The lessons it brings in driving the rapid development of e-commerce no doubt will have wide spread benefits for the rest of the region and for other established countries in charting their own journeys for digital payments.