3 Major Retail Trends in ASEAN Investors Should Know

The retail landscape in ASEAN could be changing.

ASEAN, the Association of Southeast Asian Nations, was established in 1967. The group has aims that include the acceleration of economic growth, social progress, and cultural development for states within Southeast Asia.

Today, ASEAN contains 10 member countries. This would be Brunei Darussalam, Cambodia, Indonesia, Lao PDR, Malaysia, Myanmar, the Philippines, Singapore, Thailand, and Vietnam.

recent report by market researcher Frost and Sullivan had outlined three major ASEAN retail trends that could be of interest to investors.

The rise of eCommerce

“Electronic commerce (e-commerce) continues to change the dynamics of the retail sector globally, with many “new economy” companies emerging in this region…

…With a relatively young population, growing Internet and smartphone penetration, and a wide array of payment options, the ASEAN region offers lucrative opportunities for e-commerce growth. In 2014, the region had 199 million Internet users (39% penetration) and is forecast to rise to 294 million users (48% penetration) by 2017.”

Indonesia is the largest eCommerce market in ASEAN, weighing in at US$1.1 billion. Internet retail makes up only a sliver of the overall retail sales, though. For instance, in Singapore, internet retail is less than 1% of total retail sales.

Our Garden City could have potential, since it has the highest internet user penetration rate at 82% in 2015. Singapore also boasts the highest smartphone penetration rate at 90%.

A number of companies in Singapore’s stock market are hoping to take advantage of these trends. Retailer Challenger Technologies Limited (SGX: 573), for instance, is aiming to be a dominant player in the tech marketplace through its new online website, Elsewhere, SATS Ltd (SGX: S58) is partnering Singapore Post Limited (SGX: S08) to build an automated facility to handle eCommerce orders.

Multiple trends that are driving retail growth

“Combined retail sales for the selected countries [referring to Singapore, Malaysia, Indonesia, and Thailand] are forecast to grow at a CAGR of 15.5%, between 2015 and 2018.

The projected rise in retail sales can be attributed to the expected increase in GDP per capita in major ASEAN nations, along with continued urbanisation and the steady decline in unemployment rates.”

Indonesia, the world’s fourth most populous nation, is expected to lead the way with 19.3% annual growth in retail sales from 2015 to 2018. Malaysia is expected to deliver 12.1% annual growth for the same period. Singapore’s annual growth rate is projected to be a lot lower though, at just 6.4%.

Singapore’s unique retail scene

But, there might still be bright spots in Singapore:

“Online retail is another key growth area in Singapore. While Singapore has high Internet and smartphone penetration numbers, in 2014 only 3.4% of total retail sales was done online.”

Yet, Frost and Sullivan also noted that Singapore’s public transport system supports offline retail stores.

“This may be due to the convenience of well-developed conventional retail stores that are easily accessible via public transport. Though e-retail is likely to expand in Singapore, the growth is anticipated to be the slowest in the region.”

If Frost and Sullivan is correct in its assessment, this could be good news for mall operators in Singapore’s stock market such as CapitaLand Mall Trust (SGX: C38U) and Starhill Global Real Estate Investment Trust (SGX: P40U).

For more investing insights and to keep up to date on the latest news in the world of finance, you can sign up now for a FREE subscription to The Motley Fool's weekly investing newsletter, Take Stock Singapore. Written by David Kuo, it will teach you how you can grow your wealth in the years ahead.

Also, like us on Facebook to follow our latest hot articles. The Motley Fool's purpose is to help the world invest, better.

The information provided is for general information purposes only and is not intended to be personalised investment or financial advice. Motley Fool Singapore contributor Chin Hui Leong doesn’t own shares in any companies mentioned.