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Thriving E-Commerce in Southeast Asia: Strategies for Startups to Compete

ecommerce, ecommerce platforms, ecommerce business insurance

The e-commerce space in Southeast Asia (SEA) is dominated by large marketplaces like Lazada, Shopee, Tokopedia, and Bukalapak, which hold more than 80% of the total e-commerce traffic in the region.

But it is not the end of the road for new entrants as e-commerce in Southeast Asia is still far from maturity as denoted by multiple trends. In 2018, the SEA internet economy crossed a major inflection point towards exponential growth and has continued to accelerate even in 2020 during the Covid-19 pandemic. This includes the penetration of the older demographic which consumer surveys have indicated to be a long-lasting transition. Despite a penetration rate of less than 5 percent of all retail sales, the e-commerce Gross Merchandise Value in SEA grew by 23 percent Compounded Annual Growth Rate (CAGR) from 2018 to 2020, quicker than China’s CAGR in the same period. Notably, China’s penetration level was as low as 6 percent in 2013 and has grown to 25% in 2019. This reveals an imaginable growth potential in SEA which is anticipated to reach USD 300 billion by 2025.

SEA startups have a huge opportunity to succeed in the growing e-commerce market by launching their own online store or utilizing existing marketplaces. Discover four effective e-commerce strategies for startups to stay ahead in the competitive Southeast Asian market."

Increasing importance of Value for Money

Cost leadership is often associated with economies of scale, but in this segment, we explore how two Indonesia-based startups turned inefficiencies into cost strategies by venturing into Southeast Asia supply chain management where much of the e-commerce potential is untapped. Sayurbox‘s approach to digitizing the supply chain of fresh produce is one perfect example. Having identified a lack of direct market access to Indonesia’s agriculture landscape, their approach of eliminating intermediaries through the induction of a fresh produce e-commerce platform has enabled them to offer fresh produce products at a low cost for end consumers. Interestingly, the strategy has resolved various social issues, including the reduction of waste and a raise in farmers’ earnings. On the other end of the spectrum, Dagangan, an FMCG (Fast-Moving Consumer Goods) distribution platform that facilitates FMCG access to the rural regions, has improved last-mile accessibility of daily necessities to Tier 3 and 4 cities in Indonesia (200 million population) at a lower price with less effort. Nonetheless, it is worth noting that a cost leadership strategy may not be transferable to all startups. Therefore, in the other segments, we will examine other critical e-commerce strategies that all online businesses may adopt.

Consumers want Faster, including Delivery

Now that consumers have access to previously inaccessible products and cheaper alternatives, their demand for faster delivery services has been increasing with the growing power of online buyers. Consumers expect their e-commerce delivery to be both fast and free. However, 3rd party logistic (3PL) delivery companies are also charging higher as they operate at peak levels to keep on with the surge in the number of deliveries from thriving e-commerce sales. On the other hand, e-commerce platforms must absorb those fees and incur a detriment to their margins to meet the demands of their consumers’ expectation of complimentary delivery.

In Indonesia alone, the same-day delivery industry is projected to reach USD 4.5 billion by 2023 according to CLSA research. With its rising demand, 3PL startups like Rara Delivery is set up in Indonesia to help e-commerce clients deliver on-demand at a lower cost through their innovative real-time optimization as compared to its competitors. Rara delivery is also working with Sayurbox and top e-commerce marketplaces like BliBli as part of their 3PL solutions. Forging ahead, we note that other unique selling points must be innovated as more online businesses shift towards same-day delivery.

Differentiation from Competition through Unseen and Personalised experience

Niche immature online markets often present good opportunities, especially with the highly competitive SEA e-commerce market. Norm has pinned down a relative niche issue in Indonesia where men experience lifestyle health concerns without proper treatment channels as well as the stigma associated with sexual health issues.

Through Norm's direct-to-consumer (D2C) e-commerce platform, they connect men with doctors to receive prescription treatments for common lifestyle and sexual health conditions. Presently, businesses can consider entering a niche market to set themselves apart from the crowd and attract loyal customers without needing to advertise excessively. Furthermore, Norm is enabling a seamless customer journey through private consultations with (medical/professional) consultants followed by tailored recommendations of suitable products and finally, concluding with a visually satisfying unboxing experience.

Personalization is one of the keys to increasing sales conversion by delivering customized experiences to consumers and their needs. Despite its significance, it is surprising that such personalization has only been implemented by 38% of the largest companies. With the rise of customer acquisition costs, the retention of existing customers is crucial in sustaining a business. Their level of stickiness depends on how satisfied they are with their new digital experiences.

E-commerce Fortified with Complementary solutions

Although personalization has many perks, it is also highly time-consuming. That is where Artificial Intelligence (AI) technologies such as chatbot services like helps to automate the process. is an Indonesia-based startup automating conversations on multiple chat platforms and improving the digital customer experience with prompt responses around the clock. These AI chatbots can play a big part in learning about shoppers and creating personalized experiences by understanding the shoppers’ preferences. has been deployed in some of the top businesses like Dana, Sinarmas Bank, and Tokopedia.

Moving along the digital purchase journey, more than 50 percent of people in APAC abandon their cart because the online purchasing process is extremely tedious. Arrow, a Singapore-based startup is a one-click purchase solution that is both platform and payment agnostic, which removes the endless online checkout experience for both the merchants and customers, improving online conversions.

Clear Opportunities for Innovation and Disruption

E-commerce startups can benefit from a value innovation approach, combining various strategies to lower costs and improve differentiation. Implementing this approach helps reduce unnecessary factors and enhance underutilized ones to succeed in the industry.

We believe that continued innovation will be crucial for new entrants to sustain themself. As for the future, it will be exciting to witness more disruptions pave the way from mobile to omnichannel shopping experience, together with an increase in physical connectivity towards an integrated e-commerce experience.



Darius Teo is one of our Ventures Analyst Intern at Plug and Play APAC.

As an in-house venture capital, our goal is to fund the teams that are building the defensible businesses of the future. By leveraging our capital, our network of VCs, and our corporate partners, we give our portfolio companies an added advantage. Find out more here!

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