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Even before COVID-19, global digital transformation was already rapidly changing the way companies attract and interact with their customers.
Today, businesses worldwide increasingly recognise the importance of digital transformation to stay competitive. It remains at the top of the agenda for many companies, highlighting their urgency in going digital.
In this article, we discuss the importance of digital transformation, particularly for businesses in the unique and dynamic region of Asia.
A Key Recovery Factor
The digital economy has been a significant driving factor for Southeast Asia’s recovery.
Despite the pandemic’s crippling effect on many industries, it helped to pave the way for digital technologies that continue to promote the online consumer landscape.
Nikkei Asia states that 60 million people in the region became online consumers during COVID-19, leading to a striking increase in almost all forms of e-commerce, particularly in supermarket products and exercise equipment.
Ramping up digitalisation has made it one of the most essential growth engines for developing nations, especially Southeast Asia.
Related Read: Why is E-Commerce in Singapore Experiencing Explosive Growth? »
Southeast Asia Takes the Lead
How is Asia, particularly the South, faring in the digital space?
Temasek, Google, and Bain’s e-Conomy SEA 2021 Report highlights that Southeast Asia is well on its way to becoming a US$1 trillion economy by 2030. It will be led by these sectors:
- E-commerce
- Transport and food
- Online travel
- Financial services
- Online media
- Healthtech
- Edtech
In terms of e-commerce, the region is positioned to become one of the fastest-growing regions globally. It is expected to reach US$88 billion in spending by 2025.
This traction is reflected in eMarketer’s ranking of the 10 countries with the best e-commerce retail growth, which shows that Malaysia and the Philippines take the lead.
Related Read: Singapore: The Digital Capital of Asia »
We look at some factors that may contribute to Southeast Asia’s prominence in the sector:
A Promising Demographic
Southeast Asia has a massive digitally savvy youth population that has largely contributed to the industry’s growth. More than half of its population is under 30.
This demographic profile reflects a favourable outlook for the long-term as consumers.
A Smartphone Boom
The total number of smartphone users in SEA is expected to be 326.3 million in 2022. Smartphone penetration in Southeast Asia is forecast to climb from 88% in 2022 to 90.1% in 2026. Both figures reflect the high levels of smartphone penetration in the region.
It has led to the regular and increased use of e-commerce and social media platforms to purchase goods and services.
A Rapid Rise in Digital Consumption
Consumers are quickly going online, so companies must also follow suit to meet their customers where they are.
Online purchases are greatly facilitated by enabling factors like mobile penetration, emerging technologies, and retail trends.
Social Media
Digital transformation has been a key enabler of the social media phenomenon, which has had a massive impact on the digital economy.
Social media platforms such as Facebook and Twitter allow users to share information and ideas quickly and easily, which has made them extremely popular.
The widespread use of social media has had a major impact on the digital economy, with businesses increasingly using social media to reach customers and facilitate purchases.
It remains a vital channel for consumers to perform product evaluations and for brands to engage with their customers.
An Increase in Digital Consumer Services
Apart from purchasing goods and services, consumers are also actively engaging in digital consumer services. Financial services like digital payments is one example.
McKinsey & Company forecasts that Asia’s proportion of digital payments will stand at 65% by 2024, a higher rate than the global average of 52%.
This statistic reveals that the region will likely be a critical growth driver for digital consumer services.
What Are Some Examples of Digital Transformative Efforts Implemented by Firms?
Companies across the world have been rolling out their own digital transformation strategies. Those who have yet to embark on their digital transformation journey have it on their priority list.
That said, here are some examples of the efforts some global firms have made to digitalise:
Wall’s Thailand: The creation of a new mobile-activated service together with GPS tracking and engaging messaging. By adapting to its consumers, it saw a 4% increase in sales and a 17% increase in vendor recruitment.
McDonald’s: Collaborated with Google to build an ad delivery system with dynamic ad spend adjustment and real-time response to restaurant capacity. It led to a 10% hike in return on ad spend (ROAS).
What Are Some of Asia’s Digital Transformation Trends in 2022?
As we already know, 2022 has been a year of digital transformations facilitated by digital technology advancement and a rise in demand all around.
What are some of the popular trends we’ve seen this year? Let’s take a look:
- A focus on sustainability
- The continued rise of mobile commerce, as more consumers shift to using their phones to make purchases
- The increasing popularity of virtual and augmented reality, which will be used for more immersive shopping experiences
- Cloud adoption to automate business processes
- The mainstream usage of edge computing to alleviate strains on data centres and cloud networks
- The growth of digital platforms such as blockchain and 5G
- The rise of artificial intelligence (AI) and big data analytics
- Making cybersecurity a necessity instead of taking the backseat
- The greater use of machine learning
What is Stopping Asia From Realising the Full Might of its Digital Potential?
Asia needs to step up its digital efforts to attain its optimal potential. Here are the different aspects it must work on:
- Improve digital infrastructure
- Strengthen information security
- Establish effective and reliable digital policy
- Ensure that the youth workforce is equipped with the proper skills to fill a growing manpower gap
In particular, despite the climb in the number of jobs that need expertise in digital skills, there is a lack of supply to fill them. Millions of youths in Southeast Asia remain unemployed and are not ready to take on these positions due to a lack of skills.
Related Read: Singapore Talent Outlook 2022: Top Tech Talent in High Demand »
How Can Asia Move Forward?
One way the region can go forward is to engage in more cross-country collaborations to widen the digital economy’s landscape. It can also enhance digital infrastructure.
Country-level initiatives must also be fully implemented and reviewed.
Although the majority of governments in Asia have put in place relevant policies to support and enhance the digital industry, governments should do their utmost in encouraging and fostering the digital ecosystem.
For example, they could focus on:
- Gathering and building talent
- Ensuring that the underserved youth population gets access to learn the skills they need
- Eliminating barriers to entry
- Promoting startups
- Putting in place the facilities and infrastructure required
- Creating well-detailed national regulatory frameworks
Asia’s digital economy represents a huge opportunity for companies and investors.
Firms that recognise its importance, achieve successful digital transformation, and maintain their competitiveness with innovation as a driving force can expect to emerge as a winner over the long term.
Create your digital transformation strategy, enhance your business value, and exceed customer expectations with your company today!
Related Read: 3 Steps to Set Up a New Business in Singapore »
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