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The pandemic has accelerated the shift of brick-and-mortar retailers to online channels. Retailers have launched initiatives such as parcel deposits, contactless delivery, and improved delivery infrastructure to meet the growing demand for online shopping. According to retail sales data for 2022, online sales of consumer goods accounted for 12.8% of total sales (or 14.8% for total online sales from official sources). This trend is expected to continue, with consumers buying more computers and telecom equipment online, with online spending on these goods accounting for 51%. The share of furniture and household equipment bought online is about a third, while online spending in supermarkets and hypermarkets accounted for 16% of such purchases that month.
The structural shift in consumption behavior is expected to push up online sales by a further 10% this year (2023, Euromonitor) in nominal local-currency terms. This represents a moderation from the extremely elevated rates of more than 40% at the height of the pandemic in 2020-21, but is still impressive following such strong growth. Growth is expected to continue to moderate over the next five years, despite not being the largest market by sales value owing to its population size, has the largest share of online in total retail sales among ASEAN members.
As the growth in the online retail sector begins to stabilize, the focal point of competition is gradually shifting. The emphasis is no longer solely on increasing the number of users but also on enhancing spending behavior. This strategy involves amplifying user experience and engagement on the platform. It’s intriguing to observe that online retailers are deploying entertainment elements like live-streaming and gamification to bolster customer loyalty and engagement. These interactive tools are aimed at retaining customers on their platforms for extended periods, thereby maintaining the retailers’ visibility in the crowded e-commerce market.
Lazada, a well-known online retailer in Singapore, exemplifies this shift in strategy. Back in 2018, Lazada unveiled its unique “shoppertainment” platform known as LazLive. This was an unprecedented initiative in Southeast Asia that utilized Alibaba’s robust technology. LazLive facilitates real-time interaction between users and livestream hosts, making shopping a more immersive experience. One remarkable feature is the ‘see-now-buy-now’ option, which allows customers to make a purchase instantly, right from the live stream. LazLive+ pushed this innovative concept even further by launching a 15-episode live content series titled “D.I.Y. Like A Pro” in June 2022. Presented by renowned regional key opinion leaders, this series strives to provide consumers with insightful tips and exciting inspiration related to lifestyle trends and activities.
The e-commerce market in Singapore is highly competitive and fragmented, with third-party merchants having the highest combined value share. Many e-commerce aggregators are utilizing aggressive brand acquisitions and large amounts of funding to gain a significant market share in the coming years.
Shopee, which overtook Lazada in 2020, has managed to maintain its growth trajectory and now commands a market share of 28.6%. In contrast, Lazada has been losing its footing, with its market share dipping from a previous high of 15% to the current 9%, in 2023 putting it on par with NTUC FairPrice, a traditional supermarket retailer. Meanwhile, Amazon has been growing, albeit at a relatively slower pace.
Several other prominent online retailers such as Carousell, Taobao (a Chinese B2C marketplace), eBay Singapore (the local branch of the US C2C marketplace), EZBuy (a B2C marketplace), Zalora (an e-retailer specializing in fashion), and RedMart (an online grocery retailer) continue to hold sway. These retailers are expected to continue to shape the online retail market in Singapore in the near future.
Emulating the success story of Thrasio, a US-based e-commerce aggregator valued at $1 billion, several start-ups in Singapore are adopting its business model. This approach involves purchasing a 100% stake in independent or third-party brands that operate on marketplaces like Amazon, Lazada, and Shopee. While the original founders relinquish operational control, they may continue to earn commissions on future sales. Rainforest and Una Brands are two examples of this model in action. The former is managed by former executives from Carousell and Fave, while the latter was co-founded by an ex-CEO of Rocket Internet.
Telemedicine and online medical services: Telemedicine practitioners, teleconsulting services and importers of medical devices are increasingly establishing an online presence. This trend is driven by a shift in consumer behavior towards more discretion and comfort in discussing sensitive medical issues in the comfort of one’s home. An example of this trend is Sire, a platform that prescribes finasteride for hair loss. Another platform, Zoey, offers contraceptive pills and Plan B.
Paid membership clubs: E-commerce players are creating paid membership clubs as a way to capitalize on customer behavior and loyalty. These clubs target specific demographics, such as parents with infants and toddlers, and offer exclusive perks such as product sampling and CRM programs. An example of this trend is Shopee’s mother and baby club and Lazada’s family club. These communities target parents with infants and toddlers and offer exclusive perks such as product sampling and CRM programs.
BNPL financial arrangements: BNPL (Buy Now Pay Later) financial arrangements are becoming increasingly popular with consumers. These plans allow for instant gratification in purchasing a product by splitting a transaction into smaller payments, and are being offered by more players in the market, including digital banks. An example of this trend is Atome, Pace, and PayLater by Grab, all of which are key players in the BNPL space.
Capitalizing on price-conscious consumers: Companies focusing on medical supplies are increasingly opting for an online presence. During the pandemic, consumers became increasingly price-conscious, and online platforms were crucial in magnifying the price differences in brands. An example of this trend is MEDPRO Medical Supplies, which has a store presence on Shopee and offers a wide range of medical supplies at competitive prices.
Augmented Experience: With e-commerce becoming an indispensable aspect of the retail experience for many Singaporeans, brands and retailers are leveraging digital tools and technologies to aid consumers’ online buying decisions. The inherent limitation of online shopping is the inability for customers to physically examine products before purchase, posing a challenge particularly for items with a personal or experiential element, like eyewear. To overcome this hurdle, Lenskart, an optical goods retailer, rolled out a “3D Try On feature” on its platform in 2021. The feature employs the front-facing camera of a user’s digital device to generate a virtual representation of how glasses might appear on their face. The feature received positive reviews during the pandemic. Following Lenskart’s footsteps, other brands, including Nike and Castlery, have also incorporated similar augmented reality features both online and in their physical stores.
In Singapore, There are about 48.9% of people use credit cards, and 91.8% of people use debit cards. While there are 48% of people purchase on the internet, there is only 48.7% of people with online banking accounts.
For E-Commerce Customers in SingaporeWhat are the major driving factors to purchasing online?
There is 3.30 million consumer goods e-commerce users in Singapore, and they spend total of around 6.16 billion USD dollars in 2021. That makes a per capita spending on consumer goods e-commerce of around 1869 USD. Also, in those e-commerce users, about 63% of them purchase through their mobile phone.
Our consumer research practice tracks what customers spend and how they make decisions across major economies in the world.
