SINGAPORE: Increasing competition and an uncertain economic outlook have dampened growth prospects for Singapore’s eCommerce industry.
Observers told The Straits Times that while the industry is expected to expand in the coming years, it remains vulnerable to headwinds.
Professor Lawrence Loh at the National University of Singapore Business school noted that eCommerce companies saw a surge in hiring during the pandemic to meet sudden spikes in demand, but shoppers are returning to physical stores, creating a likely oversupply of workers.
“eCommerce is an industry that is heavily dependent on economic growth fluctuations,” Loh said.
“Its imports may also be subject to tariffs in the United States, which is expected to intensify such tariffs soon, this is why these companies will be even more vulnerable to revenue shocks in the near future.”
Loh said the demand for eCommerce is expected to keep expanding over the next decade, but its growth rate is projected to be far slower than the surge during the Covid-19 pandemic, when consumers flocked to online platforms for purchases.
A report published in November by Google, Temasek and Bain & Co found that Singapore’s e-commerce sector grew from US$8bil in gross merchandise value (GMV) in 2023 to US$9bil in 2024.
GMV refers to the total value of goods sold between customers or from eCommerce platforms.
ECommerce sales here stood at US$4.9bil in 2020, during the height of the pandemic, and ballooned to around US$8bil in 2021 and 2022.
The expansion in 2024 comes after several layoffs and payment delays in the sector.
In January, regional eCommerce company Lazada axed around 100 employees in Singapore, with sources indicating that the company planned to reduce its South-East Asia headcount by 25% to 50%.
Local eCommerce company Qoo10 was declared insolvent by the Singapore High Court in November, following its failure to pay merchants using its platform since July. The company also reportedly laid off 80% of its employees in August.
Insead Associate Professor Ben Charoenwong said the sector’s volatility stems from several factors.
Rising interest rates have heightened pressure on platforms to demonstrate clear pathways to profitability, and this will likely lead to operational restructurings.
Another factor is the advancements in technology such as artificial intelligence and automation that are boosting operational efficiencies, reducing the need for human labour.
“Some of the layoffs may reflect this technological transformation rather than purely economic distress, similar to what we’ve observed with major US tech companies,” Charoenwong said.
He added that higher capital costs and changing market conditions will likely lead to cost adjustments in the sector.
This does not necessarily signal a decline but rather a “natural cycle of maturation”, with businesses focusing on sustainable growth over expanding market share.
“The intensity of future adjustments will likely depend on several factors: the trajectory of interest rates, the pace of technological adoption, and broader economic conditions,” he said.
“Companies that can adapt their capital budgeting and operational strategies to this new environment while maintaining competitive advantages are likely to emerge stronger.”
Despite the challenges, eCommerce companies here have been vying for market share in the region in 2024.
Bloomberg Intelligence notes that Sea-backed Shopee remained the region’s leading eCommerce platform in 2024, based on GMV and user numbers.
The platform’s monthly active users in South-East Asia had grown to nearly 260 million in October, up from just under 250 million in the same period in 2023.
Shopee’s GMV is expected to reach US$70bil in 2024, accounting for about 50% of the region’s total GMV. — The Straits Times/ANN
