Singapore – the home base of Southeast Asia ecommerce

It was announced earlier this year by the Minister of Trade that there are plans to transform Singapore into a regional and global ecommerce hub through a five-pronged strategy. Given the country’s growth in online sales and strong history of attracting multinational companies (MNCs) from all industries to establish regional bases, this strategy does not come as a surprise. This outcome is also a culmination of many factors at play.

Location, location, location

Singapore is strategically located along the cross-roads of the East-West trade. Historically, this helped the city flourish as a trading post for vessels and grow as an entrepot trade hub, even before its independence. Today, Singapore is within a six-hour radius of any Southeast Asian country, part of a region with budding economic potential. Along with the 50 million emerging middle-class consumers, the Southeast Asia’s internet economy is poised to grow to over US$300 billion by 2025[1].

Even amid COVID-19 and the resultant disruptions, Singapore remained the second most globally connected country[2]. It is also one of the world’s top transportation hubs for sea and air cargo, and Singapore’s container ports are among the busiest in the world, with more than 130,000 vessel calls each year[3]. Along with Changi International Airport’s link to 300 cities in 70 countries, this has helped establish Singapore’s status as the world’s connecting hub to Asia.

The geographical and logistical advantages of this nation state are primary pull factors for multinational companies (MNCs) to choose Singapore as their regional headquarters. This includes the likes of the Adidas Regional Headquarters, the Nike Global E-commerce Distribution Centre, and the Amazon Prime Now facility, just to name a few.

Sandbox of Southeast Asia

Southeast Asia enjoys vast cultural diversity, a distinctive feature of the region. Across the countries, the main languages used outside of English include Burmese, Indonesian, Khmer, Lao, Malay, Vietnamese, Tagalog, and Thai – each incorporating its own set of beliefs and values. Consequently, operating in the region is relatively challenging, as businesses have to overcome communication difficulties while navigating complex cultural nuances.

As a result, businesses looking to enter Southeast Asia often kickstart their journeys in Singapore. Besides its unmatched connectivity, Singapore’s strong historical and trade connections to the region is helpful in grasping the complexities of operating in different parts of the region. Once businesses have formulated a strategy that works well in Singapore, they are then empowered to replicate and tailor for other markets.

Apart from its location and connectedness, Singapore also offers a business-friendly safe hub to operate and thrive. ?According to The Economist Intelligence Unit, Singapore is the best country in the world in which to do business[4]. This is on the back of national efforts to provide a conducive regulatory environment for businesses to operate in, as well as the technocratic approach to economic management by the stable and transparent government system. In addition to its attractive corporate tax rate, the government has also thoughtfully rolled out attractive incentives in the form of concessionary tax rates to encourage MNCs to set up shop.

Not just for global companies, but even for the logistics and supply chain sector, Singapore is particularly attractive. As a small city boasting a flat geography, a well-established network of roads and neat housing numbers, delivery is comparatively easy.

There’s always a catch

Home to the regional headquarters of tech unicorns like Grab, Lazada, Razer and Sea, Singapore is the third most talent-competitive country globally, according to INSEAD, the Adecco Group and Google[5]. To match this competitive talent landscape, the cost of labour is much higher than neighbouring countries. This inevitably drives up operational costs.

The good news is, not all is lost as the Singapore government provides grants to help ease labour costs. For instance, the Senior Worker Early Adopter Grant provides funding support to progressive employers who hire senior workers such as by implementing higher internal retirement and re-employment ages above the prevailing statutory ages. There is also support available to increase workforce efficiency, such as the Productivity Solutions Grant for companies keen on adopting technology solutions and equipment to enhance operational processes.

Inroad to Singapore and beyond

Singapore is a great launchpad for any business looking to gain a foothold in the Southeast Asian market. With each country boasting its own marketplace arena, from Tiki and Sendo to Bukalapak and Tokopedia, Southeast Asia is probably one of the most complex regions when it comes to ecommerce. As such, the first step is navigating the crowded landscape.

This is where we come in at TMX – helping clients (brands, retailers, 3PLs) make sense of the environment in which they operate in. Once a thorough understanding has been attained, we partner together on business strategy to ensure efficiency and profitability across end-to-end functions. This ranges from demand generation right down to last-mile delivery. After this is established, the final step is to conduct a tender process to initiate the partnerships that will help deliver the success.

If you’re interested in kickstarting this process for your business, reach out to me today.

?

Word count: 843 words (excluding headline)

[1] https://storage.googleapis.com/gweb-economy-sea.appspot.com/assets/pdf/e-Conomy_SEA_2020_Report.pdf

[2] https://www.dhl.com/global-en/spotlight/globalization/global-connectedness-index.html

[3] https://www.mpa.gov.sg/web/portal/home/maritime-singapore/introduction-to-maritime-singapore/premier-hub-port

[4] https://country.eiu.com/article.aspx?articleid=329431016&Country=Singapore&topic=Business&subtopic=Business+environment&subsubtopic=Rankings+overview

[5] https://www.insead.edu/sites/default/files/assets/dept/globalindices/docs/GTCI-2020-report.pdf