Mixed outlook for S’pore’s e-commerce industry amid growing competition, economic uncertainty

SINGAPORE – Increasing competition and an uncertain economic outlook have dampened growth prospects for Singapore’s e-commerce 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 e-commerce 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. 

“E-commerce is an industry that is heavily dependent on economic growth fluctuations,” Prof Loh said.

“Its imports may also be subject to tariffs in the US, 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.” 

Prof Loh said the demand for e-commerce 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 & Company found that Singapore’s e-commerce sector grew from US$8 billion (S$10.7 billion) in gross merchandise value (GMV) in 2023 to US$9 billion in 2024. GMV refers to the total value of goods sold between customers or from e-commerce platforms. 

E-commerce sales here stood at US$4.9 billion in 2020, during the height of the pandemic, and ballooned to around US$8 billion in 2021 and 2022.

The expansion in 2024 comes after several layoffs and payment delays in the sector.

In January, regional e-commerce company Lazada axed around 100 employees in Singapore, with sources indicating that the company planned to reduce its South-east Asia headcount by 25 per cent to 50 per cent.

Local e-commerce 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 per cent 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 (AI) 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,” Prof 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.” 

Growing competition

Despite the challenges, e-commerce 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 e-commerce 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$70 billion in 2024, accounting for about 50 per cent of the region’s total GMV.

Bloomberg Intelligence analyst Nathan Naidu said Shopee’s parent company Sea has continued to invest in live-streaming features to fend off its rivals in 2024, but TikTok Shop is still the region’s most popular live-streaming e-commerce platform. 

TikTok Shop is also positioned to overtake second-place Lazada in the near term. 

The number of people who used Lazada fell to 107 million in October from 120 million a year earlier, likely due to less aggressive promotional tactics than Shopee, TikTok Shop and new entrant Temu.

Temu, which is backed by Chinese tech firm PDD, and Shein, a Chinese fast-fashion retailer, are also rapidly gaining share with “explosive” user growth, said Mr Naidu. 

“Singapore’s e-commerce market is relatively more mature compared with other markets in South-east Asia, hence e-commerce merchants might seek growth opportunities in other countries in the region such as Vietnam, Indonesia and the Philippines,” he added. 

Support for Singapore’s SMEs 

There is potential for Singapore’s small and medium-sized enterprises (SMEs) looking to enter the e-commerce sector.

E-commerce companies told ST they have introduced various initiatives to help smaller firms tap into opportunities on their platforms. For example, Shopee introduced its Seller Education Hub in 2021, where sellers, including SMEs, can attend workshops and webinars focused on key topics like using AI to improve product listings and search engine optimisation.

ST understands that Shopee plans to allow sellers to list products internationally, targeting markets like Malaysia and Thailand, through its Shopee International Platform programme by 2025.

Similarly, Amazon launched the Amazon Global Selling Singapore Cross-border Launchpad programme in partnership with Enterprise Singapore and the Singapore Business Federation in 2023. The initiative aims to help over 100 local micro, small and medium-sized enterprises expand into the United States by 2025.

The programme aims to equip at least 300 Singapore companies with cross-border e-commerce knowledge through seminars, business reviews and business-matching by 2025.

Meanwhile, TikTok Shop allows merchants to live-stream products themselves or through influencers, giving retailers the opportunity to engage users throughout the purchasing process.

It also launched its Seller Academy in 2022 to help merchants improve selling techniques and boost brand awareness.

Bhavani Stores, which sells its Uncle Saba’s Poppadoms Lentil Chips on Shopee, Lazada and TikTok Shop in Singapore, is one SME leveraging these initiatives.

Managing director Sreenivas Saba said the firm has attended Amazon’s Global Selling Programme, as it aims to enter the US e-commerce market soon.

“The great thing about e-commerce platforms today is that they are very easy to get on and start selling,” added Mr Sreenivas.

“We want to tackle some large overseas e-commerce platforms next... the good thing is that many of them have workshops which onboard sellers, and we will definitely continue making use of them.”

Mr Sreenivas said he has engaged influencer agencies to help market Uncle Saba’s Poppadoms Lentil Chips via live streaming on TikTok shop. He also plans to explore Shopee’s International Platform programme, set to launch in 2025, to expand the business to Thailand and possibly other countries in the region.

Ms Maya Kale, co-founder of woman’s wellness platform Moom Health, said platforms like Shopee and TikTok Shop have been helpful with their training workshops.

The company’s products, which include natural supplements, are sold on Shopee, TikTok Shop and Lazada.

“We definitely plan to continue selling on these platforms, as they provide valuable exposure and help grow our brand,” Ms Kale said.