SINGAPORE -- The travel and ride hailing segments of Southeast Asia's digital economy, once pillars of growth for fast-rising internet businesses in the region, have taken a drastic hit from the coronavirus pandemic.
According to a yearly report released Tuesday by internet giant Google, Singapore state investor Temasek and U.S. consultancy Bain and Company, both sectors shrank 13% in terms of consumer use amid COVID-19, as consumer behavior shifts due to various forms of lockdown to stem virus transmissions in the region.
Restrictions of movement in the 10-member Association of Southeast Asian Nations, or ASEAN, to enforce social distancing have suffocated transport-related parts of the bloc's internet economy such as travel and ride-hailing, even as people who stayed at home contributed to a surge in e-commerce, grocery and food delivery.
"Urban mobility has taken a big hit during the lockdown," said Aadarsh Baijal, Head of Digital Practice in Southeast Asia at Bain and Company during an online briefing on Tuesday. "At the height, we would expect it's 80% down, and even as restrictions have eased, a lot of us, including on today's call, are working from home and that has resulted in a decline in the transport sector."
The "e-Conomy SEA 2020 report" found that consumer use in the food delivery segment grew 34% and online groceries expanded 33% after COVID struck the region due to the change in shopping behavior. Education saw 22% growth, while video streaming increased 21%.
The report surveyed some 4,700 respondents across Singapore, Malaysia, Indonesia, Thailand, Vietnam and the Philippines in tracking the shift in their digital consumption before and after the pandemic hit. Figures are the percentage of survey respondents who answered "more than before" minus the percentage of respondents who said "less than before."
Super-app providers Grab and Gojek, both startups that built empires initially based on ride hailing as a core business, have been pivoting toward deliveries in response to the changes brought by COVID.
In its home market of Singapore, Grab launched its 56th regional cloud kitchen facility in October, catering to online orders for meals. The food business now contributes over 50% of the unicorn's revenue.
"The pandemic has had food and beverage players rethink their expansion plans," Dilip Roussenaly, senior director for Deliveries at Grab Singapore said at the time of the launch. "This is one of our latest efforts as part of our commitment to support our merchant-partners in building their digital businesses."
Prior to the pandemic, ride hailing was seeing exponential growth in ASEAN. Google, Temasek and Bain's report issued last year noted that demand for the service ballooned by five times from just 8 million active users in 2015 to more than 40 million.
Before it had its run cut short, the online travel segment was also booming, with the sector expanding from $19.4 billion in 2015 to $34.4 billion last year, based on the 2019 report. Tourism took a battering this year amid the pandemic, as governments in the region closed borders to leisure travelers to battle COVID.
Travel booking service Traveloka, one of Indonesia's most valuable startups, was forced to lay off 10% of its workforce, or about 100 people, in early April as it needed to slash overheads after seeing a "massive amount" of requests for refunds from customers whose travel plans had been affected by the pandemic.
Despite the virus throwing ASEAN into a slump, the 2020 study pegged the region's digital economy at $100 billion this year and more than $300 billion by 2025, which mirrored projections in last year's report.
"We have a lot of new digital users or consumers, more than ever before," said Stephanie Davis, vice president at Google Southeast Asia, during the briefing. "And against the backdrop of the global pandemic and unfortunate decline, Southeast Asia's digital economy has held steady."
Singapore's digital economy, shocked by the virus, shrank 24% over the year from $12 billion in 2019 to $9 billion in 2020. It is the only ASEAN country covered in the report that experienced a contraction in its internet economy, as its neighbors logged growth.
"Singaporeans love to travel. It's not surprising online travel was a big part of the economy, and clearly, the domestic market is very, very, badly hit," said Rohit Sipahimalani, chief investment strategist at Temasek.
Meanwhile Vietnam and Indonesia are countries which maintained two-digit growth. Vietnam led the bloc's expansion, with its digital economy expanding 16% from $12 billion in 2019 to $14 billion this year. The region's most populace nation, Indonesia, saw its internet economy grow 11% from $40 billion in 2019 to $44 billion this year.
Thailand, Malaysia and the Philippines also logged growth of 6% to 7%. Thailand's internet economy expanded from $16 billion in 2019 to $18 billion. Malaysia's, meanwhile, grew from $10.7 billion to $11.4 billion, while that of the Philippines expanded from $7.1 billion to $7.5 billion.
The report tipped countries like Indonesia and Vietnam to power ASEAN's digital economy through to 2025. Indonesia is expected to see the value of its internet business grow by 23% to $124 billion in five years, with Vietnam's projected to hit $52 billion -- a growth rate of 29%.
Vietnam's VNPay this year joined the ranks of Southeast Asia's unicorns -- startup companies that have hit billion-dollar valuations -- bringing the region's total to 12, from 11 last year, the report said. E-commerce outfits Lazada and Bukalapak, online gaming provider Sea Group and digital payments service OVO are among those that were already in the club.
The report also observed that private funding for unicorns has slowed as investors shied away from heavy cash-consuming businesses, with the unicorns themselves putting a keener focus on charting a path to profitability.
Funding for these companies dropped to $3.0 billion in the first half of 2020, compared to $5.1 billion in the same period last year, the report noted. It added that investors are cautiously optimistic in their outlook, even as significant dry powder, or reserves for investing, remain available.
Looking at tech investments in ASEAN, the report highlighted that total deal value dropped to $6.3 billion in the first half of this year, compared to $7.7 billion in the same period in 2019.