Conversational commerce in Southeast Asia: Basics, key dynamics, and opportunities for brands

Conversational commerce in Southeast Asia: Basics, key dynamics, and opportunities for brands

This blog post is the third in our SEA Social Commerce series. Please see the announcement of our research initiative here, and the full list of social commerce archetypes here.

Conversational commerce has been a buzzword in e-commerce for years, but there hasn’t been a lot written about its potential and dynamics for our region in particular. In this blog post we aim to define and size, at least in a preliminary way, the market for conversational commerce in Southeast Asia, and to cover the most important dynamics that brands and retailers will need to decide what to do next. We’ll cover everything from platforms to economics, but let’s start with a definition.

Conversational commerce is e-commerce where two-way conversations improve customer service and ease of shopping

At its core, conversational commerce, also known as chat commerce and c-commerce, is any kind of e-commerce where two-way conversations play a significant role in the customer journey.

The two most common types of conversational commerce today are:

  1. Messaging apps like LINE and WhatsApp, where buyers and sellers directly communicate to exchange product specifications, negotiate prices, and / or exchange payment information, e.g. bank account numbers.
  2. Live chats, often as a plugin embedded directly into the e-commerce platform or store where a buyer looking at a product can chat directly with the seller in real time to have their questions answered (and so improve the conversion rate on the platform).

By facilitating direct communication between e-commerce buyers and sellers, they make the purchase experience less transactional and more “social”, as illustrated in Exhibit 1 below.

Conversational commerce can cover the entire customer journey, like when a consumer messages a baker to customise and buy a birthday cake for their friend through Instagram. In other instances it only augments a more conventional e-commerce purchase, such as when a consumer messages a seller on Shopee to confirm that the product they’re looking for is in stock. 

Conversational commerce improves the e-commerce customer experience by providing buyers with a new way of seeking service and clarity while shopping online. Common inquiries tend to mirror the questions that consumers would ask staff in a department store or brand boutique: Some seek clarity, like asking whether a product is available in a different colour or size, while others seek service in the form of recommendations or special requests. By the same token, evaluating the quality of a conversational commerce experience is often as simple as imagining it as a face-to-face interaction with a staff member in a store.

Conversational commerce is a “hybrid” social commerce archetype

We consider conversational commerce a “hybrid” archetype of social commerce because it shows up in myriad ways across e-commerce and social media platforms, is often used by micro-sellers to communicate with their social network of buyers, and enables the underlying dynamics of community / group buy promotions.

How large is the conversational commerce market in Southeast Asia?

The only comprehensive sizing of conversational commerce we could find is in a report by Juniper Research, that estimates conversational commerce in Asia-Pacific (excluding South and East Asia) to be about 3bn USD. Let us know if you have seen any other estimates.

Given that total e-commerce in Southeast Asia is already above 100bn USD according to some estimates, an estimate of 3% or below of the total e-commerce that is enabled by conversation feels low. This is particularly so given suggestions from other public sources that indicate a large and fast-growing market. For instance, a 2019 study by BCG for Facebook indicated that 30% of consumers with awareness of conversational commerce had tried it at least once, while Thailand’s #1 messaging app LINE touts a staggering 45% conversion rate for its Thai conversational commerce business.

We are conducting our own primary research to size the conversational commerce market, across markets and categories, for our coming 2022 Southeast Asia Social Commerce Report. In the meanwhile we have leveraged published data points and some early interviews to establish a high-level estimate. Based on our preliminary analysis, we believe that conversational commerce enables around 20-40% of total e-commerce in Southeast Asia.

We have illustrated the two primary drivers of this estimate below:

  1. The rise of messaging apps
  2. The growing use of live-chat plugins on e-commerce stores

The most important conversational commerce dynamics: Consumer value drivers, customer journey and economics

Despite its promising user penetration and growth, the vast majority of brands are still not active in conversational commerce. We believe that’s largely due to a lack of data, tools and knowledge. To start the conversation, we’ve outlined the most important dynamics in conversational commerce below.

Why do consumers use conversational commerce? It’s convenient, improves shopping experience, and feels more human.

E-commerce revolutionised shopping by offering unbeatable convenience, giving consumers access to near-infinite product selection with cheap and fast delivery. But it’s always had a service and soul problem. As we recall one Singaporean mall landlord asking rhetorically, “when was the last time you really felt something while shopping online?”. The meteoric rise of e-commerce has historically been over-indexed in low-service purchases, but as its share of total retail continues to grow, it has to start providing solutions to high-touch purchases too. We believe conversational commerce is part of the response to that. 

That conversational commerce is fundamentally about providing better service in e-commerce is supported by a 2019 BCG study commissioned by Facebook. The study, which surveyed 8,864 people in 9 countries, includes responses from consumers in 5 SEA markets. Its findings are clear: Consumers use conversational commerce for many of the same reasons they ask for assistance from staff in offline stores - seeking product information, inquiring about prices and deals, and seeking personalised recommendations and service. A separate study by Facebook from 2021 indicates that 48% of surveyed holiday shoppers in APAC would be more likely to buy from a brand that offers instant messaging.

We have summarised the findings from the 2019 BCG/Facebook study in the exhibit below:

Another way conversational commerce provides value to consumers is about the context in which it appears most often: messaging apps. Southeast Asia’s consumers are among the world’s most common and intense users of messaging apps (see exhibit 4 below). Although conversational commerce sometimes appears in other settings like website/app live chats and on e-commerce platforms such as Shopee, messaging apps is by far the most popular pathway. 

Messaging apps provide the ideal stage for conversational commerce in Southeast Asia due to several factors:

  • A familiar environment: The vast majority of internet users in Southeast Asia use messaging apps every day and for a wide range of purposes; everything from speaking with friends and family to securing a car loan or indeed buying goods. Micro-sellers were the first to offer shopping through instant messaging, and many brands have since followed suit to stay competitive. Nearly everyone knows how to use messaging apps, which lowers the barriers to purchase.
  • Network concentration: Southeast Asia’s messaging apps markets tend to be highly concentrated, with just 1-2 apps reaching near-total penetration. That makes it easy for sellers to find their customers, and for customers to understand the interface and features of the apps they’re using.
  • Selling tools: The dominant messaging apps across Southeast Asia are all acutely aware of conversational commerce as a prime opportunity for generating engagement and monetization. While Meta’s platforms (WhatsApp, Instagram and Messenger) are mainly focused on chatbots, local favourites like Zalo and LINE are going one step further and building in-app check-out flows with integrated payment and order tracking. 

We’ve collated an overview of the most-used messaging apps across Southeast Asia, according to GWI via DataReportal, in the exhibit below. While this data broadly corresponds with what we’ve seen and heard in the market, the statistics for The Philippines feels off. Rakuten’s Viber messaging app is listed as #4 with 36.2% penetration rate, far from PR figures between 71% and 80%. The truth likely lies somewhere in between, but it’s safe to say that Viber is among the most popular messaging apps in the country.

What does a conversational commerce journey look like? More or less like a chat with a friend, with technology embedded along the way.

An interesting trait of conversational commerce is that it’s always been driven more by organic consumer demand for convenience than platforms’ or brands’ concerted effort to create a new way of shopping online, and this demand for convenience has shaped what constitutes a great customer journey in conversational commerce.

At its core, conversational commerce looks and feels a whole lot like texting a friend or family member. The conversation is initiated through a text message with the hope and expectation of a fast response, and is carried on in a rapid-fire back-and-forth format. Conversations are mostly conducted through text messages, but photos and other media can be utilised where useful. 

One transaction can easily span several conversations, starting with broad recommendation questions and slowly narrowing in towards final selection of what to purchase. Once all questions are answered and terms are settled, payment is typically conducted through manual means. In 2022, cash on delivery and bank transfers proven with a screenshot are still the most common modes of payment in conversational commerce.

The reliance on manual payments is indicative of the broader customer journey, which can often feel disjointed and clunky. This seeming paradox - clunky yet convenient - comes down to the high value consumers place on being able to speak with a real human while shopping online. Going forward, we expect technological innovation to target the weakest areas of the conversational commerce customer experience:

Customer journey weak point Innovation themes
Experience breaks if an agent is not immediately available to reply Multi-agent routing software, chatbots,
No support for credit cards, buy-now-pay-later, etc. Closer integrations with payment gateways, lightweight web checkout flows
No post-purchase email with order tracking link Conversational commerce order management systems, chatbots for order tracking
Hard for agents to understand past context of customers’ questions Multi-agent routing software, conversational commerce CRM
Challenging to provide immediate responses at all hours of the day Multi-agent routing software, outsourced contact centres, chatbots

Platforms, sellers and a horde of third-party vendors are all working hard to solve these basic pain points. That will lead to better conversational commerce experiences and, we believe, drastically higher penetration and use of this new way of shopping online.

A key take-away is that consumers who try conversational commerce are incredibly patient and flexible, as long as they receive human or ‘human-grade’ answers in a timely manner. If these two ingredients are missing, however, the offering falls flat. This goes a long way in explaining why many corporate brands have failed to make their recent conversational commerce efforts stick; they tend to rely highly if not completely on chatbots for responses, and consumers are predictably not interested. 

What are the economics of conversational commerce like? Great for high-value / high-margin products. Not so for small basket sizes.

There’s no doubt that consumers appreciate the convenience and ease of conversational commerce, but brands and retailers must carefully consider the costs and benefits before investing. While the business case of conversational commerce will vary from brand to brand and category to category, we believe the following approach can be helpful for gauging high-level feasibility. 

Our conceptual approach relies on a few core assumptions:

  • The core benefit of conversational commerce is service, and that the element of service increases e-commerce conversion rate while limiting the required traffic acquisition spend.
  • The core cost driver of conversational commerce is manpower expenses, in the form of live chat agents who have the required knowledge and tools to provide clarity and service to consumers. 

With these assumptions in mind, we can project the theoretical profitability of an e-commerce business in a known category, market and price range. In the below exhibit we’ve used the example of an online sneaker store in Thailand: 

In our sneaker shop example we’ve expressed our key assumptions as follows:

  • Average basket size net of 10% average discounts at THB 4,500 (US$ ~120) based on desktop research from online sneaker shops
  • Cost of Goods Sold (COGS) at 50% of the average basket size before discounts, and other variable charges like logistics fees and G&A based on industry comparisons
  • Conversational commerce labour cost per conversion at THB 350 (US$ ~10), based on various assumptions about the agents’ remuneration, working hours, productivity and conversion rate
  • Blended Return On Ad Spend (ROAS) at 4x for our baseline e-commerce projection and 6x for our conversational commerce projection. 

With these high-level assumptions, conversational commerce would reach unit operating profitability at an average basket size level of THB 2,800 (US$ ~75) and beat conventional e-commerce profitability from around THB 4,800 (US$ ~130). 

While these projections are merely theoretical, the take-aways are clear: conversational commerce requires a high average basket size to break-even, but can outperform conventional e-commerce at higher average basket size points since the agent cost-per-order tends to be fixed. 


We believe conversational commerce is one of the most promising and vibrant social commerce trends in Southeast Asia, and one that is very relevant for brands and retailers. It’s grown out of sheer organic demand from consumers, and reached impressive penetration and usage rates despite limited platform and vendor tools. 

The pioneers of conversational commerce could not be more different: On one end of the spectrum, high luxury brands like Dior and Louis Vuitton have been using messaging apps for so-called clienteling for years, while on the other, social micro-sellers were among the first to offer instant text-based purchases through e-commerce platforms and messaging apps. 

What’s been largely missing is the vast middle of consumer brands and retailers, who have shied away from conversational commerce due to a lack of data, tools and insights. But as our research shows, not only is conversational commerce large and growing, it can also be very profitable under the right conditions.

Southeast Asia’s e-commerce landscape might have been limited in the past, but with innovations like conversational commerce there’s a new impetus for brands to consider new ways of delighting customers online. At long last, brands that spent decades building trust and service in the offline world will have alternatives to the everything-for-everyone environment of e-marketplaces. We’re excited about what that means for e-commerce development in the region.

Share this post
Chalawan Insights Newsletter
No spam ever, we hate that too. You can unsubscribe anytime.
Thanks for subscribing, we won't let you down!
Oops! Something went wrong while subscribing.