Asean's new consumer landscape

Asean's new consumer landscape

Changing habits being shaped by Covid-19, tech and more

While Covid-19 will cause a significant economic impact with potential GDP contractions this year, the 10 Asean member states are poised for a tremendous leap forward in socioeconomic progress based on their long-term fundamentals.

Over the next decade, the region will be the world's fourth largest economy, with a US$4-trillion consumer market.

"The Future of Consumption in Fast-Growth Consumer Markets", a project in collaboration with Bain & Company, focuses on the emerging markets that comprise 40% of the world's population. After studying China in 2017 and India in 2018, for 2019-20 it turned its attention to Asean.

For now, Asean is in the throes of the health, humanitarian and economic crisis resulting from the pandemic. A majority of Asean chief executives surveyed by Bain in April predict Covid-related restrictions will last through the third and fourth quarters of 2020, with economic recovery in mid-2021.

The pandemic has caused noticeable changes in consumer behaviour. Some of those changes bring short-term volatility while others will alter consumer relationships and spending patterns in the longer term. Overall, eight themes will emerge across Asean in the post-pandemic world, with slight nuances in each country:

1. Consumer spending will double, driven by a middle class boom. The Asian Development Bank (ADB) estimates the region's annual GDP growth will fall to 1% this year and rebound to 5% in 2021. However, by 2030, 70% of the Asean population will be middle class. The middle class boom will more than double consumption in the region.

2. Boundaries of premium and value shopping will blur. Consumption behaviour has changed significantly as many communities quarantine. Disaster preparedness categories and daily essentials spiked, while luxury and non-essential spending experienced a dip with a possible slow recovery. Goods focused on convenience and well-being are likely to see high demand persist even post-recovery.

Over the next decade, many of Asean's new consumer class will buy their first luxury product and be willing to pay a premium for convenience, well-being and personalisation. At the same time, they will seek more value for money, with more than 60% of high-income consumers surveyed by Bain in 2019 rating price as a top purchase criterion.

3. Digital ubiquity will become the norm. The pandemic is accelerating the digital future, with many consumers making their first digital purchases and existing consumers spending more time online. In Indonesia, Malaysia, the Philippines, Singapore, Thailand and Vietnam, consumers clock an average 4.2 hours of mobile screen time daily, or 1.2 times the global average, according to Hootsuite. The abundance of information and choice will influence consumer behaviour. Bain research finds roughly 65% will switch brands if their favourites were not available.

4. Technology will tear down socioeconomic walls. The pandemic will accelerate the digital transformation process as governments and businesses strive to provide connectivity and everyday essentials to vulnerable communities. As rural and low-income communities gain access and exposure to similar information as their urban and higher-income counterparts, digital will begin to homogenise consumer behaviour. It will remove barriers for small businesses to flourish, enable delivery of basic services such as healthcare and education and provide access to products with better price, quality and assortment.

5. Local and regional competitive winds will prevail. Fully 80% of Indonesia's consumers prefer local brands to global brands, especially in food categories. The trend will continue, even in times of crisis, as communities look to #SupportLocal. During Covid-19, local food and beverage conglomerates are also at an advantage, as consumers tend to prefer large, trusted brands -- they look for lower prices, availability and security, and prefer brands that offer farm-to-factory visibility.

In a continuing trend, Korean, Japanese and Chinese brands are gaining popularity over Western brands. These brands are capturing significant market share -- from 57% in the Philippines to 74% in Indonesia in 2019 -- in categories such as beauty, fashion and smartphones, according to Euromonitor.

6. Shoppers will move beyond omni-channel to expect omni-presence. The pandemic is likely to expedite the shift, especially in categories and consumer groups that were previously more resistant to e-commerce. Covid-19 has led older consumers to make their first online grocery purchases, and many enjoy the convenience of home delivery. This is the first step toward a change in channel preferences.

Overall e-commerce is likely to grow at double-digit rates, accounting for 13% of retail by 2030, close to US penetration today, according to research from both Bain and Forrester. While social distancing has taken a toll on offline channels, convenience stores and traditional trade will remain relevant, evolving to offer services beyond retail such as digital financial services or last-mile delivery for e-commerce.

7. Convenience will be the new currency. Two out of three urban consumers in Asean rank convenience as one of their top three criteria for purchases, according to a Bain survey. The same ratio is willing to give up data privacy for convenience. These findings suggest there is huge opportunity for "super-apps" and fintech to streamline across such verticals as shopping and food delivery.

8. Sustainability will be non-negotiable. While 80% of Asean consumers in one Bain offline consumer study said they value sustainability and have made changes to their lifestyle to be more eco-friendly, the pandemic could trigger a short-term reversal. Cash-strapped governments and businesses are likely to put sustainability goals on the back burner as they focus on jump-starting the economy.

Yet there may be tailwinds that are longer lasting. For example, telework is showing organisations they can reduce travel, allowing employees greater flexibility and reducing air pollution for a healthier Asean in 2030.


Praneeth Yendamuri is a Bain & Company partner and Zara Ingilizian is head of Shaping the Future of Consumption and a member of the executive committee of the World Economic Forum. This article is adapted from one that originally appeared on the World Economic Forum Global Agenda.

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