Q&A: Understanding the ASEAN Consumer
Analyst Insight by An Hodgson – Income and Expenditure Manager
Our recent webinar on “Understanding the ASEAN Consumer” explored the diversities and similarities in consumer income and spending patterns across the ASEAN, with detailed examination of the four largest markets in terms of total consumer expenditure (Indonesia, Thailand, the Philippines and Malaysia). The webinar went on to assess the key challenges and opportunities that these disparities and similarities present before ending with a Q&A session, highlights of which are below.
Beyond the diversities and disparities that we discussed in our webinar, Southeast Asian consumers and businesses share an eagerness to welcome business and investment opportunities with the common goal of prosperity. They are willing to cooperate with each other to generate wealth and improve the standard of living, which culminates in the imminent creation of the ASEAN Economic Community (AEC). In addition, ASEAN consumers are young compared to more developed regions as well as China; they are family focused and are also very technology savvy. These are the similarities that we need to take into consideration when targeting the ASEAN consumer.
What do you think about the overall e-commerce landscape in ASEAN, its growth, trends and opportunities?
Southeast Asia is a new prime spot for e-commerce. The region has a young population, expanding middle class, increasing Internet connectivity, rising smartphone penetration and greater payment options, all of which are favourable for the growth of e-commerce. Between 2009 and 2014, the proportion of the ASEAN population using the Internet rose from 12.6% to 25.8%. By 2030, this is expected to reach 44.6% of the ASEAN population. E-commerce will help to create endless opportunities for brands to connect with consumers, present them with a cost-effective approach to establishing their presence in Southeast Asia, and help them gain market share in the region. With opportunities, however, come a number of key challenges, including a lack of transport and logistics infrastructure in some parts of the region for reliable delivery of goods, online payment fraud, regulatory loopholes regarding e-commerce, and corruption to name a few. As for the consumer, the expansion of e-commerce will give ASEAN consumers a greater choice of goods and services, at competitive prices.
Which retail category or consumer spending category will embrace e-commerce the most?
In as much as ASEAN consumers are diverse, the categories of consumer expenditure that will see the strongest e-commerce growth in different countries are also quite diverse. Over the period of 2016-2019, Euromonitor International forecasts that the category with strongest Internet retailing growth in Indonesia will be apparel and footwear (at 138% in real terms), in Thailand it will be beauty and personal care (82.5% in real terms) while in the Philippines it will be consumer healthcare (39.4% in real terms).
What will be the impact of rise of India on the ASEAN?
The rise of India will certainly have a positive impact on the ASEAN. Especially as the Chinese economy slows, the rise of India will even be crucial for the ASEAN. Already India is an important market for ASEAN exports, which reached US$43.4 billion in 2014 (up from US$27.1 billion in 2009). India and the ASEAN have already implemented free trade agreements (FTA) in goods since 2009, while an FTA on services and investments also came into effect in July 2015. A rising India with its vast population and strong income gains will give the export-driven ASEAN economy an expanded market, which in turn will boost investment, job creation, disposable incomes, and ultimately economic growth for the grouping.
What will be the key impact of AEC?
The AEC will ultimately form a single economic market, with free movements of trade, investment and skilled labour. When all of these plans are fully implemented, the AEC will offer businesses an extended market, a friendly business environment, and a strengthened ASEAN economy. However, in the short term, the global and regional economies will not feel any immediate impact of the AEC establishment at the end of 2015, because the AEC’s official establishment will be followed by a lengthy process of negotiation among member states on all aspects of the economic community and its implementation. The absence of strong regional institutions to enforce compliance can also be another factor which contributes to delaying regional economic integration.