"ASEAN is poised to become a dramatic consumption opportunity, driven by four mega-forces: strong demographic trends; rising income levels; geopolitical shifts increasing foreign investment; and digital advances opening new consumer markets."
Over the next decade, ASEAN will become the world’s fourth-largest economy with a roughly $4 trillion USD consumer market. While the entire region will offer abundant growth opportunities, each market will evolve differently.
Eight key consumption themes will emerge, some of them accelerated by the COVID-19 pandemic.
In particular, COVID-19 is changing shopping behavior, radically speeding up the digital future and making sustainability a harder tradeoff for policymakers in the short-term.
While COVID-19 will cause a significant economic impact with potential GDP contractions in 2020 and likely spilling over to 2021, the long-term fundamentals of the ten Association of Southeast Asian Nations (ASEAN) member states are on the cusp of a tremendous leap forward in socio-economic progress. Over the next decade, the region will be the world’s fourth largest economy, with a $4 trillion USD consumer market. While each of the ten member states will evolve differently, all of them will offer abundant opportunities for growth.
The Future of Consumption in Fast-Growth Consumer Markets, a project in collaboration with Bain & Company, focuses on the emerging markets that comprise more than 40% of the world’s population. After studying China in 2017, India in 2018, for 2019-2020 it turned its attention to ASEAN.
For now, the ASEAN region is in the throes of the health, humanitarian and economic crisis resulting from the COVID-19 pandemic. A majority of ASEAN CEOs surveyed by Bain in April predict that COVID-related restrictions will last through Q3 and Q4 2020, with economic recovery in mid-2021.
The pandemic has caused noticeable changes in consumer behavior. Some of those changes bring short-term volatility while others will alter consumer relationships and spending patterns in the longer term. Overall, eight consumption themes will emerge across ASEAN, in the post-pandemic world, with slight nuances in each country:
Consumer spending will double, driven by ASEAN’s middle-class boom. While the looming recession triggered by COVID-19 will dampen consumer sentiment and reduce overall spending within the year, this behavior will self-correct as economies move into recovery. The Asian Development Bank (ADB) estimates Southeast Asian annual GDP growth to fall to 1% in 2020 and rebound to 5% in 2021. However, by 2030, 70% of ASEAN population will be middle-class. The middle-class boom will more than double consumption in the region.
Boundaries of premium and value shopping will blur. Consumption behavior has changed significantly as many communities quarantine across ASEAN. 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 personalization. At the same time, they will seek more value for money, more than 60% of high-income consumers surveyed by Bain in 2019 rating price as a top purchase criterion.