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Ashok Sethi, TNS

December 2007

Asian Consumer Trends


Consumer trends
Asian Markets
Demographic and socio-economic trends
Environmental trends
Changing consumer mind-set

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Asian Markets
Asia - 12 relevant markets
China and India tower over the others (77% on the Asian population)

Population in Million

China 1,316

Taiwan 23

Korea 49
But can China really be
Philippines 90 considered as one market?
Thailand 65

Indonesia 246

Malaysia 25

Vietnam 85

Singapore 4.5 *Population estimated in 2006


*Source: GeoHive (www.xist.org/earth/)
Hong Kong 7

Japan 127

India 1,100

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Several provinces of China are larger than many other Asian countries
In reality Asia has 40+ markets – most with a population of 10 million+!

Region Population (M) Region Population (M) Region Population (M)


India 1100 Hubei 57 Malaysia 25
Indonesia 246 Zhejiang 49 Gansu 26
Japan 127 Korea 49 Inner Mongolia 24
Henan 94 Guangxi 47 Taiwan 23
Shangdong 92 Yunnan 44 Xinjiang 20
Guangdong 92 Jiangxi 43 Shanghai 18
Philippines 90 Liaoning 42 Beijing 15
Vietnam 85 Heilongjiang 38 Tianjin 10
Sichuan 82 Guizhou 37 Hainan 8
Jiangsu 75 Shaanxi 37 Hong Kong 7
Hebei 68 Fujian 35 Ningxia 6
Thailand 65 Shanxi 34 Qinghai 5
Hunan 63 Chongqing 28 Singapore 5
Anhui 61 Jilin 27 Tibet 3

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Asian markets

Guangdong, Jiangsu and Shandong each have a GDP which is:


not very far from that of Indonesia
higher than that of Thailand and Malaysia
Shanghai alone has a GDP which is almost equal to that of the
Philippines

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Demographic and Socio-economic trends
1. The Greying Consumer
% of population over 65 years
20
China

Hong Kong,
China
16 India

Japan

12 Indonesia

Malaysia

Philippines
8
Singapore

Thailand
4
Vietnam

Korea, Rep.

0
1975 1980 1985 1990 1995 2000 2005

Source: World Bank


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1. The Greying Consumer
The emerging “grey market”

A new emerging market of 60 years+ with considerable buying power:


With unique physical and emotional needs
Implications exist on product design, formulations, packaging
Special store and shelf design

Apparel
Travel packages
Health care products

Elder care services


Telecommunication products 9
2. Urbanisation

% Urban population
90

China
70 India
Japan
Indonesia
50 Malaysia
Philippines
Thailand

30 Vietnam
Korea, Rep.

10
1975 1980 1985 1990 1995 2000 2005

Source: World Bank


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2. Urbanisation
Implications

This group of recently “urbanized” presents a unique market as their


needs are special and are neither represented by the urban nor the rural
consumers.
This migrant population:
Has special financial needs (sending money back home, no social security)
Unique social and emotional needs as a result of living away from the family
Entertainment needs

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3. Rising Incomes and expenditure

Household final consumption expenditure per capita (constant 2000 US$)

25,000 2500 Japan

Korea, Rep.
20,000 2000
Malaysia

15,000 1500 China

India
10,000 1000
Indonesia

5,000 500 Philippines

Thailand
0 0
1975 1980 1985 1990 1995 2000 2005 Vietnam
* Note: Left Axis for Japan and Korea Rep., right axis for all other contries
Source: World Bank

Asian economies growing at 7%+ per annum as compared to global growth of only 3%
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3. Rising Incomes and expenditure
Rate and quantum of increase different for urban and rural

Value (RMB)
13995

Rural Household per capita 11759


11995 disposable income
10493
Urban Household per capita 9422
9995 disposable income
8472
7703
7995 6860
6280
5854
5425
5995 4839 5160
4283
3496
3995
2577
1700 2027 3255 3587
1995 2936
2622
2090 2162 2210 2253 2366 2476
1578 1926
-5 1221
709 784 922
1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006

Source: National Statistics Bureau, China

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3. Rising Incomes and expenditure
Implications

In rural areas, as consumers are lifted out of poverty, it creates additional


market for low priced, Bottom of the Pyramid (BOP) products.
At the upper end, rapid increases in income and consumers catapulting
into the HNWI (high net worth individuals) category, are boosting the
market for luxury products in Asia
In the middle, increasing white collar jobs and service industry jobs are
lifting BOP and lower middle class consumers to well groomed middle
class, creating market for mid level discretionary products.

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4. Emergence of the independent female consumer
Traditional concept of “housewife” does not exist in most of Asia

China 75.8
87.8

22.4
India 55.1
Female
48.7 (%)
Taiwan 67.4
Male
Korea 50.3 (%)
74.1

49.6
Philippines 79.2

Thailand 64.0
80.9

Indonesia 48.6
84.7

45.8
Malaysia 79.9

Vietnam 51.2
55.7

Employment%:
*Data estimated in 2005
*Source: Asian Development Bank (ADB)- Key Indicators 2007 (www.adb.org/statistics)
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5. Smaller families
Smaller families – with distinct marketing implications

Average numbers per household


2.7
Japan 2.6
3.3
Korea, Rep. 2.7 2003
3.3
Hong Kong 3.2

Taiwan 3.3 2006


3.2
3.5
Singarpore 3.5
3.8
China 3.5
3.8
Thailand 3.6
4.4
Indonesia 3.8
4.4
Malaysia 4.7
4.8
Vietnam 3.3
4.9
Philippines 5.0
5.4
India 5.3

Source: The Economist


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Environmental trends
1. Environmental awareness
Evidence of increasing concern across Asia …

Pollution and global warming are now touching the lives of the
people. Concern is no longer merely academic – and is
increasing sharply.

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1. Environmental awareness
Evidence of increasing concern across Asia…
I would be willing to pay 10% more for groceries/products that are more
environmentally friendly
Ave

India 51 42 5 2 3.4

Chinese mainland 38 55 6 1 3.3

Philippines 44 46 9 1 3.3

Indonesia 41 47 11 1 3.3

Malaysia 28 55 14 3 3.1

Thailand 26 56 17 1 3.1

South Korea 22 58 18 2 3.0

Singapore 15 55 27 3 2.8

Hong Kong 15 54 27 4 2.8

Japan 10 54 33 3 2.7

New Zealand 15 38 34 13 2.6

0% 20% 40% 60% 80% 100%

Strongly agree Somewhat agree Somewhat disagree Strongly disagree


Sources: Grey Group study
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1. Environmental awareness
“Environmental-friendly” products likely to find increasing favour

s - f ree~
ho sp horu
Eco-friendly is the new status symbol! P
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2. Internet and Web 2.0
Several Asian countries are at par with the West. Penetration in China
is also very high in large urban areas.

70
Past month internet usage % 67 66 67 68
63
61
Source: Internet World Stats
50
48
44

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13
9 10
8
4
Malaysia
Thailand

Taiwan
China

Japan

South Korea

Hong Kong
Germany
Vietnam

Singapore
Indonesia

Spain

France
Philippines

USA
India

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2. Internet and Web 2.0
Surfing in i-cafes, at home, office or school
(0,000) users
20000
Internet population: China is the home to the second
largest internet population in the world!
16000
16200

12000 13700
12300
11100
10300
8000 9400
8700
7950
6800
5910
4000
4580
3370
2650
2250
0
2000.12 2001.06 2001.12 2002.06 2002.12 2003.06 2003.12 2004.06 2004.12 2005.06 2005.12 2006.06 2006.12 2007.06

60%
Internet penetration: Big city penetration 53.4%
50% in China is close to Western cities 47.6%

40% 36.8%
32.2%
30%

20%

10%
8.0%

0%
National, 6+ yrs 36 cities, 15+ yrs 4 cities, 15+ yrs 4 cities, 15-44 yrs 4 cities, 15-44 yrs,
MHI RMB 2000 or
above
Source: CNNIC / CNRS 22
2. Internet and Web 2.0
Implications

Explosion of information
Consumers make much more informed choices
Transparency critical
Web 2.0 or user generated content
An opportunity to tap into consumer creativity
A threat if left unmonitored and ignored

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3. Growing prominence of Asia

Economic performance
Economic clout and influence
Excellence in sports
Reaching for the space!

Asia now the centre of the world!


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3. Growing prominence of Asia
A palpable sense of optimism
When people are asked “Do you think the next generation will have more economic
120%
prosperity, less economic prosperity or the same as now?”, countries around the
world have diversified opinions.

2% 0% 1%
100% 1%
2% 0% 3% 1%
2% 5% 1% 6%
4% 7%
26% 14%
6% 24% 21% 15%
24% 13%
80% 28%
17%

8%
25%
42%
60% 27% 20%
20% 44%
47%

37%

40% 28%
73% 23%
30%

44% 21%
44% 17% 21%
20%
22% 20%

17% 10% 13%


9%
5% 6%
0% 2% 2% 1% 1%
CHI IND JPN KOR VNM FRA GER UK USA
A lot more economic prosperity than A little more economic prosperity than
The same as now A little less economic prosperity than
A lot less economic prosperity than now Don't know(DO NOT READ!)

Source: Gallup International report 2006 of “Worldwide Survey Highlights


lack of faith in leaders in an uncertain world” 25
3. Growing prominence of Asia
Increasing cultural influence
Feng shui, Yoga and the Korean wave

Cultural influence also ascending – including cross border influence within Asia.

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Changing consumer mindset
1. From affiliation to individualism
Concomitant of changing demographics

Traditional marketing has always sold products in the context of


husband/children/wife/family/friends (“buy this and be a good mother!”).
However current sentiment has veered towards “I am important and deserve
it!”. Consumption is now legitimate for oneself!
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2. The evolving consumer needs of individuality,
connoisseurship and indulgence

Beyond status, needs of consumers have evolved


towards two directions: individuality and experience

INDIVIDUALITY
Trend-setter
(Individuality)

Connoisseurship
(Taste and ‘Indulgence’
discernment) (Enjoyment
and experience)

‘Bling’ (status)
CONFORMITY

OWNERSHIP EXPERIENCE

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3. Trade up & trade down
Store label kitchen roll and LV bag

The same consumer displays extreme price sensitivity for one product
(normally functional products of low perceived differentiation) but an
extraordinary premium for another product (mostly visible consumption
products or products of high perceived differentiation).
Asian Luxury products market in China is forecasted to become the
largest in the world in another decade or so.
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4. Health and wellness
Evidence of increasing concern across Asia …

Health products and supplements are some of the most advertised


products in Asia. Health clubs and fitness centers have been
mushrooming across Asia.

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5. Consumer assertivism
Coke and Pepsi targeted in India. SK II in China.

Consumers determined to get the best out of the companies – and pouncing on
any lapse. Tuangou, or team buying, aims to drive unprecedented bargains by
combining the reach of the internet with the power of the group.

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6. From products and services to solutions and experience
Implications
Moving from functional needs to emotive needs
From functional to emotional gratifications
Hence from products to experiences
Diluting the product category boundaries
Creating opportunities for companies to collaborate

Nike + iPod Mplayer (iRiver + Disney)


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7. Ascendance of Design
Implications

From the marketer’s perspective


Decreasing opportunities for product differentiation
At the same time a strong need to uniquely position the brand
From the consumer’s point of view
Demand to find greater value
Desire for higher gratification
As a result design reigns supreme in almost all product categories
From product, to packaging, to advertising to web design

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7. Ascendance of Design
Design finds a role even in credit cards

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7. Ascendance of Design
As also in packaging

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Ten important trends

Growing concerns Growing From affiliation Emerging needs


Internet and
about prominence of to individualism of connoiseurship
Web 2.0
the environment Asia and indulgence

Health and Consumer From products Ascendance


Trade up and
wellness assertivism to solutions and of design
trade down
experience

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For more details :

Ashok Sethi
Regional Director, Methodology and Analytics
t: +86.21.63601808
ashok.sethi@tns-global.com
www.tnsglobal.com