In a highly inter-connected world, many clients are thinking about how consumer trends and behaviours – particularly around technology, innovation and retail, open up new growth opportunities and translate from Eastern to Western markets.
One key region is ASPAC: the largest retail market in the world, with over 50% of the world’s population. It has also seen phenomenal economic growth – especially China. Since joining the World Trade Organisation (WTO) in 2001 when it was a minor global economy, China is now number one in terms of purchasing power and number two in terms of growth.
I have had the pleasure to dig into the big picture trends in ASIA at two events this summer. Firstly, at our KPMG In Conversation series and secondly, when chairing a panel discussion at the China-Britain Business Council's (CBBC) China Consumer 2022 conference. I was joined by Gillian Drakeford, previously CEO of IKEA in China and the UK and now a consultant advising businesses on ASPAC strategies, and Anson Bailey, Head of Consumer Markets at KPMG China.
So, what can businesses learn from consumer trends on the other side of the world, and apply in their approaches?
4 lessons from ASIA
1. A hotbed of growth and innovation – Be a leader not a follower of new tech
Retailers and consumer goods businesses have moved from ‘copying’ Western formats and trends to leading with innovations of their own. There is a significant investment right now in NewCo’s pioneering the metaverse, NFT, and tokenisation. One client is even considering buying Fortnite licenses for every member of the executive committee so they can try it out and see what the potential could be.
It’s vital to keep an eye on digital developments and keep pace with a digital savvy generation. Take a ‘test and learn’ approach in markets that are already at the forefront of tech and innovation and think about partnering where applicable. Testing first will help you avoid making rash investment decisions that can quickly become expensive. There’s a perception, for example, that China is ‘cheap’ – but costs are rising there too.
With so many new technologies and innovations reaching markets faster than ever, it’s important to identify those that are key and most appropriate for your business’s growth strategy. New technologies can be expensive, so aim to priorities innovation spend accordingly vs investing in multiple innovations at once.
2. Gen Z and a growing middle class – Embrace and engage
One of the stand-out features of the region is the size of its Gen Z population. There are some 300 million Gen Z-ers in China, and about the same again across the rest of Asia – a staggering market of nearly 600 million. Another significant consumer audience is China’s burgeoning middle class, who have moved on from purchasing their first homes and cars to making whole series of connected purchases across the home, leisure time, lifestyle and travel.
As Gillian observed: “Gen Z in ASIA is absolutely immersed in technology – it’s their world. They’re eager adopters of new features and capabilities, and anything that drives convenience. They’re hugely important on their own, but don’t forget that they frequently make purchases on behalf of their parents and families too – amplifying their significance even more.”
If technology is the way to reach them, it’s also worth noting that China has been very successful at driving connectivity because it has a relatively closed social media ecosystem. Everything is much more joined up and connected. To put it into perspective, we would need about 20 different apps on our phones to do everything you can do through WeChat.
Identify your audience and understand their specific needs. Get to know the dynamics of the huge Gen Z population in particular. Use social channels to gauge what they are talking about and interested in. Launch limited edition products and assess market interaction.
3. ESG matters – Show your credentials
There may be a perception in the West that ESG has a lower profile in parts of Asia. But this is not the case, and Gen Z in particular are becoming increasingly aware, as Anson reflected:
“Gen Z in China and ASEAN are incredibly tech and media savvy – and they’re also increasingly socially conscious. This extends to ESG and sustainability. They’re watching us, asking more questions and are happy to call out brands that don’t ‘walk the talk’.”
ESG commitments must be real, not just marketing hype. More attention is being paid to sustainability issues, the sourcing of goods, packaging and consumption. Eco-conscious Gen-Z are taking action, mindful that the Asia-Pacific region is home to some of the most at-risk locations where rising sea-levels are concerned. Businesses need to be able to show that they are focusing on greening their supply chains. In China, there’s a particular focus on products that are safe, especially from a health perspective. Consumers value brands that display trackability, honest storytelling and that work to build their trust.
This resonated with Gillian, who added: “Businesses also need to help consumers make more sustainable choices. This includes bringing costs down – we can’t have a mentality that it’s OK for more sustainable products to cost more.”
But tensions may surface in the coming years. There are a number of huge online festivals like Alibaba Singles Day where significant numbers of purchases are made. But as ESG consciousness rises, we may see consumers balancing their urge to buy with a desire to adopt a more sustainable footprint. Retailers may also begin to charge for returns. It will be fascinating to see how this plays out.
Take ESG as seriously in China and wider Asia-Pacific as you would anywhere else. Understand the values and expectations of Chinese/ASPAC consumers whilst ensuring that your activities and profile there align with your brand’s core principles.