How One Region is Shaping Worldwide Trends
No region better illustrates the emergence of the digital consumer more than Asia Pacific. The region leads the world in the number of internet users, due to the rise of mobile. The expansion of connectivity has also transformed life for Asia Pacific consumers, with these users embracing the ubiquity of the mobile device more than those in any other region.
Why Asia Pacific Is Worth Watching
Asia Pacific accounts for over half of the global population and roughly one-third of consumer expenditure today. A continued shift in global power will increase Asia Pacific’s leadership as a regional powerhouse in the future. There are two major factors propelling the region forward — an expanding population and growing economy. Asia Pacific is the most populous region and will add an additional 400 million people to the global total by 2030. Key contributors to that growth will be India, China and Pakistan. In 2018, 31% of the world’s disposable income came from Asia Pacific. By 2030, this region is expected to add an additional USD12 trillion in disposable income, which will account for 39% of the global increment. Given the potential of the population and economic growth, Asia is set to become a fundamental part of the world’s economy. In fact, by 2050, Asia is expected to account for over half of global consumer spend. Sustained growth in income will increase demand for consumer goods and services.
The Asian Century will usher in more digital consumers. Pacific is the global leader of internet users today. As of 2018, 51% of the internet users globally reside in Asia Pacific, which is expected to rise to 53% by 2030. This is due to an investment in digital infrastructure, competition-enabling regulations and the rapid spread of mobile technology. The region will contribute the most internet users globally over the 2018–2030 time period, adding 1.6 billion.
The Defining Characteristic of Asia
In Asia Pacific, there is a strong emphasis on traditional and cultural practices that unite the region. Even so, one of the most overriding characteristics of Asia Pacific is its diversity. Asia Pacific is one of the most culturally diverse regions in the world, which converges in melting pots, like Singapore, where groups such as the Chinese, Malays, Indians and Eurasians live in harmony. The region’s diversity also extends to its general development, including how and when different countries came online. With a mixture of developed and emerging markets, Asia Pacific is home to some of the countries with the highest and lowest levels of disposable income on a per capita basis. On the high end, there is Hong Kong, Singapore and Japan. On the other end, there is Myanmar, Pakistan and Bangladesh. Asia Pacific also contains countries with the highest median age such as Japan. Some of the youngest populations in the world, including Pakistan, Philippines and Bangladesh, reside in Asia. Even in terms of its digital uptake, there is a dichotomy. While developed markets like South Korea and Japan came online through fixed broadband connections decades ago, the high cost of network plans and devices hindered others. In the last decade, cheap cellular voice services extended connectivity to now mobile-first markets, including China, Indonesia and Thailand.
India remains a market of high digital promise
Local insight by Swarnava Adhikary, Senior Analyst
India’s low internet connectivity restricts the country’s overall digital development and as a result its digital commerce uptake. Just over one-third of the population has internet access. Even if internet is available, services are patchy and network speeds are low. This is particularly true in semi-urban and rural areas. Moving forward, internet usage is expected to improve with the completion of the government’s BharatNet national broadband project. Mobile will remain the key medium to address the rural-urban digital divide. Over the past couple of years, 4G LTE network coverage improved rapidly and cheap data plans are available. However, smartphone usage and speed must increase before the general population begins adoption. India’s absolute digital commerce spend is one of the highest in Asia, trailing only the East Asian markets such as China and South Korea. This is due to India’s population size. Per capita digital commerce spend is low, given the country’s huge population and concentration of rich digital consumers in the largest cities. India could be a promising market if the digital infrastructure improves and more consumers join the digital mainstream and become familiar with digital transactions. Over the forecast period, the per capita digital commerce spend will increase, though it will remain lower than wealthier East Asian nations. Overall, the Indian digital consumer is younger and wealthier than its regional counterpart. With a higher income compared to the general population, these consumers can access the latest digital devices and high-speed broadband, both fixed and mobile. This implies that Indian digital consumers form a small proportion of the population currently. However, the number of consumers is expected to grow over the next few years as mobile broadband and smartphone usage improves.
How Asia is Shaping the Digital Commerce Landscape Globally
Asia Pacific is a favourable market for the expansion and evolution of the digital consumer. Mobile-enabled consumers in Asia Pacific will lead other regions in many facets of life. Commerce is one example. A surge in smartphone usage over the last decade spurred an infatuation with the mobile device, which led to more commerce activities. Even activities that were predominantly performed on other devices are now shifting to phones. Consumers use handheld devices to interact on social networks, access a wide array of services on super apps as well as check out more easily with digital wallets. These are the three ways that Asia Pacific is shaping the digital consumer story globally.
Three ways Asia is leading commerce development
Consumers are slowly transitioning to social channels to interact with brands and execute purchases. Using social networks as a commerce channel is highest among emerging market consumers and those under the age of 30. S-commerce is highest in Asia Pacific, Latin America and the Middle East and Africa. Asia Pacific accounts for six out of the 15 markets for buying something via a social media platform, according to Euromonitor International’s 2019 Lifestyles Survey. The Asian Gen Z cohort tops their global counterparts when it comes to buying via a social media platform and sharing a product.
Asia Pacific also gave rise to the super app revolution. A super app is a multifunctional mobile app combining several features such as communication, lifestyle, social, financial and retail, into a single platform. These apps enable companies to leverage their existing infrastructure to generate new revenue streams and increase consumer engagement. Consumers are embracing these all-in-one apps because they offer a seamless and integrated experience.
Digital wallets are another area Asia Pacific is writing the commerce story globally. Overrun with these alternative payment platforms, digital wallets are evolving differently depending upon market dynamics. In China alone, more than half a billion
people use mobile payment services such as Alipay and WeChat Pay to transact online or in brickand-mortar stores. In Singapore, the industry is extremely fragmented with 27 different digital wallets. Even in cash-dominated societies such as India, mobile wallets like Paytm are driving the growth of digital payments. Asia Pacific is the global leader in mobile payments. As of 2018, Asian consumers transacted USD1.6 trillion on a mobile device. That is 61% of the total mobile payment value being transacted globally. Asian connected consumers use their mobile phone more often on both a weekly and monthly basis to buy a good or service, according to Euromonitor’s 2019 Lifestyles Survey.
Prospects for Asia in the Years Ahead
The global economic balance is gradually shifting to Asia and this shift will gain momentum over the next few years. Rising incomes in emerging Asia and growth in discretionary consumer expenditure will boost online purchases. China will remain the largest digital commerce market in Asia. However, the region is expected to witness new growth centres such as India and Indonesia. With a youthful population, both countries are quick to adopt new technologies. In fact, Indonesia is one of the most mobile-savvy countries in the region. India is pushing digital initiatives in terms of broadband investments and the launch of new payment platforms. Large regional companies, notably Alibaba, invested heavily in digital commerce businesses in both countries: Tokopedia in Indonesia and Paytm in India.
Retailing will remain the largest industry, with goods purchased online accounting for 44% of digital commerce in Asia Pacific. A key growth area is the apparel and footwear industry. While online sales in this category represent only a small percentage of total sales in many Asian nations, this is not the case in markets like China and South. In particular, online apparel and footwear sales in China are growing rapidly and are now higher than in the US. Online foodservice order and delivery will be the key growth driver. This is particularly popular in South Korea due to a rise in single person households. For instance, the company Yogiyo created a niche for itself by allowing consumers to pay by credit card and cash. This convenient option is attractive for consumers who are concerned about online data security. In India, young, tech-savvy consumers are driving growth in online food ordering. Companies, like Swiggy, are attracting large investors betting heavily on the growth potential over the next several years.
What Companies Need to Do to Win in Asia Pacific
To be successful in Asia Pacific, companies must embrace the digital channel to reach and engage consumers. It is important to consider how consumers use their mobile phones within larger lifestyle choices. Companies must be mindful of the role that social plays in the life of connected consumers in Asia Pacific compared to consumers elsewhere. Brands must have a strong social presence. Connected consumers in Asia Pacific take a more pragmatic approach to time spent on these platforms. As a result, these consumers are embracing all-in-one super apps to execute a variety of different activities. Companies competing in this region need to consider how connectivity has reshaped lifestyles and how these devices are rewriting commerce. Asia Pacific consumers turn to smartphones for browsing and buying more than any other region. As a result, Asia Pacific emerged as the first mobile-centric region.
Authored by Michelle Evans, Global Head of Digital Consumer, Euromonitor International