How to win Asia-Pacific consumers in the new era
First of two parts
Before the COVID-19 pandemic unleashed its unprecedented impact on economies and societies, consumer behaviors were already shifting. Digitalization was reimagining how consumers live, work, play and consume, evidenced by the rapid rise of e-commerce in the Asia-Pacific region.
In a survey conducted by VISA (VISA Consumer Payments Attitude Study) mid-year, about 93% of Filipinos increased their shopping activity on websites and mobile apps. In fact, up to one in two Filipinos shopped online during stricter lockdown protocols. Businesses and consumers alike anticipate monthly promotions of online retail platforms and explore shopping via social media platforms such as Facebook and Instagram.
The pandemic accelerated some of these changes that were underway, leading consumers to reprioritize what they value. Arguably, it is no longer just about what they buy but also how they want to live their lives. That means consumer companies need to understand what is driving consumer lifestyles and ultimately, use these insights to make bolder plans to get ahead of change.
To be fair, many consumer companies did pivot to cater to shifting consumer demand during the last 18 months of the pandemic. However, the consumers that companies adapted to serve during the pandemic may not be the same consumers who will make them profitable in the future. That said, certain pandemic-induced traits may persist. For example, companies that offered the supply and price stability needed by consumers early in the pandemic are more likely to be rewarded with consumer stickiness than those that chose to pass on the higher costs to consumers.
Many consumers, particularly in the Asia-Pacific region, appear to be turning into COVID-19 anxiety “long haulers,” as indicated by real-time global consumer sentiment tracked by the EY Future Consumer Index which surveyed more than 5,500 respondents across six Asia-Pacific countries — China, India, Indonesia, Japan, Australia and New Zealand — from among 20 countries in total. Of the Asia-Pacific consumers surveyed in the May 2021 edition, 85% express concerns over health. With regard to pandemic-related caution in their spending behavior, 44% say they are purchasing only essentials and about two-thirds say they are thinking more carefully about how they spend money. This is consistent with the results of the study published by Kantar (Kantar Purchase Confidence Study in July 2020) where roughly 79% of consumers expressed worry about their financial situation and the importance of health and immunity benefits of fast-moving consumer goods (FMCG) products.
FIVE DOMINANT BEHAVIORAL SHIFTS
While individual consumer behaviors are likely to be volatile in the foreseeable future, companies can proactively accommodate their needs in five key areas: value, health, sustainability, experiences and omnichannel.
Consumers, being concerned about finances, are invariably increasingly price-sensitive. Of the respondents in the consumer index report, 56% of consumers see price as a more important purchasing criteria than before, while 44% are purchasing only essentials. Less than half at 42% will buy more store-brand household staples moving forward.
Consumer companies need to review their overall portfolios and value chains to consider if they can offer consumers quality, low-cost alternatives, as well as compete effectively with store brands and private labels. At the same time, retailers need to reassess their private label strategy. Short-term brand conversion during the pandemic could likely lead to longer-term brand loyalty — but only if private labels continue to drive product range and innovation, marketing outreach and quality.
The pandemic has re-emphasized the importance of health, fitness and wellness. Understandably, as much as 85% of consumers are concerned about their family’s health. Meanwhile, 48% are spending more on healthy or “good for me” products, and 36% are willing to pay a premium for products promoting health and wellness.
Asia-Pacific consumers are concerned with protecting their health and that of their family. Consumers are actively shopping for health products that will make them safer and healthier at home. Catering to this “in-home” hygiene market, including cleaning, nutrition, fitness and even beauty products may require more ingenuity in exploring healthier formulations, reshaping product portfolios and R&D investments.
It is not enough to just offer a product at the right price point: the behavior of a company is as important as what it sells. An overwhelming 82% of Asia-Pacific consumers say that companies must be transparent about their environmental impact and 28% are willing to pay a premium for more sustainable goods and services. Almost half at 48% also say that local sourcing has become more important.
If consumer companies can proactively demonstrate accountability and transparency over their environmental impact, they will be able to gain consumer trust and encourage higher spending. To do so, companies should look into re-engineering their production, logistics and supply chains as well as recognizing the third-party risks that can erode credibility.
Pent-up demand for unique experiences, especially among younger consumers, will create opportunities for consumer companies to provide new offerings that fit a range of budgets. The EY Future Consumer Index revealed that 64% of Asia-Pacific consumers are willing to share personal data for a tailored online experience. Meanwhile, 45% will be less inclined to take part in experiences outside their homes, and 43% will actually spend more on experiences. The question is whether companies can switch flexibly between on-trade (or on-site) and off-trade (or bring home) as pandemic restrictions vary.
Forward-thinking companies are offering consumers a mix of both digital and physical experiences: digital experiences that can be accessed safely at home, paired with unique in-store experiences that are worth exploring. Adapting to this new trend may require an operating model reset for some Asia-Pacific companies, strategically reallocating resources and restructuring the organization for greater agility.
Many consumers who moved online out of necessity will largely sustain their online behaviors, although the extent of digital engagement may shift. The interaction between online and offline will be more important than before. For instance, 54% of consumers in the Asia-Pacific region are doing their grocery shopping both online and in person, while 47% even say that the availability of delivery is a more important priority when shopping. On the other hand, 41% are visiting stores less frequently.
Consumers want digital engagement to be just as reliable as going to the store. An integrated channel strategy, supported by agile supply chains and logistics, is needed to deliver a consistent and enjoyable experience across online and offline channels. With the right data strategy, the data captured from online interaction and consumption will also yield valuable insights for business planning and delivering superior, bespoke experiences.
In the second part of this article, we discuss the three key actions that leaders of consumer companies should consider in order to address these aforementioned shifting consumer expectations.
This article is for general information only and is not a substitute for professional advice where the facts and circumstances warrant. The views and opinions expressed above are those of the authors and do not necessarily represent the views of SGV & Co.
Olivier Gergele is the EY ASEAN Consumer Products & Retail leader, Maria Kathrina S. Macaisa-Pena is a business consulting partner and the Consumer Products and Retail Sector leader of SGV & Co., and Fabrice Imparato and Shaurya Ahuja are EY-Parthenon partners.