Strategy

Engaging Tomorrow’s Asian Consumers – Today

27 October 2016 by Yen Feng

 

Asia is different. How different?

More than you might think. Asia’s next-generation consumers are more sophisticated than ever – which means “business as usual” just won’t be good enough. Growth strategies that may have worked in the West will have to be re-thought, revamped and repackaged.

Because in Asia, customers no longer only want the world’s latest premium products and services. They also want localised, unique experiences that make a lasting impression.

If all this sounds impossibly ambitious, know that others have succeeded.

By investing big in innovation, research, and consumer-led data insights, companies such as the Watson Group, Alibaba Group, Snapdeal, and Procter & Gamble (P&G) have continued to expand their dominance in the Asian market.

And they have plenty of insights to share, as shown in their recent participation at the Singapore Summit, as speakers of a panel discussion titled: “Engaging Tomorrow’s Asian Consumers”.

A different kind of consumer

Savvy businesses with customers around the world have known for a while that Asia’s customers liked to be treated a little differently from their Western counterparts. They want customised packaging that are more sensorial, designs that suit their tastes and whet their appetites, said Magesvaran Suranjan, President of Asia Pacific Selling & Market Operations at P&G.

“These products tend to have a richness in perfumes – more so than in the West. The packaging also has to be more vibrant. That’s the consumer profile in Asia,” he added.

But today their needs go beyond the cosmetic. They yearn to be delighted. They want to discover new products and services that they can share on social media. New experiences that are international, yet feel personal. Most importantly – they want it fast.

According to a new report by Boston Consulting Group, the fastest-growing consumer group in Asia are the upper middle class, who are more willing to pay for premium quality goods and services. And with the popularisation of e-commerce and mobile shopping, they can get it anywhere – whether it’s being offered in Beijing, Bangalore, or Budapest.

The report, A Silver Lining in Consumption Slowdown, produced for debut exclusively at the Singapore Summit in September 2016, was unequivocal in its finding: “Companies must understand this unique and evolving group, and be strategic in how they target and serve this group.”

In other words, businesses who don’t want to be left behind by this new, growing, and increasingly valuable market will not just have to keep up with ever-evolving Asian needs. They need to race ahead if they want to stay in the game.

As Malina Ngai of the A.S. Watson Group recently declared at the Summit: “There are only two types of retailers in the future – the fast or the dead.”

Brand new world


Ngai should know. As Chief Operating Officer of Hong Kong’s largest health and beauty retail group, she has real-time experience observing how often customers in Asia switch to new products, compared to customers in Europe, where the group is aggressively expanding.

In Asia, 65 percent of customers buy new products within a period of 12 months, she said. In Europe, the corresponding figure is 40 percent. In the skincare market, “Asian customers love to explore,” said Ngai. “So we need more new products, a lot more, in Asia than in other countries.”

One reason for the need for new and exciting products is just how hyper-connected today’s consumers are, especially in Asia.

Consider this: In early 2016, India overtook the United States to become the world’s second largest Internet market, reported the United Nations’ Broadband Commission for Sustainable Development in September. It has 333 million Internet users, trailing only behind China’s 721 million.

In Southeast Asia, the rate of digital adoption is unmatched – with more than 250 million smartphone users in the region, reported The Wall Street Journal in April. According to a Bain & Company survey cited in the report, more than 80 percent of the region’s digital consumers use social media such as Instagram to research products and connect with sellers.

In fact the whole of Asia-Pacific has become, for the first time, the largest digital retail market in the world, according to market research company eMarketer. In a 2016 report, it noted that overall APAC e-commerce sales reached US$877.61 billion last year, up more than 35 percent from 2014. Driving this growth were India (up 129.5 percent in e-commerce sales), China (up 65.5 percent), and Indonesia (up 65.6 percent).

Which means if you haven’t received the memo yet, read it here now loud and clear: You simply cannot be operating just a traditional brick-and-mortar store anymore.

For B2C companies, this is especially important: Go online, and go mobile. Otherwise, you may as well pack up, shut down, and go home.

Alibaba Group’s Chief Executive Officer, Daniel Zhang, recently shared at the same Summit conference that in 2015, mobile purchases accounted for about 80 percent of all sales. This is double its 43 percent figure in 2014, reported The Wall Street Journal.

“Over 90 percent of our traffic are from mobile,” said Zhang. “People are living on their smartphones.”

Alibaba Group owns Taobao, Tmall, and shares in a string of other high-profile e-commerce websites, including Snapdeal and Lazada. In 2015, during its Singles Day shopping event in November, the company rang up US$14.3 billion in sales in just 24 hours.

In India, the percentage of orders that come in via the web is 80 percent, said Snapdeal’s founder and CEO Kunal Bahl. Three years ago, this was less than 5 percent.

Great expectations

Beyond the normal rules of engagement between retailer and customers, Asia customers also increasingly want best-in-class services. They want developed market services, but at emerging market prices.

Take delivery, for example. A few years ago, the big incentive offered to customers was cash vouchers, but these days it’s free delivery, said Bahl.

For Alibaba’s shoppers, even free isn’t good enough. Customers today want free next-day, or even same-day, delivery, said Zhang, referring to its online orders for groceries.

The same is happening across other e-commerce sites. Last year, Amazon announced that it would be offering its Prime members same-day delivery and since then, it’s also launched Prime Now which guarantees delivery within one to two hours on select items.

There’s also greater demand for businesses to integrate its online and offline offerings. This means that a customer can order an item online, and choose to pick it up at a physical store.

“Going forward, all offline commerce will undergo a digital transformation,” Zhang concluded. “In the future, people will not say whether a business is an online or offline business.”

A fully integrated business seems to have worked for Alibaba. Zhang said that whether online or offline, the company has been able to achieve margins of more than 40 percent on its sales.

And, according to Ngai, Watson’s customers spend more in stores when the process is complemented with a good digital experience.

In fact, she said, those who shop at its stores both online and offline spend almost three times more, compared to those who shop only offline – a key learning point to note for businesses who have yet to buy in to the concept of an omni-channel experience.

The next big thing

What’s next? Sometimes, the way to succeed is through details which many large companies tend to miss out. The next big thing, you could say, is paying attention – to the small stuff.

One way to think about this is to get hyper-local. In the grocery delivery space, especially, hyperlocal start-ups are already giving traditional big-box retailers a run for their money.

Dozens of e-commerce websites in recent years have entered the multibillion-dollar grocery delivery space in Asia, including Grofers, Flipkart, Redmart, Honestbee, and Paytm – which is also backed by Alibaba. Even Uber’s foray into food delivery and courier services is an example of how such start-ups are disrupting traditional service industries.

But getting hyperlocal also means getting to know your customers at the local level. Understanding how they live and what their everyday needs are.

Giving an example of what this meant for Snapdeal, Bahl said that the company discovered during a recent visit to a local village that the people there referred to cocktail gowns as “one-pieces”.

So Snapdeal modified its search engine so that these gowns would show up together with bikinis if anyone was searching for “one-pieces”, resulting in more sales driven by online search traffic.

“We have to build local insight right into the platform - you can’t just cut and paste,” said Bahl.

Because India is home to hundreds of languages, Snapdeal is also working to offer multiple translations of its website to reach other local communities around the country.

For Alibaba, getting hyperlocal means expanding the company’s reach into some of China’s hardest-to-reach areas: its rural countryside.

Get boots on the ground to connect with bus drivers and local delivery services, said Zhang. That’s how you set up your distribution network.

And if your business is running an online marketplace, empower your local sellers.

In India, and other developing economies, such as Vietnam, Indonesia, and Thailand, that could mean investing to set up the infrastructure needed, including payment platforms and cloud computing services, to enable your merchants to do well.

It’s a lot of work, no doubt. But it’s doable – as shown by these speakers at the Summit, who lead some of the world’s top companies who are succeeding in the region.

And if you need anymore convincing, just ask Zhang to remind you how well the company did during its Singles Day event last year. He’s got 14.3 billion reasons why you should start engaging tomorrow’s Asian customers – today.

 

This article was written based on a panel session that Future Ready Singapore attended at the Singapore Summit 2016 (16 – 17 September). The fifth edition of the annual event brought together more than 400 business leaders and experts to discuss future-oriented topics in finance, business and economics with a Global-Asia focus.

Edited by Tan Yi Xuan and Liew Hanqing