How to Win Over Asia's Upper Middle Class
The global economy is pretty dark these days but there's a bright spark on the horizon.
This spark is Asia's upper middle class – a fast-growing segment of consumers that experts say is already more influential than the luxury class. Serve them well and your business will grow and flourish – even when up against an overcast economy.
But first, a snapshot of who they are: Sophisticated consumers, more well-heeled than their middle-class counterparts. Because they travel often, they’re exposed to global trends and like to shop internationally. They are happy to try new things, but won’t buy into hype. They love their tech, and aren’t afraid to use it: Give them a raw deal, and you can expect to hear about it on social media.
As a consumer base, the upper middle class is a huge and growing economic force that no business today can afford to ignore.
Over the next 10 years, Asia’s share of global GDP is likely to grow from 29 percent to 35 percent. In China alone, more than 46 million upper middle class households will emerge in just half that time.
Now, a new report by the Boston Consulting Group (BCG) is filling out the picture for the rest of Asia: In Malaysia and Thailand, the upper middle class now form a greater proportion of overall households. For countries like India and Vietnam, though the size of this class is still small, it is expected to grow and catch up fast.
Titled A Silver Lining in Consumption Slowdown and for debut exclusively for the Singapore Summit this year, the report makes clear that to win over this group of consumers, companies must work on the following three areas:
(1) Make better use online tools, such as social media, to drive brand awareness and create more customer access points;
(2) Target the younger generation, who are digitally savvy; and
(3) Play the global-Asia nexus, by offering a global menu of goods and services.
The report concludes: “Given the unique characteristics of the upper middle class consumers, businesses cannot simply replicate their strategies and expect a success.”
Closing the digital and global gap
Business leaders at the recent Singapore Summit gave valuable insight into some of these new strategies for Asia. The main takeaway: Closing the digital divide means more than a half-hearted attempt to peddle your wares on the Internet. It has to be part of a company’s comprehensive and overall growth strategy, the experts said.
At the A. S. Watson Group, 72 percent of its customers are under 35 years old – a sign that its consumers today are changing: “They are more digitally connected and much more willing to spend,” said its Chief Operating Officer Malina Ngai.
Ngai said that the company, which is Hong Kong’s largest health and beauty retailer, keeps track of customers’ changing preferences by monitoring its 120 million-member database using data analytics. Based on this data, the company’s growth plans are discussed and tweaked every quarter of every year – as opposed to once every five years.
Commenting on the need for an integrated digital strategy, Ngai said it will help companies adapt to changing consumer tastes more quickly. Speed is what you’ll need to successfully acquire this new generation of customers, she added.
There’s speed, but don’t forget about selection. Alibaba, Asia’s answer to Amazon.com, has in recent years beefed up its retail menu to include more international brands, as part of its retail strategy to woo well-travelled and socially networked consumers.
Its giant e-commerce website, Taobao.com, sells everything from language tapes to lingerie from Taiwan, Japan and South Korea, among other territories in Asia and beyond. Last year, it even auctioned off a castle in Italy built during the Renaissance period for US$16 million.
Singapore's Asian Advantage
In other words, going digital and global is not just about creating additional sales channels. It’s fundamentally about engaging your customers and giving them a consistent experience – where, when and how they want it.
The challenge: How to do this well when they are spread far and wide across Asia’s geographically and culturally diverse landscape? This is where Singapore has clear advantages in two key areas.
The first is logistics and supply chain management.
As a leading supply chain hub, Singapore is served by the world’s leading service providers, which have the distribution network and know-how to access Asia’s diverse geographies. Its clear and efficient import and export procedures also mean permits and licences can be processed quickly – saving businesses time and money.
“While Singapore’s market might be considered modest in some segments, the nation is centrally located to serve most regional markets. This provides a “good logistics base” for companies to tap into the growing Asean market,” said BCG’s partner and managing director Lim Yew Heng, who co-wrote the consultancy’s A Silver Lining in Consumption Slowdown report.
Singapore’s second advantage is innovation.
Its compact size with a dense ecosystem of top MNCs and a growing start up community make the city state an ideal environment for companies to co-create and test-bed new offerings for the region’s changing needs and preferences.
Unilever is one such company tapping on this advantage. In 2014, the British-Dutch multinational consumer goods giant launched The Foundry, a global platform to ramp up its digital innovation efforts based out of its regional headquarters in Singapore.
Unilever global chief executive Paul Polman in a recent interview shared how Unilever is exploring new frontiers, such as predicting consumer behavior with data analytics, making use of virtual reality in retail and more to keep up with the changing consumers trends in the region.
Indeed, companies who adjust quickly will have first-mover advantage, and there are greater rewards for those based in locations that support innovation and are within proximity to the larger Asian market, such as Singapore.
Do that, and you’ll be on your way to winning over the hearts and minds – and wallets – of Asia’s upper middle class.
This article was written with reference to The Boston Consulting Group’s report, ‘A Silver Lining in Consumption Slowdown: Capturing Growth Opportunity with the Upper Middle Class’ and insights from BCG partner and managing director Lim Yew Heng . The report, developed in Singapore and produced for debut exclusively for the Singapore Summit, feature business insights on future-oriented topics in finance, business and economics with a Global-Asia focus.
Edited by Tan Yi Xuan and Liew Hanqing