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Industry
With consumers increasingly becoming more sophisticated and knowledgeable, the demand for luxury and lifestyle products is on the rise especially in Asia.
In 2001, combined nominal retail sales for 11 key Asian economies, excluding
Japan, was about US$ 1.0 trillion, just 41.9 percent of the total retail sales in the United States. In 2016, retail sales for the same 11 economies jumped to an estimated US$ 6.6 trillion, much higher than the corresponding US figure (US$ 3.9 trillion).
The surge is even more apparent when the figures are adjusted for inflation and purchasing power parity (PPP)—combined retail sales for the Asian economies valued at 2012 US$ PPP was 3.3 times the corresponding US value in 2016, according to Oxford Economics. While combined sales levels are impressive, so is the growth rate over the years for each country.
Rising retail spending in Asia is a natural corollary to growing incomes and wealth. For instance, over 2001–16, real disposable personal income is estimated to have grown at an average annual rate of 11.5 percent in China, 7.5 percent in India, 6.6 percent in Vietnam, and 5.7 percent in Malaysia.
This trend is likely to continue with the Asia-Pacific region’s share in the global middle-class population expected to rise to 66 percent by 2030 from 28 percent in 2009.
Many factors fueled the growth of retail sector in Asia-Pacific.
Asian consumers have benefitted from rising house prices, a key component of household wealth.
Changing lifestyles and the advent of globalization have also opened up the world to the Asian shoppers.
Demographics is another advantage, with Asia playing host to a large population. Add to it the fact that Asia’s population is relatively young and that it is moving fast into urban centers—where avenues for spending abound—and you have a nice mix of enabling factors playing into the retail story in the region.
Automobiles are a major item of retail purchase in key Asian economies.
Consumers are also buying more of home furnishing-related items; in China, the category’s share has gone up over 2005–16, perhaps driven by rising home ownership and improved living standards.
Online retail has been rising fast in Asia, sometimes even faster than in the United States, where the share of e-commerce in total retail sales has been increasing steadily.
In Singapore, instead, apparel and footwear and food and beverages have instead aided retail growth. Data on retail sales volumes in Indonesia reveal a strong surge in the share of information and communication equipment (ICE).
With the retail market expanding fast and much growth yet to come, Asia is a lucrative proposition for global companies.
The road ahead for global majors is not easy however. They will run up against competition from domestic companies with deep knowledge of the market. So, while Asia may be too attractive a market to ignore for global companies, it may require a lot of innovation, especially targeted at the young population, and patience to win the race. They may need to partner more with local talent and smaller enterprises to carve out a winning strategy, one that also adds value to the economies they serve.
What ADVISINGASIA can do for you
ADVISINGASIA helps clients to better manage and execute the planning of selling mass-market or high-scale goods directly to local customers.
We help them expand their activities across Asia or Europe.
With an increasingly competitive worldwide market, it is essential to study and implement customized strategies. We tailor made the most effective sales strategy based both on our Clients’ strengths and weaknesses, and the dynamics of the market where the products need to be offered.
With regard to Retail Management, it is key to select the appropriate local partners, either as non-exclusive dealers or main importers, in order to better promote our Clients’ products.
One of the most common mistakes – often due to distance and different cultural or business mentalities – Is to believe that once a deal is reached, the distributor will effectively and appropriately promote the products.
Unfortunately, it is not always going as described above, since local distributors are in most cases working on a multi-platform products range, and will treat your products simply as “one of the many”. As a result, several products are not marketed in the correct way and therefore local sales are poorly performing.
In many cases, foreign ventures wrongly believe that the local dealer is effectively promoting their products, whilst in reality this is not happening, with disappointing results on both sides.
The best way to overcome this situation is to put the “boots on the ground”, with a constant control of local sales activities. Only by setting up an effective presence in the new market, foreign businesses can redirect all sales efforts towards a successful, localized, tailored-on-local-tastes product marketing.
On top, this strategy also reassures the dealer of the principal’s commitment in the region and contributes to a better overall result.
ADVISINGASIA Solutions at a Glance
We offer tailored services that create value and new untapped opportunities for our Clients:
