Confident Indonesian consumers top an optimistic region: Nielsen

With a confidence index of 122 points, Indonesia is ahead of Asia’s average of 103 points and the global average of 93 points. “Indonesian consumers are particularly buoyant due to strong domestic conditions,” notes Catherine Eddy, managing director, Nielsen Indonesia.

Reasons for this, she continued, include a wave of increased optimism in the lead up to Indonesia’s 2014 Presidential election as well as an increase in the minimum wage. “There is a clear trend of consumers trading up to premium brands,” added Eddy.

The Nielsen Global Survey of Consumer Confidence and Spending Intentions, established in 2005, measures consumer confidence, major concerns, and spending intentions among more than 29,000 respondents with Internet access in 58 countries. Consumer confidence levels above and below a baseline of 100 indicate degrees of optimism and pessimism. In the latest round of the survey, conducted between 17 February and 8 March 2013, Asia Pacific was the only region globally to sit above the 100-point benchmark.

Overall, consumers in Asia-Pacific are an optimistic bunch, with seven of the world’s top 10 most confident markets from the region. Indonesia is followed closely by India at 120 points, and the Philippines at 118 points. The remaining global top 10 are Thailand (116), Brazil (111), United Arab Emirates (108), China (108), Hong Kong (108), Malaysia (106) and Norway (106).

Furthermore, of the 14 Asia-Pacific countries Nielsen surveyed, nine saw increases in consumer confidence compared to the previous quarter. Significant gains were experienced in Hong Kong (108, up 23 points), Japan (increase of 14 points to 73), South Korea (up 13 points to 51) and Taiwan (increase of 12 points to 78). Other countries recording increases included Vietnam (up 6 to 94) and Malaysia (107, an increase of 4 points) while Thailand (116) and Singapore (96) both increased by one point.

Declines were recorded at the southern end of the region, where confidence in Australia (94) and New Zealand (90) dropped by one and four points, respectively. Only China remained steady at 108 points.

“Pockets of local government austerity measures, combined with improved prospects for Asia imports by the US economy, created opportunity for healthy confidence gains in Southeast Asia markets and substantial gains in Hong Kong, Japan, South Korea and Taiwan,” said Therese Glennon, Nielsen’s APMEA region consumer insights leader.

Asia-Pacific however does vary greatly from market to market with a 71 point difference between Indonesia at the top and South Korea at the lower end, pointed out Glennon. “(This) is due to some countries being more exposed to shifting global conditions and the export market, while others are experiencing robust domestic growth.”

Along with strong market confidence, 62 per cent of consumers (up four points from Q42012) in Asia-Pacific are optimistic about jobs in the year ahead compared with Latin America (45 per cent), North America (41 per cent), Middle East/Africa (33 per cent) and Europe (23 per cent). Likewise, sentiment towards personal finances remains positive, increasing three points to 62 percent.

Asia Pacific consumers are also at least two times more likely to have spare cash than any other region in the world, with only seven per cent of respondents indicating they have no spare cash, compared with 15 per cent globally. Saving money continued to be of highest priority for Asia Pacific consumers in Q1 2013, with 62 per cent indicating they save spare cash once essential living expenses have been covered – an increase of four percentage points versus prior quarter and 15 points higher than the global average. Similarly, intentions to invest in stock and mutual funds (30 per cent) and retirement funds (14 per cent) also saw 1 to 2 point increases each over the last quarter.

Another form of investment for some is home improvements, with 23 per cent of Asia Pacific consumers planning to spend on their homes, a five-point gain in the last quarter, Holidays and vacations outside the home remain the most common form of discretionary spending for Asia Pacific consumers, with 39 per cent planning to spend on travel, an increase of 3 points over last quarter. Discretionary spending in other categories like new clothes (35 per cent), out of home entertainment (34 per cent), and technology products (30 per cent) remained stable in the latest quarter.

The biggest concern for Asia Pacific consumers remains the economy, with 16 per cent stating this was their largest worry. Work/life balance came in second at 14 per cent and job security was a close third at 13 per cent.

“The Asia Pacific consumer continues to gain optimism, yet remains quite discerning and frugal, and will continue to prioritise saving and investment,” commented Glennon.

Marketers should focus on gaining new relationships with consumers in areas where the emerging middle class is entering the market at a rapid pace, such as Indonesia, India, Thailand, the Philippines and China, she added.

“Further premium products gain appeal to wealthier consumers who can now demonstrate their purchasing power through the brands or leisure activities they choose, while for basic needs they often continue to choose local lower cost options. Understanding these nuances, which differ greatly from market-to- market, is critical to satisfying the needs of the Asia Pacific consumer and capturing a share of their spending,” concluded Glennon.