Following two consecutive years of double-digit growth, FMCG retail sales growth in the region slowed to 6.3 per cent in 2013, with the slowdown most notable in developing markets such as China, India and Vietnam.
The Asia-Pacific retail sector has been relatively fragmented in the past, particularly in developing markets; while in Hong Kong the top five CPG retailers enjoy a market share of 74 per cent, the top five retailers in Indonesia account for just 24 per cent of the market and only nine per cent in China. There has been a notable move in recent years towards trade concentration, however, which is set to continue. As a result, it is increasingly important for marketers to adapt their product availability and ranging to align with the shifting retail landscape, while effectively engaging consumers and addressing their diverse needs.
Female shoppers are a particular focus for FMCG brands—women account for 49 per cent of food purchasing decisions and 65 percent of health and beauty purchasing decisions, controlling around US$12 trillion of the US$18 trillion in global consumers spending. While attitudes and behaviours differ by market across the region, a number of common themes can be seen, particularly around convenience. Today’s female shoppers, regardless of which country they live in, feel increasingly time-poor and seek products which offer convenience, and brands must focus on developing products which address this demand. Similarly, retailers must look to develop small store formats which address everyday shopping needs, particularly in categories such as fresh and ready-to-eat.
The region’s rising middle class is also a strong focus for FMCG brands, particularly in developing markets. Today’s Asian middle class consumer population represents around 30 percent of the global middle class, and by the end of this decade that number will increase to more than 50 per cent of the global middle class, accounting for more than US$2 trillion in new consumption in Southeast Asia alone. As the middle class expands, they are also becoming more aspirational and looking for ways to trade up their brand choices to convey their rising social status.
While modern trade accounts for just over 50 per cent of retail sales across Asia-Pacific and is growing at around one to two per cent annually, the majority of consumers in developing markets still shop across multiple channels and traditional trade is an important part of their store repertoire. While the average grocery shopper in developing markets is shopping more frequently, their typical basket size is smaller—Indonesian shoppers for example make more than five trips to a grocery store within any given week and buy six to seven items per visit, compared to an average Australian grocery shopper who makes two to three shopping trips per week and buys an average of 19 items. As a result, brand marketers must look to gain greater understanding of shoppers’ shopping mission across both modern and traditional trade in order to successfully navigate the range of store formats available and develop assortment and ranging which suits those formats.
With growing access to product information via the ever-expanding number of media platforms, in particular social media, consumers in Asia-Pacific are becoming more discerning. Coupled with the rising middle class population, many of whom are making first-time brand purchases, the importance of building and sustaining shopper engagement is critical for any FMCG brand.
Engagement strategies should look to address and embrace the diversity of the region: Asia Pacific consists of a multitude of ethnicities, cultures and demographics and a one-size-fits-all approach will no longer suffice. Further, with rapidly changing lifestyles, it is important for brands to understand how shoppers shop their category and consider shelf tactics which can achieve cut-through, especially with regard to packaging, pricing cues and promotions, and programmes which encourage trial. Finally, employing engagement strategies which span multiple touchpoints throughout the entire path-to-purchase, both above- and below-the-line and encompassing both traditional and new media platforms, is a must.
Looking ahead, Asia-Pacific’s FMCG sector will continue to be defined by the region’s diversity. To succeed, marketers need to stand out; embrace diversity and recognise that there are many first-time shoppers within Asia. It’s important to keep pace with consumers’ emerging needs and offer them categories that matter. Integrating traditional bricks and mortar, online and mobile retail strategies will be paramount to engaging the shoppers of tomorrow.
Connie Cheng is executive director of shopper insights, Southeast Asia, North Asia and Pacific, Nielsen