Retail in Asia


South East Asia: The next wave of luxury?

Regan Leggett, executive director, thought leadership and foresight, Southeast Asia, North Asia and Pacific:

Southeast Asia represents the next big hotspot for premiumisation in Asia. As the region accelerates through this cycle of spreading consumer prosperity, it is predicted that the number of middle-income consumers will increase from 190 million in 2012 to 410 million in 2020.

We’ve already seen that premium products have reached 16 percent of grocery category sales in SEA—21-percent growth compared to value and mainstream products. China’s continuing growth in this space would suggest that SEA consumers’ sentiment toward premium products has a healthy future. But the approach to premium is not as simple as it may first appear. There are a number of considerations to work through, particularly in diverse regions.

Asia has historically been dominated by traditional trade or local stores that are very simple and focused on neighbourhood custom, compared to modern trade which is more sophisticated and offers a compelling consumer environment. But it is logical to assume modern trade is a more natural fit for premium sales, with 20 percent of total sales in SEA alone coming from this segment and growing at 14 percent. Traditional trade now sees 8 percent of its sales come through premium products, growing at 20 percent. This reflects the shifting fortunes of consumers who have been traditional trade customers, and the trend will continue.

When looking at premium, it’s important to consider the application of the products for consumer—there are certain sweet spots manufacturers and retailers can focus on to tap into the biggest opportunities. These sweet spots may shift, though, as new considerations emerge. When it comes to categories where consumers pay extra prices more often, personal products such as face cleanser and face moisturizer, and home cleaning products have a heavy weighting towards premium. Food and beverage is also an area for premium products, but it does not have the same relevance to consumers seeking trade up.

(Source: Campaign Asia )