Southeast Asia consumer confidence is on track for a rebound as value-seekers embrace new needs, said Bain recently.
According to the SYNC Southeast Asia report “Bold Moves: Leading Southeast Asia’s next wave of consumer growth” by Meta, Bain & Company, and DSG Consumer Partners, 39% of consumers in the region indicated a reduction in average spend in the past year, citing top concerns around economic stability (63%) and cost of living (58%).
The largest drop in spend was observed in alcohol and electronics, while food, personal care and wellness categories remained resilient, Bain noted.
Despite this trend, Southeast Asia consumer confidence isn’t dropping as the findings indicated that consumers are reprioritising what they perceive to be needs versus wants, Bain pointed out.
A new hierarchy of needs vs wants emerges
Previously cited luxuries like eating out every week, branded apparel, and latest gadgets have moved into what consumers perceive as new “needs”, according to the study.
Across income levels, social media was cited as the top essential category, and streaming emerged as a rising essential category, the study indicated.
While Southeast Asia’s working population is set to increase by 24 million people by 2030, rising incomes and the growing middle and upper middle class are driving the region closer to a consumption inflection point and thus a rebound of Southeast Asia consumer confidence.
Two consumer segments — Gen Zs and single households — in particular drive this growth, Bain observed.
Study highlights
- Gen Zs currently make up 23% of the total Southeast Asia population, while the solo economy, comprising single households, is growing and driven by three key demographic groups - older singles, young professionals and young urban migrants.
- Shifts in household sizes are expected to be most pronounced in Philippines, Singapore and Thailand, which are expected to see a 20% increase in single households by 2030.
- Gen Zs value individuality, authenticity, and identity more than other generations.
- Gen Zs are also not just digital-centric, but highly engaged in the digital community, messaging businesses an average of eight times a month, and 82% of those surveyed saying they are part of an online community.
- While Gen Zs are at the forefront of digital-first behaviour in Southeast Asia, older generations are quickly catching up and are not far behind in experimenting with new technology.
- The fact that all generations in the region are spending more time online and experimenting with new technologies such as AI, VR and healthtech will affect how Southeast Asian businesses can successfully engage with consumers.
- 73% of business leaders surveyed recognised the opportunities from AI but also admitted that they were not prepared to seize them.
- The focus on personalised marketing and the investment in AI-powered and AI-enabled tools to facilitate personalization on a large scale, will enable businesses to effectively reach Southeast Asian consumers and drive strong ROI.
The dawn of the insurgent disruptors
In addition, insurgent disruptors are around the corner. Defined as brands that are new to the market and are growing five times quicker in revenue vs their category growth rate, insurgent disruptors are now responsible for US$52 billion of revenue in Southeast Asia alone and accounted for 23% market share in 2022, Bain said.
Top categories where insurgent disruptors have successfully gained market share include beauty and personal care and packaged food, the firm added.
“Insurgent disruptors are new brands less than 10 years old that have demonstrated strong market share growth,” said Sameer Mehta, Head of Southeast Asia at DSG Consumer Partners. “With ‘wants’ transitioning into ‘needs’ and dissatisfaction with what the incumbent brands provide, it is no surprise that Southeast Asian consumers are choosing insurgent disruptors to satisfy their unmet needs and evolving expectations.”
