With the official launch of the ASEAN Economic Community (AEC) at the start of 2016, firms around the world want to seize the vast ocean of opportunities that the ASEAN countries represent as a whole. In order to do so, InvestAsian believes that the first step is to truly understand who their customers here in Southeast Asia are – how much the average consumer earns and spends.
Even though it will be some time until AEC achieves its goals in becoming a single market and production base, it is still important to have a detailed understanding of ASEAN and its consumers. Only then can companies be able to come up with an appropriate sales and marketing approach to thrive in this new trading bloc.
ASEAN is the Rising Star of Trading Blocs
As already widely known by most people, ASEAN represents a huge trading bloc of over 634 million people. It is also the third largest consumer market, trailing behind only the giants that are China and India. Key features that distinguish ASEAN from other big consumer markets are its rapid growth in income and its young consumer market. Comparing median age across many similar regions, ASEAN’s 28.9 reveals that it is made up of a populace younger than China’s 37.5, USA’s 37.8, and the EU’s 42.4.
Even though ASEAN is the third most populous consumer market, in terms of trade value it is only number seven. However, that’s predicted to change very soon. Many organizations forecast that before 2030, the ASEAN economy will be worth over US$3.0 trillion – ahead of Japan’s US$2.9 trillion, the UK’s $2.6 trillion, and even the entire Eastern Europe’s $2.5 trillion.
ASEAN’s Diversity Adds to its Strength
Firms should not dive into ASEAN too deep without expanding their knowledge of the region. Even though the region is large and is expanding in terms of trade value, there are many things that should be considered. The most important of them all is the great diversity present in the region.
It should be said that the previously stated facts that made ASEAN unique from other consumer markets may have the potential to mislead investors in the region.
Even though ASEAN has rapid growth both in income and expenditure levels, the growth is not spread out throughout the region. For example, comparing Singapore and Vietnam which are on the different ends of the spectrum in the region, Singapore boasts an average household annual disposable income level of more than US$100,000 whereas in Vietnam it is below US$5,000.
Such disparities in income can be explained by the respective countries’ uneven degrees of economic openness, trade liberalization, financial market development, and competitiveness across the ASEAN region.
Unsurprisingly, coming hand in hand with income levels are the expenditure levels. The gap here is as large, if not larger. Once again, the region’s most developed country, Singapore gets compared to another country at the other end of the spectrum, Myanmar. The average Singaporean household expenditure is over US$70,000 compared to Myanmar’s US$3,000. This is why the figure’s “average household expenditure” in ASEAN may be misleading.
As if the disparities in expenditure and income within the regions were not enough, extreme disparities usually exist within each country itself.
Other factors that are different across countries in Southeast Asia would obviously be the culture, language, and religions.
Companies Expanding into Southeast Asia
Due to its extreme diversity, companies are encouraged to not approach the ASEAN region with a “one size fits all” strategy but more of a locally adapted strategy. This will help ensure that firms can capture their targeted consumer market. Before that, firms must gain a more thorough understanding of the consumer market to decide whether they should even enter the market in the first place.
However, should firms be able to overcome ASEAN’s challenges, they will gain access to one of the fastest growing consumer markets in the world made up of a young, aspirational, and increasingly connected population.
The opportunities to be had just by gaining an insightful understanding into the region is boundless.