There is a lot of rhetoric flying around about ASEAN 2015, and most of it involves some variation on how the bloc’s ten countries are not ready for an open economic community. It is true that a lot of measures will not be in place in time, and the market unification initiative will be stop and start. This hardly matters in the grand scheme; the broader pattern of regional growth will continue unabated. More than anything else, the single strongest trend will continue to be the rapid growth of the middle class in Southeast Asia.
There are huge differences between each of the ten ASEAN countries, but some common cultural traits do bridge most of the divides. One of these is the Southeast Asian approach to shopping, and in particular, a love of luxury goods. It is no surprise that high-end goods manufacturers have all turned to the region as one of the strongest emerging markets for their goods. This is even more true as China is slowing, and the recent corruption crackdown has dampened the luxury goods market in a culture where bribes are commonly given as Swiss watches and Scotch whiskies.
We see firsthand this fast emerging middle class with its thirst for luxury and sophistication here in Myanmar, as well as in our travels throughout the region. And our observations are backed up by measurable data. In a fascinating report from the global consumer research firm Nielsen, the absolutely mind blowing pace of the growth is highlighted. Incredibly, the size of the middle class in the ASEAN countries is expected to more than double, just by 2020! Happily, this means an end to hand-to-mouth living and subsistence farming for millions in the region. It also means the unquenchable thirst for the highest quality goods will only grow stronger.
The report, entitled ASEAN 2015: Seeing Around the Corner in a New Asian Landscape, has a number of other incredible figures and projections in it. In addition to the doubling of the middle class to 400 million by 2020 (currently estimated at 190 million out of the region’s 600 million people), the paper projects regional economic growth of 6% annually. Southeast Asia is also called out as the world’s most economically optimistic region; consumers here are overwhelming confident about the future.
While that figure of 6% is not exactly eye-popping, the growth combined with local tastes and spending habits have primed the market for luxury goods in the coming years. Southeast Asian consumers are among the most label-conscious in the world. People are not afraid of a little opulence, and they will readily pay a premium price for a premium product. They are also known to be impulsive shoppers, not flinching at all when they’ve found a product that they want, whether it’s a handbag, a watch, a fine cognac, shoes, home furnishings, fashionable clothing, or a car.
The criteria Nielsen use to define “middle class” in the report, is having “$16 to $100 disposable income per day in 2005 purchasing power parity”. This may not seem like much to many people, and probably not like the foundation of a customer base for high-end goods, but that’s where Asia is different. The upper end of this scale means having around $3000 USD per month in disposable income, a significant amount, and certainly more than enough to be able to afford the occasional nicety.
There is also the show-off factor, a sort of “keeping up with the Joneses” for Asia in the 21st century. This of course is a universal trait; most people don’t want to be the only one in their group of friends without a nice watch or designer handbag. But in Asia where the concept of “face” is so important, this takes on an added importance. And since all ten of the bloc’s countries were recently or still are mostly poor, many people with money aren’t used to having it. Most money is new money, and new money is usually more likely to be shown off. This is in contrast to those with money in some Western countries now who might wear secondhand clothes and keep a backyard vegetable garden.
Of course ASEAN consumers are savvy as well, and are not just chasing labels. They understand the value of a well-made product and will more readily shell out for something they know will last. And it’s not just durable goods either. Consumers in the region value experiences as well, and the ASEAN luxury travel sector – already well established – will reap the rewards of this. Visit a high-end resort in Bali, or Phuket, or Boracay, and you’ll likely see more Asian faces checking in and out than Westerners. The emerging middle class in Southeast Asia want to experience a luxury lifestyle, and they increasingly will travel to do so.
One final driver of sales for luxury goods in the region is the culture of gift giving. This is extremely important across Asia, and it exists in families, at the workplace, and among friends. It cuts across class lines, and can be something as simple as giving sweets or small trinkets. But among the growing middle class and the wealthy, it is not uncommon for luxury gifts to be exchanged, even cars and expensive jewelry.
Global spending on luxury goods is expected to increase by 20 percent to $1.2 trillion USD by the year 2020. A majority of this growth is expected to come from Asia, and while much of this will be in China and India, the ASEAN countries will make up a large share too. The region is not at all homogenous, and the ever-changing regulatory landscape within each country and across the ASEAN Economic Community means that smart luxury brands must get in early and stay nimble. Southeast Asian consumers don’t have hardened brand loyalties yet, and a quality product and great marketing can win over this unjaded public. Whatever you’re selling, ASEAN customers want to buy. The only question is, will you be there to make the sale?