These are unprecedented times and as Asia and the world heads into uncharted territory, understanding what’s really going on will be crucial for business leaders. The first question many wonder, is there a recession in Asia?
Dattel an ASEAN data company and consumer intelligence firm recently initiated the COVID-19 Insights Circle (CiC), a data-driven business support group for companies to get insights and collectively collaborate during these uncertain times.
Dattel had previously launched a pre-COVID-19 study to understand the consumers’ state of mind earlier this year so they have a baseline to see how consumer opinions, spending habits and mindset is changing.
“We need to recalibrate our lives, reflect on how there are aspects of life that changed because of the virus. Four aspects have become highly critical, and they are personal change, social change, business change and change of expectation and delivery in governance. At the core of all of these, certainly, the personal change would be the key influencer as change always begins within the capacity of close family and friends first,” according to President Director of Dentsu Indonesia, Shubhabrata Sarkar.
One of the critical findings discussed was the confidence of consumers and whether they will continue with their existing habits considering the global outbreak. In Indonesia, optimism prevails for purchase plans, but it could worsen over time. According to the report, Indonesians remain on the path towards ownership, but they are more inclined to give up social activities and gatherings. For Malaysia, the general population has no desire to spend on high worth items or social events for the next 3 months. Malaysian consumers intend to focus on day-to-day needs and activities that keep physical contact to a bare minimum. This pattern points to a slow economic recovery.
However, the trends appear to defy consumer confidence expectations in Thailand. Thais’ demand for products and services is still high and they say they’re interested in making new automotive and property purchases. Hence ASEA is a bit of a mixed bag. It seems confidence is generally higher in Indonesia, and the lowest in Malaysia. Businesses are reminded to factor in local cultural nuances into business plans because they can have a significant impact on how consumers perceive the near future and their current state of health and financial comfort.
Confidence score among consumers in Indonesia, Malaysia, and Thailand during the crisis of COVID-19.
Surprisingly across all three countries, adoption of non-cash payment methods during the pandemic has been relatively low. Most of the purchase made by consumers are still cash-driven, in contrast to the belief that people have migrated to online shopping due to COVID-19. Recent reports show that online shopping has reached 30% adoption by consumers, this means that 70% chose mainly physical stores to do their shopping. It paints the reality that the majority of the people are not ready to make the jump towards a fully online shopping method. Hence, switching into the world of e-commerce would still require consumers to embrace a non-cash payment method.
Another outlook from this study is that non-essential spending has slowed down, such as leisure and entertainment. This is only natural since governments in each country have enforced travel and movement restrictions; citizens are no longer taking the opportunity to go out lightly. The inability to visit places and the restrictions to go to only specific areas has made visiting physical stores become extremely important. Across ASEAN it is generally viewed that using cash gives consumers better control of their finances. However, it is imperative to note that online shopping will continue to grow.
The results of these insights is that businesses need to recalibrate their business strategies. Companies need to understand the change in dynamics between essential and non-essential products. More importantly, household products in the market that have common usage will become more stable, while products for individual indulgence are less likely to thrive. Hence, companies are recommended to reassess on the importance of providing value to consumer’s daily life, and not necessarily on more frivolous offerings.
Additionally, the use of vanity products for conspicuous purposes such as garments, shoes, travel, fine dining, and accommodation is likely to slow down. However, these products and services may see an immediate spike when the movement restrictions end.
We are in unusual times so the more information businesses and investors have the better. Right now we know consumers are changing their spending habits but we still can’t properly answer the question, is there a recession in Asia? For that we’ll need to wait for more widespread government statistics.