ASEAN countries will become one of the largest markets and a "must-win battleground" for consumer-goods companies in the next five years, Accenture has found through a study involving more than 1,800 consumers in the region.
By 2020, ASEAN is expected to have a US$3 trillion (S$4.3 trillion) economy and a population of close to 600 million people.
With nearly 100 million people joining the consuming class or moving into more affluent consumer segments, consumer spend in the region is expected to double to US$2.3 trillion a year, with more than US$770 billion of new money generated by the newly-minted spenders.
But as alluring as the pot of gold is, the path leading to it is not without its obstacles, the global consulting firm said. It has identified three major challenges to capturing the rapidly evolving ASEAN market:
The first is in finding and reaching these new consumers in a highly-fragmented landscape with multi-tiered distribution systems and minimal reliable data to guide market entry.
Accenture's global chief executive of its products group Sander van't Noordende said: "Singapore looks more like New York than any country in ASEAN; then you have mega capitals like Bangkok and Jakarta, emerging markets Myanmar and Cambodia and hard-to-reach islands in the Philippines and Indonesia."
And this is just one aspect of the diversity. Companies will have to consider the melange of ethnic groups, languages and religions that make up the landscape, along with the varied distribution networks ranging from large department stores to independent neighbourhood retail kiosks.
The Accenture study estimated that outside Tier 1 cities, three-quarters of all grocery sales are made through five million "mom and pop" shops across the region.
The second challenge lies in winning and maintaining customer loyalty. Accenture's research showed that only 34 per cent of ASEAN consumers are loyal to specific brands. In two-thirds of all purchase situations, the customer could well switch to a competitor's product.
Mr Noordende said: "Consumers today are under the constant influence of social media, their friends, advertising and other impressions every day, everywhere, all the time."
This phenomenon is more apparent in ASEAN than elsewhere because of the region's younger digital-native consumers. In tech-savvy Singapore, for instance, consumer loyalty is a paltry 15 per cent due to easy access to information online, myriad retail channels and new products.
Thirdly, brands will have to navigate these challenges amid ever fiercer competition.
With the ASEAN Economic Community coming into fruition this year to facilitate more cross-border trade, local brands can rapidly expand their traction across ASEAN, even as existing ASEAN-based multinationals and global consumer goods companies have rapidly expanded their regional footprints.
How then should consumer-goods companies gear up for a piece of the pie?
Mr Noordende suggests that they adopt a "digital first" orientation in three areas: retaining the new consumer, heightening product availability and doing these two things with agility and speed.
Digital technology and analytics enable companies to gain deeper insights into and perpetuate engagement with the consumer, while enhancing sales force reach and productivity as well as boosting logistics management to ensure coverage across complex, multi-layered distribution channels.
Systems designed for Western, mass distribution will not work in ASEAN, the study found, as the region's diversity will require an approach tailored to each market's reliance on smaller scale, highly manual, traditional distribution outlets.
More than before, companies need to have a good view of the market they want to serve, the kind of products they want to push, and how to get these products to that market segment, Mr Noordende stressed; this will almost certainly require strategic partners in local markets.
Founder of Singapore-based fast-food chain Sushi Burrito Sherry Ang, a believer in the power of technology and the ability of a digitalised distribution network to boost productivity, agrees with the research insights.
Her food-delivery channel enables her kitchen capacity to be maximised; technology has also given her a digital presence so she bypasses paying rent, even as she reaches out to customers farther afield than her two physical food outlets in the CBD can do.
"Without our website and direct ordering channel, I would have to rely on my staff answering the phone calls and writing the orders down one by one in a busy fast-food restaurant.
I can't even imagine that," said the entrepreneur who launched her first franchised outlet in Jakarta in January; she will open a third outlet in Changi Airport's Terminal One next month.
Speed is also of the essence. As Mr Noordende puts it: "Consumer-goods companies need to be agile because consumers won't wait for them. People are moving to the cities, they are finding jobs there, and earning and consuming. They don't wait for companies to be ready.
Whoever is ready is going to get their business. Companies must embrace trial and error. If something works, you need to scale fast; if it doesn't, you need to fail fast.
"It's a dynamic process, and much different from 10 years ago, when people had the luxury of taking two years to work on production creation then marketing then getting it out to retail. Those days are over."
This article was first published on Apr 11, 2015.
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