asia 2020 - nielsen · retailers. in korea, e-commerce is now the largest retail channel and in...

A SIA 2020PROGRESSING, PREPAREDOR PESSIMISTIC? MARCH 2016

200020102020

IIICopyright © 2016 The Nielsen Company

ARE YOU RE ADY ?

WH AT ’ S A RO UND THE CO RNE R?2000

20102020

IV ASIA 2020 | NIELSEN FUTURE BUSINESS SENTIMENT SURVEY | MARCH 2016

Few business leaders would disagree that the pace of change is

accelerating in Asia Pacific. Technology advances have impacted

industries across the board, geopolitical moves have occurred

in many markets, economies have risen and fallen while various

other fundamental shifts have significantly changed our world and

business environment.

It could be argued this rate of change has been more profound in

Asia Pacific. As parts of the world struggle to find growth in these

economic times, Asia Pacific still boasts significant opportunities

due to favourable demographic and economic conditions. Around

the world, multinational companies continue to look to Asia Pacific

as a driver of growth. These changes, both macro and more specific,

have knock on effects of varying degrees impacting the business

environment through which business leaders must navigate their

organisations. It can change the economies they operate in, the

business partners they rely on, the consumers they hope to please –

the chessboard they play on is changing before their eyes.

There are ample examples of organisations (and even industries) being

blindsided by change that they either did not see coming or were too

slow to respond to. A product surpassed by competition, technology

becoming redundant, legislation that inhibits growth or shifting

consumer tastes. Increasingly as change accelerates and becomes

more diverse yet connected, business leaders must anticipate change

and understand how their organisations can mitigate risk and take

advantage of opportunities that arise from it.

5Copyright © 2016 The Nielsen Company

OVER 7 IN 10 BELIEVE IT ISLIKELY THEIR ORGANISATION WOULD HAVE TO CONTEND WITH A MAJOR CHANGE IN THEIR INDUSTRY OR MARKETIN THE NEXT 5 YEARS.

Extent your organisation will

have to contend with a major

change in industry

What is the biggest change or concern in the next 5 years?

CHANGINGCONSUMER

PREFERENCES

LEGISLATION/POLITICALCHANGES

REGULATIONSAND TAXATION

ECONOMICDEVELOPMENTS

NEWCOMPETITORS

16% 15% 15%9% 8%

Nielsen sought the opinions and thoughts from senior leaders within

the Asia Pacific business community to gain greater visibility and

understanding of the changes they anticipate they will face over the

next five years.

BUSINESS SENTIMENT

LIKELY

78%NEUTRAL

17%

UNLIKELY 5%

NIELSEN FUTURE BUSINESS SENTIMENT SURVEY

6 ASIA 2020 | NIELSEN FUTURE BUSINESS SENTIMENT SURVEY | MARCH 2016

WHAT KEEPS SENIOR LEADERS AWAKE AT NIGHT?Navigating a large organisation through periods of significant change

is not easy. Much of the change that is taking place across the

region is unmistakable – economic development, changing political

environments and changes to regulation and taxation. But as the

famous ‘boiling frog’ anecdote illustrates, gradual change such as

changing consumer preferences or emerging new competitors, can

be just as impactful.

SENIOR LEADERS ACROSSTHE REGION AGREE THAT IT WILL BE “DIFFICULT” TO NAVIGATE THEIR ORGANISATION THROUGHTHE CHANGING L ANDSCAPE THEY OPERATE IN OVER THE NEXT 5 YEARS.

DIFFICULT

59%

NEUTRAL

35%

EASY 6%

Ease of navigating business in changing

landscape in the next 5 years

EASE OF NAVIGATION



HOW DO LEADERS REACT AND ‘FUTURE PROOF’ THEIR ORGANISATION IN THIS CHANGING ENVIRONMENT? IT VARIES.

Almost one in two (48%) leaders believe their organisation is

prepared for the future but less (43%) are confident they have the

systems and processes in place to spot early indicators of change in

their operating environment.

1 IN 4 ARE NOT CONFIDENTAT ALLBut despite half of business leaders not being prepared, almost

three quarters believe their business model in five years will differ

significantly to today.

SIGNIFICANT DIFFERENCE

76%

NEUTRAL

16%LITTLE DIFFERENCE

7%*Although business leaders see the future

business environment as complex and

unpredictable, 75% say they have systems;

processes or alternative operating plans

in place in case of an emergency event, or

natural, political or other major disaster.

CONFIDENT

43%

NEUTRAL

33%

NOT CONFIDENT

24%

Ability to spot early indicators

PREPARED

48%

NEUTRAL

34%

NOT PREPARED

19%

Prepared for the future

Change in business model

IN THE ENVIRONMENT OF A CHANGING LANDSCAPE...



When we asked business leaders what keeps them awake at night, not surprisingly

the range of responses varied widely, from disruption of innovative competitors to oil

prices to rising obesity rates. But while the concerns business leaders f lagged were

wide-ranging, some common themes emerged.

While change is inevitable, it is the speed of change and how we adapt to it which

determines how successful our organisation will be. Some changes can be considered

broad and slow moving – population change, emergence of a growing middle class,

changing political and trade environment. Other changes such as changing consumer

preferences, entrants of new competitors or disruptive innovation can be focused

and swift and require leaders to be agile and flexible to ensure their organisation can

f lourish in a new environment.

CHANGE IS COMPLEX, CHALLENGING AND ACCELERATING ...

OVER DECADES

BROAD & SLOW

AUTONOMOUS CARS

BIG DATA/APIs/PREDICTIVE ANALYTICS

SOCIAL RESPONSIBILITY

PREMIUMISATION

HEALTH & WELLNESS/FUNCTIONAL & PERFORMANCE FOODS

FOOD STRESS

CONSUMER STRATIFICATION

DRONE DELIVERY

VIRTUAL & AUGMENTED REALITY

3D PRINTING

ENERGY

PERSONAL DEVICES/THE INTERNET OF THINGS

POLLUTION

GEN Y

POPULATION GROWTH

MIDDLE INCOME EMERGENCE

DEMOGRAPHIC SPREAD

INFRASTRUCTURE INVESTMENT

ASEAN SECONDARY CITIES

ASIAN MEGACITIES

CHANGING REGIONALBUSINESS FRAMEWORK

OVERNIGHT

FOCUSED & SWIFT


THE CHANGING FACE OFASEAN CITIES, MIDDLE CL ASS GROWTH AND THE CHANGING REGIONAL BUSINESS ENVIRONMENT ARE KEY EXAMPLES OF L ATENT CHANGE.The UN forecasts that the population of Southeast Asia will grow

from approximately 632 million in 2015 to approximately 694.5 million

in 2025. But the real story is where the population will be living.

While Southeast Asia is becoming increasingly urbanised, a sizeable

proportion of the region’s population will still be living in rural areas

in 2025 and many urban dwellers will live in large towns and small

cities as opposed to megacities.

This is quite a different trend to that being observed in India and

China where megacities are surging, moving from a total combined

population of 2.68 billion in 2015 to 2.86 billion in 2025. The growth

of the combined Australian and New Zealand population is also

driven by urban centres, estimated at 28.5 million in 2015 and 32

million in 2025.

In many ways, we are products of our environment and from a

consumer perspective, our options around retailers, education

providers, jobs availability and entertainment options all inf luence

our lifestyle and the accessibility and suitability of products and

services. When segmenting different city sizes into population

tiers along with their characteristics, it is evident that less densely

populated places are developing rapidly in Southeast Asia – change

is afoot. As the strains on high density cities increase and investment

and infrastructure f low outside traditional boundaries, smaller cities

and rural populations will be a much bigger prize than they are today

with very different needs than their big city cousins. Compounding this

trend, the number of middle class consumers living in Southeast Asia

is forecast to more than double to 400 million by 2020. In the midst of

such substantial change, clearly opportunity abounds with hundreds

of millions of new consumers trialling new products, categories and

brands for the first time.


The key to successfully tapping into middle class growth and urbanisation

of smaller cities lies in understanding the unique nuances of these

consumers and how they differ to consumers in rural areas and big cities.

As all of this is happening at the consumer level, a slow but persistent

change is also occurring in the economic and business environment that

companies operate in.

Regional and cross country agreements which will level the playing

field, such as the ASEAN agenda, the Trans-Pacific Partnership (TPP)

and other bilateral/unilateral exchanges are already being discussed

and implemented, allowing organisations to compete in more countries

regardless of their origin. For some who previously enjoyed a protected

industry or marketplace, local competition will arise while others look for

expansion opportunities in other markets. In a new environment it is likely

more mergers and acquisitions will evolve as companies either struggle to

keep pace or look for footholds in new markets, with foreign investment

being a key enabler.

The majority of business leaders (58%) from across the region believe

trade agreements such as the ASEAN agenda or TPP will have a positive

impact. One in three believes it will have little or no impact on the

business environment in the future.

Among leaders looking to expand their businesses into new growth markets,

Vietnam, Indonesia and China are the most common priority markets.

POSITIVE

58%

LITTLE/NO IMPACT

34%

NEGATIVE7%

Impact of trade agreements

Top 3 priority markets for companies likely to expand

LIKELY

56%

NEUTRAL

14%UNLIKELY

31%

Expand into new markets

MOST LEADERS ARE ABREAST OF SLOW-MOVING CHANGE


VIETNAM INDONESIA CHINA


LOOKING THROUGH THE RETAIL WINDOW TO THE FUTUREAsia’s retail footprint and environment has evolved dramatically in

the last five years, and is set to continue with growing urbanisation

and changing physical and digital formats. The retail landscape in

Asia represents true diversity, from luxury mega-malls to street stalls

to digital outlets – the retail eco-system is in a state of change.

1 IN 2 SENIOR BUSINESS LEADERS BELIEVES RETAILERS AND THE TRADE WILL HAVE A POSITIVE INFLUENCE ON THEIR INDUSTRY AND MARKETPL ACE IN THE COMING 5 YEARS.

1 IN 5 BELIEVES THEY WON’T.


POSITIVE

50%

NEUTRAL

30%

NEGATIVE

20%

Inf luence of the role of

retailers and trade

Top 5 factors in retail environment of the future that will be most important to your organisation

When asked to nominate the factors which will be most important to

their retail environment in the future, not surprisingly, the majority of

business leaders singled out digital shopping and e-commerce.

ONLINE &E-COMMERCE

ROUTETO MARKET

CONSOLIDATIONOF RETAIL POWER

GROWTH OFSMALL FORMAT

& CONVENIENCE

LOCALPLAYERS

63%52% 50% 48%

22%

RETAIL ENVIRONMENT



TECHNOLOGY IS CHANGING THE RETAIL FOOTPRINT BEFORE OUR EYES.

E-commerce is no longer the sole domain of travel, book and music

retailers. In Korea, e-commerce is now the largest retail channel and

in China online retail sales grew at over 24% in 2015. While still in

its infancy in Southeast Asia, one thing is certain, e-commerce is

set to grow exponentially and will change the retail and consumer

landscape as we know it. In China, we’ve seen retail formats and

distribution channels leapfrogged as e-commerce brings new

purchasing opportunities to rural consumers. With the size of the

rural and small city populations of Southeast Asia, China and India,

a new wave of opportunity is upon us and our surveyed leaders agree.

NEARLY ONE THIRD OF SENIOR LEADERS BELIEVE E-COMMERCE WILL ACCOUNT FOR GREATER THAN 20% OF THEIR ORGANISATIONS’ TOTAL SALES OVER THE NEXT 5 YEARS.

50% BELIEVE E-COMMERCE WILL REPRESENT MORE THAN 30% OF THEIR ORGANISATIONS’ GROWTH IN THE NEXT 5 YEARS.


These numbers alone represent a step change in the way

organisations operate. The reality of these irrevocable shifts is

ref lected in senior leaders’ sentiment, with almost three in five (59%)

concerned about competition from outside their markets.

Having the ability to do business in a market is one thing, but

understanding how to play in that market is another thing altogether.

The diversity of consumers within one market like Indonesia can

be extreme but multiply that by the ASEAN community and its

neighbours, and it is not hard to understand the complexity and

challenge that companies will continue to face in the future.

Senior leaders across the region are well aware of this situation

citing understanding changing consumer preferences as their biggest

concern for the future.

E-commerce as a percentage of your

organisation’s sales in the next 5 years

E-commerce as a percentage of your

organisation’s growth in the next 5 years

GROWTH

36%UNDER 10%

SALES

32%10–20%

16%21–30%

7%31–50%

9%>50%

32%UNDER 10%

19%10–20%

19%21–30%

21%31–50%

10%>50%

E-COMMERCE AND THE ORGANISATION



THE CONSUMER L ANDSCAPE OF THE FUTUREThe sheer diversity of consumers in a region like Asia has a

significant impact on business factors like distribution channels,

product ranging, services and marketing strategies. Adding to this

challenge, underlying themes of change are beginning to impact

consumer attitudes and preferences in a way that will change the

future environment.

These themes are not new but are gaining incremental momentum

and are fast approaching a tipping point. Health and wellness,

premiumisation, social responsibility and environmental stewardship

are just a few of the emerging themes that are resonating with

consumers, and companies that offer products and services in these

areas are starting to win the hearts of consumers.

These emerging themes, coupled with the accelerating ‘stratification’

of consumers in Southeast Asia due to the diversity in age,

income, education, values, interests, technology and infrastructure

access, mean that mass marketing is being replaced with one-to-

one marketing as bespoke and niche segments emerge to meet

consumers’ needs.


MORE FOCUS ON CUSTOMERS AS SEGMENTS

53%

INCREASE IN BOTH SEGMENTS AND INDIVIDUALS

12%

MORE FOCUS ON CUSTOMERS AS INDIVIDUALS

3%NO CHANGE IN FOCUS

32%

Thinking about

how your business

will engage with

customers in the

future, do you think

there will be….

SENIOR LEADERS AGREE THAT CUSTOMER ENGAGEMENT OF THE FUTURE WILL NEED TO BE FOCUSED ON CUSTOMERSAS INDIVIDUALS.As our world becomes increasingly digitalised and connected,

companies can now use big data sets to establish preferences and

customise the way they interact with individuals. Senior leaders

anticipate a rise in customer engagement methods which leverage

digital and social media platforms to augment traditional formats

such as television and print media.

ENGAGEMENT WITH CUSTOMERS IN THE FUTURE



WHAT DO CONSUMERS OF TOMORROW WANT?ASIA PACIFIC CONSUMERS CARE ABOUT THE ENVIRONMENT AND SOCIAL AND SUSTAINABLE PRACTICES.

Three in four consumers in Asia Pacific say they will pay more

for products and services from companies committed to positive

social and environmental impact, up from 64% in 2014 and 58%

in 2013. Compared to the global average of 66%, it highlights

Asian consumers are likely to lead the demand in this emerging

trend. Considering consumer attitudes in conjunction with the

commitments the Asian Development Bank and countries like China

made following the Paris Climate Conference in December

2015, there is a definite logic that consumers will seek out companies

driving this environmental agenda. Similarly, governments are likely

to provide incentives through tax breaks and subsidies.


THE RISE AND RISE OF THEHEALTH-CONSCIOUS CONSUMER

Despite relatively low obesity rates in Asia compared to many western

countries such as the US, UK and Australia, there is an alarming

increase in the number of overweight citizens, especially in markets like

Malaysia, Singapore and Thailand. Many Asian consumers are aware of

this emerging trend and are actively trying to change their behaviour.

The Nielsen 2015 Global Health and Wellness report identified:

• 68% of Asia Pacific respondents are cutting down on fats and 60%

are cutting down on chocolate and sugars in a bid to change their

diet and lose weight; and

• Over half (54%) are eating more natural fresh food.

Not only are consumers seeking foods that are healthy and nutritious

but governments agencies like Singapore’s Health Promotion Board

have initiated a number of programs (eg Healthier Hawker Program

encourages street hawkers and local food courts to use healthy

ingredients) to drive awareness of the importance of a healthy diet

and active lifestyle.

Health and wellness has broader financial implications as well.

Governments in Asia Pacific are looking abroad to countries that have

identified the impact of an unhealthy diet on their health systems.

Legislation has been suggested to transfer the health cost back to

producers that do not address this need. A recent Australian study

estimated that issues related to overweight and obesity cost

AU$56.6 billion per annum*. France and Mexico have implemented a

‘sugar tax’ which is also being considered in the UK. The implications

are clear – companies that are unwilling to address the increasing

demand for products which cater to health and wellness needs in the

future risk harsh penalties.

*Source: https://www.nhmrc.gov.au/health-topics/obesity-and-overweight


As the economic prospects and purchasing power of Asian

consumers increase, they increasingly seek out products which

express their growing prosperity and changing lifestyles. Although

this trend is more prominent in industries like fashion, automotive

and travel, it has also entered the retail and consumer goods industry

across Southeast Asia. Premium products (defined as 20% more

expensive than the average category price) account for 16% of grocery

sales and are growing by 21% which is double the highest percentage

growth of other price tiers.

To a degree, senior leaders are aligned to some of these signals of

change. Asians lifestyles are increasingly ‘on the go’, and the majority

of business leaders concur that convenience is one of the most

important factors they must deliver on in the coming years. Business

leaders also highlight time saving, efficiency and health and wellness

attributes as being important factors to consider in the future.

CONVENIENCE PRODUCTIVITY/EFFICIENCY/TIME SAVING

HEALTH& WELLNESS

ONLINE/DIGITAL PRESENCE

SOCIALNETWORKING

93% 87% 82% 81% 75%

MOST IMPORTANT PRODUCT/SERVICE ATTRIBUTES IN THE NEXT 5 YEARS



FROM NASCENT TO MAINSTREAM: EMERGING TRENDS WATCH LIST

While many of tomorrow’s mainstream trends already exist today in

some form, the challenge lies in understanding which emerging ideas

will find fertile ground to grow and shape the future.

Emerging technologies are a perfect example where prototypes

and products already exist, but we must consider factors such as

affordability, potential alternatives, supporting infrastructure, demand,

practicality, barriers to entry and legislation to determine which are

most likely to gain wide-spread acceptance.

THE FUTURE IS ALREADY HERE, IT’S JUST NOTEVENLY DISTRIBUTED.

WILLIAM GIBSON


MAKE NO MISTAKE, TECHNOLOGY WILL FUNDAMENTALLY RE-SHAPE ORGANISATIONS OVER THE NEXT 5 YEARS.

Technologies like 3D printing could fundamentally change the way some

industries operate. Imagine walking into a shoe retailer and printing a

customised shoe. The benefit of such a revolution is all-encompassing

for consumers, manufacturers and retailers alike. Drone technology is

an example of the future potential of logistics with the likes of DHL,

Amazon and Singpost already trialing delivery capabilities. Although

there are currently limitations, it is easy to imagine the impact such

technology would have on retail, e-commerce and consumption options

across Asia Pacific where large proportions of the population are still

expect to live in rural areas in 2025.

As consumers’ lifestyles continue to evolve and the availability of

resources and infrastructure expand, technological advancement and

innovation will emerge to address these needs – be it sustainable

energy, nano-technology, driverless cars, artificial intelligence or robots

assisting the aging population in many countries. The release of the

iPhone less than a decade ago popularised the smartphone and heralded

a change to modern life that few of us could have anticipated in 2007.

What would have seemed impossible ten years ago, is now the norm.

AGREE

84% NEUTRAL

11%DISAGREE5%

Do you agree

new technologies

will change

your business

environment in the

next 5 years?

IMPACT OF NEW TECHNOLOGY



IN A WORLD OF UNCERTAINT Y AND EVOLVING CHANGE WHAT ARE THE TOP AREAS OF FOCUS FOR ORGANISATIONS OVER THE NEXT FIVE YEARS? Not surprisingly, the vast majority of business leaders (94%) believe

innovation will be increasingly important in the next 5 years. A company’s

ability to innovate is pivotal to its success. A focus on all things digital – be

it a digital presence in market or leveraging digital platforms for internal

operations – is also deemed critical by many. Similarly, big data and

predictive analytics will play a key role in driving companies’ understanding

of what their customers are seeking.


HAVING A SYSTEMATIC APPROACH TO IDENTIFYING SIGNALS OF CHANGE WILL SERVE AS A PRACTICE IN RISK MITIGATION AND OPPORTUNIT Y IDENTIFICATION FOR ALL ORGANISATIONS.Keeping abreast of key topics and themes as the pace of change

accelerates is essential for business leaders, as 2020 comes firmly

into focus. In the complex fast-paced business environment of

the future, only the most prepared and agile organisations will be

positioned to tap into the opportunities that await. Conversely,

companies that are unable to anticipate the changes ahead and adapt

are likely to be left behind.

INNOVATION DIGITAL BIG DATA/PREDICTIVEANALYTICS

SUPPLYCHAIN

IMPROVEMENT

RETAILERPARTNERSHIPS

94%87% 81% 80% 77%

PARTNERSHIPS&

ACQUISITIONS

NEWMARKETS &

EXPANSIONS

74% 72%

IMPORTANT FOCUS AREAS FOR ORGANISATIONS IN THE NEXT 5 YEARS



FORESIGHT: AMMUNITION FOR UBIQUITOUS CHANGE

GLOBAL/MACRO

BRANDS

ORGANISATION

INDUSTRY

SOCIETYMARKET

ECONOMY

ABOUT NIELSEN

Nielsen Holdings plc (NYSE: NLSN) is a global performance management

company that provides a comprehensive understanding of what consumers

Watch and Buy. Nielsen’s Watch segment provides media and advertising

clients with Total Audience measurement services across all devices where

content — video, audio and text — is consumed. The Buy segment offers

consumer packaged goods manufacturers and retailers the industry’s only

global view of retail performance measurement. By integrating information

from its Watch and Buy segments and other data sources, Nielsen provides

its clients with both world-class measurement as well as analytics that help

improve performance. Nielsen, an S&P 500 company, has operations in over

100 countries that cover more than 90% of the world’s population.

For more information, visit www.nielsen.com/apac.

Copyright © 2016 The Nielsen Company. All rights reserved. Nielsen and

the Nielsen logo are trademarks or registered trademarks of CZT/ACN

Trademarks, L.L.C. Other product and service names are trademarks or

registered trademarks of their respective companies. 16/9711

A B O U T T HE AU T H O R

REGAN JAMES LEGGETT

EXECUTIVE DIRECTOR, THOUGHT LEADERSHIP AND FORESIGHT

SOUTHEAST ASIA, NORTH ASIA AND PACIFIC

NIELSEN

Regan Leggett leads Nielsen’s thought leadership and foresight

initiatives in Southeast Asia, North Asia and Pacific. Prior to joining

Nielsen he studied strategic foresight and worked as a foresight

consultant. He is passionate about encouraging forward focused

conversations with clients and colleagues.

asia 2020 - nielsen · retailers. in korea, e-commerce is now the largest retail channel and in...

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