The most influential Megatrends set to shape the world through 2030, identified by Euromonitor International, help businesses better anticipate market developments and lead change for their industries.
Rising incomes in Asia Pacific has not only led to higher consumer expenditure but also changes in consumption patterns. Asian consumers are shifting towards greater discretionary spending, especially spending on communications, education and health goods and medical services. These new spending patterns are creating exciting opportunities for businesses and investors, despite the fact that market potentials in some sectors concentrate among richer households.
Real Period Growth in Per Capita Annual Disposable Income in Asia Pacific and Other Regions: 2007-2012
Source: Euromonitor International from national statistics
Despite the impact of the 2008-2009 global economic downturn, countries in the Asia Pacific region have experienced strong economic growth and rising incomes:
Over the 2007-2012 period, real GDP growth in Asia Pacific averaged 6.3% per year, compared to the 3.3% average annual real growth for the global economy. Although falling exports as a result of plummeting global demand weighed on their export-oriented economies, the average annual real GDP growth over this period still reached 10.1% in China, 7.3% in India, 6.3% in Vietnam and 6.0% in Indonesia;
On the back of strong economic expansion, consumers in the region have enjoyed rising incomes. Over 2007-2012, Asia Pacific’s average per capita disposable income grew by 19.3% in real terms. In particular, per capita annual disposable income in China rose by 63.3% in real terms over the period;
Consequently, per capita consumer expenditure in the region saw a healthy real growth of 20.3% over the 2007-2012 period, with China recording a neck-breaking growth rate of 83.3% in real terms;
In addition to rising expenditure, the consumption patterns have changed towards greater discretionary spending – that is, spending on items other than food, non-alcoholic beverages and housing. In China, for example, discretionary spending as a proportion of total consumer expenditure stood at 35.4% in 2012, up from 42.7% in 2000.
Communications is the fastest growing consumer spending category in Asia Pacific over the 2007-2012 period, with a real period growth of 52.4%. In comparison, the region’s overall consumer market grew by 27.2% in real terms over the same period. Asia Pacific is already home to technology power houses such as Japan and South Korea. It also has six of the ten largest mobile phone markets in the world, and a large, youthful and tech-savvy population, among whom social media has gained popularity. Therefore, the region offers abundant and diverse opportunities in online marketing, online advertising, e-commerce and m-commerce;
Health goods and medical services is not far behind communications, as this category recorded a growth rate of 51.7% in real terms over the 2007-2012 period. In China, consumer expenditure on health goods and medical services grew by 114.3% in real terms over the same period. Driven by rising incomes, better standards of living, longer life expectancy, and population ageing in countries such as China and Japan, there will be growing demand for hospitals, medical and dental services. As government spending alone will not be sufficient to meet such rising demand, there will be plenty of opportunities for the private sector to fill in the gap;
Education is another area with significant potentials thanks to rising incomes, aspirational middle-class consumers and an Asian culture that prizes educational attainment. Between 2007 and 2012, consumer expenditure on education rose by 93.8% in real terms in China, by 90.7% in Indonesia and 53.0% in India. However, as Asian consumers are eager to spend to bridge the gap in quality between the state and private education sectors, the region’s education market is largely dominated by richer households;
Annual Real Growth in Total Consumer Expenditure and Consumer Expenditure in Selected Categories in Asia Pacific: 2007-2020
Source: Euromonitor International from national statistics/UN/OECD
Note: Data for 2013-2020 are forecasts
Even within the non-discretionary category of food and non-alcoholic drinks, Asian shoppers are trading up to better quality as well as embracing a wider range of products, including Western foods. Therefore companies in the food and non-alcoholic drink sector will certainly find plenty of opportunities to expand further in this region as the level of sophistication of the consumer increases.
Over the 2013-2020, Asia Pacific’s per capita annual disposable income will rise by 35.2% in real terms and per capita consumer expenditure is expected to grow by 37.2% in real terms. Key emerging market economies in the region will continue to drive regional consumer spending growth, especially as they are striving to reduce exports dependence and enhance domestic consumption in an effort to balance the economy. Per capita consumer expenditure is forecast to grow by 75.3% in real terms in China and 69.4% in India over the forecast period;
Communications, education and health goods and medical services will continue to be the fastest growing consumer spending categories in the region, recording real growth rates of 80.9%, 76.5% and 68.9% respectively over the 2013-2020 period. Euromonitor International forecasts that China will overtake the USA as the world’s largest education market in 2017.
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