Asian Consumers – Solution To The Current Economic Crisis?

As the world continues to be subdued by the global economic crisis, companies the world over are now setting their sights on focussing on Asian consumers as a solution to the situation. As the West recently went through the first anniversary of the Lehman Brothers collapse, Asian consumer indices continued to move steadily upward, mainly in China and India, the world’s two largest economies of the developing world. Asia has slowly but surely emerged stronger in the last decade, and boasts of one of the largest manufacturing and services setups worldwide.

Experts claim that in spite of the recent downturn, consumer spending on items like consumer lifestyle goods in Asia will continue to grow at 5-7%, at a time when economies the world over have shrunk. In fact, China is set to become Asia’s largest consumer market this year, and GDP growth in India continues at a steady 5-6% in spite of the failure of the monsoons. With the exception of Japan, most Asian economies have managed to ride out the recession well. And multinationals are scrambling to grab a share of this growth, in order to shore up their bottom lines.

With a population of billions and wildly diverse income levels, the markets represent unique challenges to companies, who have responded by reworking their value addition to better meet the aspirations and needs of the Asian consumer. E-commerce as a channel is slowly taking hold in urban centres of these countries and a number of companies of the likes of Cartier and Louis Vuitton are moving in. The latter is reportedly setting up its first store in Mongolia, in the capital Ulan Bator this year.

Multinationals entering India and China will face stiff competition from the local players, many of whom have now set their sights on conquering markets beyond their own shores. The Tata group’s acquisition of Jaguar-Land Rover is a case in point. Consumers in the Asian economies are from diverse backgrounds and income levels, and there is a strong need for multinationals to understand the psyche of their consumers instead of simply trying to shoehorn established products into these markets. MNCs that tried it in the 90s when the Indian economy first opened up have gotten their fingers badly burnt in the process and now know better.

Some of the key steps that corporations will have to undertake while targeting the Indian consumer include strengthening regional teams for an entrepreneurial mindset, moving and managing resources quickly to take advantage of emerging trends and provide service support at a level never seen before, in order to win hearts and wallets. Supply chains are being tweaked to reach a wider geographical area at lower cost, in order to sustain volumes. Regional collaboration, rather than country-focused set-ups are emerging as the business model in most parts of Asia.

But with the European markets set to see shrinkage of around five percent in the luxury segment, and the US markets even more so at close to fifteen percent in 2009, the Asian consumer is the new king.

Sources:

http://www.mckinseyquarterly.com/Marketing/Sectors_Regions/Think_regionally_act_locally_Four_steps_to_reaching_the_Asian_consumer_2436

http://www.time.com/time/business/article/0,8599,1906541,00.html

http://www.channelnewsasia.com/stories/economicnews/view/1007843/1/.html

http://www.nextbillion.net/news/the-south-asian-consumer-market

http://www.atimes.com/atimes/Asian_Economy/EK26Dk01.html

http://www.chinadaily.com.cn/china/2008-09/08/content_7008871.htm