Gerard Tan – Commercial Director – GfK Asia looks at digital consumer trends in Asia Pacific
GfK’s Gerard Tan was one of the “main acts” at the recent IFA Global Press Conference in Rome. Following is an exclusive summary of his presentation.
In Asia, the consumer is “hyper-connected”. We are moving towards an era in which consumers today, especially Asian consumers, really embrace the connected lifestyle in everything they do.
About 4.5 billion people are living in Asia-Pacific. That’s about 60% of the global population. Five of the world’s ten fastest growing economies are also in this region. Half of the world’s internet users live in Asia, so this is where most manufacturers test their product categories, due also to the fact that there is a growing middle class here. By 2030, about two thirds of the world’s middle-income earners will be living in APAC. Seven of the world’s ten top smartphone brands also come from this region.
GfK has been looking at how consumers use their smartphone when shopping around the world, and found that in APAC, the percentage was particularly high. 90% of consumers in China use their smartphone to help them do their shopping. In Indonesia that figure is around 76%. Brands are thus customising their marketing in these regions keeping this in mind, and it’s even affecting the way products are rolled-out and presented. Even baby boomers, aged approximately from 53 to 71, now use their mobile phone as the first source of information before shopping, and it goes without saying that Gen Y and Gen Z are leading the charge. The majority of them don’t even have credit cards, but most of them will be carrying a mobile phone. In Asia Pacific, in you go into any household, or any restaurant, you realise that everyone is always looking at their phones. It’s an evolving trend, as technology changes the lifestyle of most people living in Asia Pacific. Music and data transfers have become extremely affordable, and almost everyone has a device with which they can connect.
In the past, it has occasionally difficult to find the growth drivers, but this time, it was pretty easy, because everything sold less than last year, but everything was more expensive. This is a challenge for the brands. If you look at the top, it’s the TVs, imaging, smartphones and PCs. Brands need to take into account the fact that people are looking more and more for premium products, and this is the case with Chinese smartphone manufacturers who are selling premium products, driving up price points, resulting in the fact that Asians are spending more on these products.
In the PC market, we have already been talking about the importance of gaming over the past couple of years, and this is now skyrocketing, with gaming machines, gaming notebooks, gaming PCs… you still see that happening. 22% of all the mobile computers sold today – and that’s not small – are gaming notebooks. And that’s a premium price.
If you look at thin & light, there is also good growth this year in APAC. What is really suffering is the mainstream PC, which now has only around 35% share. If you look back to 2015, it was 70%.
Gaming-related devices, such as headsets and mice, the price index has almost grown two times versus the previous year. And the value growth in all of these segments is rising.
The big question for the manufacturer is “What technology should I implant into the devices I launch?”, knowing the spending habits of the Asian consumer. There is a link between the consumers across Asia-Pacific, in that among the younger generation, 90% own smartphones, but only 69% hold credit cards or charge cards. So, there are a number of young people who have a smartphone but no credit card at all. And they do three things: they explore, the research and they purchase; and they want to do these three things whenever and wherever they are. Here, China and India are way ahead of the curve. 70% of all the consumers we surveyed also agreed that these three things are fundamentally part of what they do almost every week. This has resulted in the skyrocketing of eCommerce – online sales. This has grown to US$46bn in APAC – and I am just talking about eight markets. That breaks down to US$31bn in smartphone sales, US$7bn for TVs and US$8bn for major appliances. So, going to a shop, and then making the purchases online, is becoming very common in APAC. This gives a challenge to classic bricks and mortar shops to look at how they can improve their sales online.
Sales of biometric enabled smartphones are growing fast, and another new phenomenon is a surge in sales of smartwatches with NFC – as a “mobile wallet”. In terms of value, we are now up to around half of all sales – a growth of 22% over the previous year.
Other Key Facts & Figures in APAC
Wireless sports headsets grew 64% y/y, wireless earbuds also took off in 2017 (over 1,000% growth, because the previous figure was so low).
In the TV market, the World Cup will be a big driver for 4K TV. 45 million UHD TVs are expected to be sold in APAC in 2018 (+31% growth y/y).
The digital camera market is being driven by full frame devices, which saw a unit growth rate of 16% in 2017, and growth in average selling price of 7% (av. US$2,381).
Smartphones are seeing consumers spending more on a device with every upgrade. The average user touches the phone around 2,500 times a day. 140 minutes, on average, are spent on the device each day. So something nice to hold, with a nice screen, is the way to go, and smartphone sales are just not slowing down. I was sure last year that we would see some saturation this year, but it didn’t happen. Obviously, China still leads the pack, as sales in developed APAC, grew 11% (despite penetration levels already being between 180-250%) and in emerging APAC grew 23%. In every single country in APAC, spending has risen for smartphones. It comes from the fact that people want to have something that looks and feels more “premium”. I find this trend very encouraging and most of the brands are embracing that. It’s extremely difficult to try to segment the smartphone market, as kids at school might be carrying an iPhone X, while major CEOs may have an iPhone 4.
Artificial Intelligence: We hear a lot about AI, and what’s exciting in Asia, is that when brands heard about AI, they just took it on and started doing it. In China, you can already buy a monitor – a TV “housekeeper” that tells you what’s on and what’s off at home. It’s already happening. This form of reaching out to the consumers helps educate people about what brands are trying to do with connected devices, and how AI can be used at home. A lot of brands are moving in this direction, and in the survey we undertook last year, we found that 50% of consumers globally are sure that smart home will change their lives in the near future, while in China that figure is 75%. Proof of this is the sales of smart speakers that are climbing exponentially in China (from US$2.9m sales in July, through US$9m in October to US$35m in December ’17) – with 21 brands selling 34 models. If you asked the brands whether they had forecast this growth, they would tell you they had no idea.
The excitement rates and adoption levels continue to drive Asians and move Asians, and if you put a product in front of them, and sell them the benefits, these kinds of trends will happen, and they did happen last year.
In summary, Asia is the growth engine of the industry, with a rapidly expanding consumer base, and Asians are tech savvy consumers; data shows that Asians are spending more and more across all major tech devices; Asia is hungry for new technology – with its rapidly expanding middle class; Asia is embracing mobile payments, fuelling opportunities for omni-channel; and Asia is making AI more affordable, with high adoption rates and China leading the way.