The pandemic, rising cost of living, energy crisis, geopolitical unrest, and the climate crisis have all taken a toll on consumers, and with people moving from crisis to crisis in recent years, interesting shifts in consumer shopping behaviors have been observed in Southeast Asia (SEA).
90 percent of polled Southeast Asians have cut down spending or reduced household costs in the last six months to manage the impact of soaring inflation, according to Blackbox-ADNA’s latest study—Inflation and Shopping in the Digital Age, which covers more than 9,000 adults across Singapore, Malaysia, Thailand, Indonesia, Vietnam, and the Philippines.
The study revealed that higher-income shoppers in the region are more insulated from inflation and are less likely to alter their shopping behavior.
However, as retailers – both online and offline – prepare for the upcoming holiday season, they must grapple with consumers pulling back on discretionary spending to focus on essentials.
The study also showed consumers in the region taking various actions to save money or cut cost in the last six months: 25 percent say they are eating cheaper meals at home, 25 percent are cutting back on out-of-home dining/ going to restaurants, 24 percent are buying more items on discount, 12 percent are purchasing from cheaper brands, and 12 percent are cutting back on food delivery to home.
“This study quantitatively validates what many of us feared – across Southeast Asia, inflation has impacted most of the population with only the affluent spared. The populace across the six countries is taking active steps to cope with the household budget-balancing challenge by cutting down on discretionary spending and hunting for savings on the necessities,” said Nishant Kaushal, Global Head of Data, Strategy and Solutions of ADNA.
According to the survey, online shopping too has not been spared by inflation and digital spend in Southeast Asia has taken a hit in 2022.
While Southeast Asians are still shopping online, they reported that their overall proportion of online/digital purchase this year has decreased by 9% compared to 2021.
“Our study results show that not even e-commerce has been spared by the recent onslaught of high inflation. The rapid rise in digital spending across Southeast Asia that we saw during the pandemic now faces a reality check,
“Moving forward, competition is going to intensify and stronger value propositions from e-commerce platforms will become much more important,” said David Black, Chief Executive Officer of Blackbox Research.
It is noted that rising inflation and rising interest rates are collectively making 67 percent of Southeast Asians more anxious about the current economic scenario than anything else.
In markets such as Singapore, Vietnam and Malaysia, this figure rises to 81 percent, 80 percent, and 71 percent respectively.
Key Study Findings
1. Rising inflation and interest rates impact Southeast Asians’ everyday lives
Four in five respondents in SEA identify an inflation-related issue as their biggest financial challenge at present, compared to 1 in 5 who say it is rising interest rates.
Alongside rising interest rates (21 percent), general price rises across all household purchases (19 percent) now ranks as one of the top two most critical issues regionally, and in almost all SEA markets.
Understandably, Southeast Asians are worried about rising prices and everyday concerns. Across the board, they reported worrying about: (1) General price rises across all household purchases (33 percent), (2) Rising interest rates (32 percent), (3) Rising fuel prices/transport costs (31 percent), (4) Rising food prices (30 percent), and (5) Rising utility prices (30 percent).
Southeast Asians are unanimous in their belief that the two biggest causes of the current high inflation are (1) The aftereffects of Covid on the global economy (63 percent), and (2) The Russia-Ukraine war (41 percent).
Poor/bad government policies (18 percent) round up the top 3 perceived causes for the current high inflation regionally; this factor is especially pronounced in Malaysia (28 percent) and the Philippines (18 percent).
2. Countering inflation’s impact on daily lives
In order to manage the impact of rising inflation, 90 percent of Southeast Asians have cut down spending or reduced household costs in the last six months. This figure rises to 95 percent in Vietnam and the Philippines.
The top five actions that Southeast Asians have taken to reduce their spending in the last six months includes (1) Eating cheaper meals at home (25 percent), (2) Cutting back on out-of-home dining/going to restaurants (25 percent), (3) Buying more items on discount (24 percent), (4) Purchasing from cheaper brands (12 percent), and (5) Cutting back on food delivery to home (12 percent).
3. E-commerce/online shopping platforms to the rescue
The current uncertain economy, coupled with rising inflation—while driving people to cut back on spending—is also driving Southeast Asian consumers to seek money-saving tactics, including discounts, cashback rewards, and deals.
Economic pressures are driving the broad adoption of shopping rewards programs, which are “crossing the chasm” from deal hunters and early adopters to mainstream consumers seeking to cut costs any way they can.
This appears to be one of the key drivers for 44 percent of Southeast Asians to prefer some form of online shopping over traditional shopping.
Even when it comes to shopping for goods locally, Southeast Asians are unanimous in their preference to do so through an online medium.
4. Online shopping reigns supreme
In terms of the top five e-commerce/online shopping platforms by user favourability in Southeast Asia, Shopee (93 percent) and Lazada (93 percent) are tied at the top spot, with Amazon (91 percent) hot on their heels, followed by Shein (85 percent) and AliExpress (73 percent).
When asked why they like to shop online, Southeast Asians reported that while Discounts/Sales (33 percent) and Reward Programs (17 percent) were up there among the key reasons for shopping online, they were also drawn to other benefits such as Convenience (43 percent), Variety of Choice (25 percent), Getting the latest trends fast (19 percent), Getting the things not available locally (17 percent), and Price (11 percent).
However, it’s not all a bed of roses for online shopping and e-commerce players. Southeast Asians do acknowledge that they have some major bugbears with shopping online.
Their top three challenges with online shopping are (1) Wrong size or wrong order delivered (50 percent); (2) Goods not turning up (29 percent); and (3) Unreliable quality of goods (27 percent).
5. Seven in ten consumers in SEA tune in eagerly to online sale seasons
Despite riding a tailwind during COVID-19, which has seen massive upheavals in consumer behaviors and spending habits, online shopping too has not been spared by inflation and digital spend in Southeast Asia has been affected in 2022.
While Southeast Asians are still shopping online, 70 percent are more likely to wait and purchase items during peak online sale seasons like Amazon Prime Day (19 percent), Singles Day Sale (18 percent) and Black Friday Sale (18 percent).
This deal-hunting behavior is much more pronounced in markets like Singapore (85 percent), Malaysia (81 percent), and Indonesia (71 percent).
Perhaps, this is the reason the overall proportion of online/digital purchase decreased by 9 percent this year compared to 2021.
The exception to this trend are Singaporeans who reported that their overall proportion of online/digital purchase in 2022 has increased by 16 percent compared to 2021.
“Hard selling tactics and fear-based marketing messages at this time would add to the stress that the households across Southeast Asia are already facing,
“Hence, our advice to retailers, e-commerce platforms and marketers would be to demonstrate genuine empathy to consumers and try to be part of the solution. By doing so, you would most likely win more customers,” Kaushal concluded.