Cities are Ideal Entry Points for CPGs to Emerging Asia

For CPGs building a presence in Asia, cities are key access points. Operating at national scale is challenging in such a culturally diverse region, but through cities, suppliers can establish pockets of financially viable operations, with which they can test consumer response and optimise further market development strategies. 

Asia will see its share of global retail rise from 40% to 45% in the next five years. By 2025, 54% of the continent’s 4.2 billion people will live in cities, driven by internal migration as consumers look for better lives.

CPGs and retailers should take this opportunity to capture a rising consumer with increasingly streamlined lifestyles across borders. Targeting the world’s fastest-growing region, CPGs must identify the right geographic and channel entry points for their specific brands to maximize customer impact.

Urban lifestyles will favour residential and online formats

Retailers and CPGs are enjoying growth in both incomes and addressable population. Within retail, digital (driven by fast mobile adoption) and convenience are now the fastest-growing segments, in a reflection of increasingly time-poor lifestyles. This provides opportunities for international CPGs to address consumers at a time when they are adopting new routines.

Consumer behaviours of the future are driven by:

  • Small household sizes, supporting small but frequent residential shopping trips
  • Rising female workforce participation, fueling the need for speed and convenience
  • Congested roads, incentivising consumers to opt for time-saving shopping routines, including residential and digital missions

Demand for experiences will change the face of retail

Growing demand for experiences, which has expressed itself in a falling share of retail in consumer spending, is creating opportunities both within grocery stores and outside. Urban consumers in emerging Asia will reduce their retail share of consumer spending from 52% in 2010 to 43% in 2023.

To be relevant in a digitally-enabled small-box grocery environment, with limited shelf and merchandising space, brands must drive creative solutions including rotating products, mixed cases, freestanding display units and digital elements. Outside grocery stores, Asia’s preference for digital discovery tours and creative education, as well as consumers spending much of their spare time outside their homes create opportunities around experiences.

Cities feature a highly diverse customer base, as they blend different age and income groups with diverse ethnicities and religions. This challenges retailers and CPGs to target diverse shopper segments, from low-income populations in slums to high earners looking for upmarket experiences. Both retailers and brands must, therefore, create a clear brand positioning for themselves to maximise customer appeal.

Tech-savvy consumers demand frictionless experience

Mobile has become the foremost device used for accessing the internet in Asia, mainly driven by high smartphone adoption rates. Mobile connectivity gives city dwellers access to unlimited information on the go and is raising consumer expectations of convenience and personalisation. To prepare for the rapid speed of mobile adoption, retailers across Asia’s cities must ready their operations to accept digital payments, and incentivise customers accordingly. If payment takes too long or a retailer fails to accept preferred payment types, urban shoppers will consider abandoning their shopping cart.

Cross-border commerce facilitates spread of international products

Urban middle classes across the continent have been quickly adopting online platforms –particularly 3P marketplaces – giving international brands and suppliers an opportunity to overcome geographic restrictions. On top of a widening customer base, partnering with digital marketplaces will offer brands the opportunity to capture a wealth of customer data, test new products and services with high response, and build knowledge of local markets.

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