July 15, 2017 12:13 am JST
Asia300 Global Business Forum 2017

Asian consumer behavior changing as middle class expands

Prosperity enables shift from needs to desires in spending

YUKAKO ONO and CK TAN, Nikkei staff writers

From right, Pipope Chokwatana, adviser to Saha Pathanapibul; Kalin Sarasin, chairman of the Thai Chamber of Commerce; and Wang Yu, chairman of Spring Airlines. (Photo by Kosaku Mimura)

BANGKOK -- As Asia's middle class rapidly grows, customer behavior is changing and businesses need to leverage technology to adapt, business leaders told Thai and international executives Friday.

"Once the middle-income class people have more money, they want to spend on their lifestyle and pay for products like traveling abroad," Kalin Sarasin, chairman of the Thai Chamber of Commerce, said at the Nikkei A300 Global Business Forum.

He added that the Asia-Pacific region's middle-class population is set to increase fivefold by 2030 from 2009, becoming the largest in the world by far. Consumer spending will experience a 571% growth over that period.

Thailand, for example, is enjoying a record number of tourists every year, with 2016 seeing 32 million international arrivals, up nearly 10% on the year. The most numerous visitors were Asians, with Chinese topping the list. Those from Laos and India also increased.

Increased travel volume is definitely good news for Spring Airlines, China's largest low-cost carrier. To reap the full benefits, the company is stepping up its information technology investment, Chairman Wang Yu said.

"We are now an IT company," he said, adding that "there is no limitation in hiring in the IT department, unlike other departments in the company."

Bucking the industry trend, Spring has a small presence on online travel agency websites, with 85% of its bookings coming through its own mobile site.

Wang said this approach is essential to collect detailed data on customers, especially to understand the behavior of the diversifying middle class. "If we don't have the data, we will become further away from our customers," he said.

For example, the behavior of Chinese passengers, Spring's main clientele by far, differs among provinces, Wang said. "People from certain provinces prefer to travel in early hours, while there are others that like to travel midday."

Pipope Chokwatana, adviser to Thai consumer goods conglomerate Saha Pathanapibul, agreed that consumer behaviors are changing.

"One of the features of middle class is small-sized families with spending behavior that values the kids' needs," he said. This will nurture a more sophisticated consumer, as "the kids will be able to know what they want and express themselves more."

Speaking of his home market, Pipope noted that consumer buying power in the past years has been low, largely due to the high household debt, which now equals more than 70% of Thailand's gross domestic product.

But he said Thais will be spending more in two to five years as they repay their debts. Debts were inflated partly due to a government policy several years ago that offered tax incentives for first-time car buyers.

"They already bought something big and made debts," Pipope said. "But once this issue is solved and buying power is back, people are likely to buy what they like, not what they need."

Asia300

Spring Airlines Co., Ltd.

China

Market(Ticker): SHG(601021)
Sector:
Industry:
Transportation
Airlines
Market cap(USD): 4,123.28M
Shares: 800.58M
Asia300

Saha Pathanapibul Public Co., Ltd.

Thailand

Market(Ticker): BKK(SPC)
Sector:
Industry:
Distribution Services
Wholesale Distributors
Market cap(USD): 458.54M
Shares: 330M

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