Asia Pacific Retail A Decade of Massive Change, With More to Come

Asia Pacific Retail A Decade of Massive Change, With More to Come

Over the past 10 years, the retail scene in much of the Asia Pacific region has undergone dramatic change.  Strong economic growth, more affluent populations and changing societies have transformed the way consumers throughout the region shop for their groceries and other goods. What’s more, Asia Pacific has robustly emerged from the global recession, posting the strongest consumer confidence scores of the 55 countries The Nielsen Company tracks.

To get a better sense of where the fast moving consumer goods industry stands – and where it’s going – in Asia Pacific Nielsen has released its comprehensive mid-year report highlighting regional trends such as total FMCG category growth, the role of hypermarkets and the changing gender profile of shoppers as well as country highlights on retail trends in 14 key nations.

FMCG Growth

Volume growth in the industry was down across many Asia Pacific countries as consumers cut back during the recession.  But there were some standouts: India and Vietnam posted value sales rises of nearly 15%.  In China, where value sales had been posting double-digit gains for much of the decade, growth slowed to just 3% in 2009.  But thus far in 2010, the segment has rebounded nicely, with 11% in the sector in the first quarter of the year.

Modern vs. traditional

The traditional retail trade, both wet markets and counter service mom & pop stores, continues to play an integral role throughout much of Asia.  Even in countries experiencing rapid growth such as China, Vietnam, Indonesia and Malaysia, the wet market continues to be the main place for buying fresh food.  But modern grocery stores, such as hypermarkets and convenience stores are now an established presence in most urban areas, with the strongest growth for such formats seen in China and Korea.

Modern channels have continued to grow steadily and now account for 53% of all packaged grocery sales in the region, up from just 35% in 2000.  But that trend varies widely: almost all packaged grocery shopping was done in the modern market in Taiwan and Singapore (94% and 92%, respectively) while in India, just 5% went through self-service outlets.

China has been the most dynamic country over the past decade, with the modern trade growing from 34% in 2000 to 64% in 2009, the fastest retail ever seen with Korea fast on its heels, expanding from 63% in 2000 to 86%.

Share of trade for modern self-service outlets

Format Wars

The expansion of hypermarkets has been a boon for many shoppers, especially those in urban areas.  Today, this format is the strongest modern trade channel, accounting for 28% of packaged grocery sales in China.  In Shanghai, 77% of shoppers use hypermarkets as their main store, while in Beijing, 45% do the same.  In Korea, the channel accounts for 31% of trade.  Meanwhile, in Southeast Asia, Hypermarkets are strongest in Thailand with 90% of urban shoppers using them regularly, there has also been significant development in Malaysia where nearly 40% of shoppers spend most in this format.

In many of these countries, the traditional grocery store has been in slow decline as it has faced increased competition.  In Korea, the traditional channel posted a closure rate of 5% per year, accounting for more than 50,000 store closures over the course of the decade.  Although the hypermarket is making huge gains in Malaysia, most shoppers (over 70%) still visit traditional grocery stores two to three times a week. Asian shoppers now have a wide portfolio of alternative shopping channels to meet different shopping needs and occasions including both traditional and modern stores.

Any visitor to Asia will notice the surge of small format stores, both convenience stores and mini-marts, with some intersections boasting two or more such stores on the corner.  Convenience stores such as 7-Eleven, Familymart and Circle K have continued to grow strongly throughout the region, with shoppers attracted by their convenient location and food service offer.

Indonesia has seen explosive growth in mini-markets, small modern grocery stores, with local chains leading this change.  With just 2,000 such stores at the start of the decade, the nation now boasts more than 11,500, and this channel’s now accounts for more than 17% of grocery sales.

Tapping the Potential of Private Label

In North America and Europe, private label goods have experienced strong growth, especially during the recession.  What’s more, consumers in those regions say that they expect to continue buying private label goods even after the recession is over.   The story is very different in Asia.  The private label concept has yet to make a significant dent in sales, and only in Hong Kong do they have above 5% share of sales.  Retailers across the region have been investing in the development of Private Labels but still have a lot of work to do to convince shoppers of the quality and value of these products compared to leading brands.

Private Label Share of Total Market

What’s Ahead

The changes shaping the retail scene in Asia Pacific go beyond store size and format.  Nielsen has identified a number of trends that will affect retailers and manufacturers in the next decade, including:

  • The growing role of the male shopper – Tradition still leads the way in most countries in the region, but an increasing number of men are becoming involved in grocery shopping.  Only in India and Indonesia do housewives dominate, and Korea and Vietnam also still strongly adhere to traditional roles.  Across the region, 22% of the “main” grocery shoppers for households are now male, up from 14% a decade ago.

While there are signs of change in Korea, likely driven by the development of Hypermarkets, only 11% of men claim to be the main shopper for their families.  In Vietnam, the percentage is likely to stay low for a while as long as the traditional Wet Market channel continues to dominate packaged grocery sales.

  • Hypermarket growth stalls as multi-format strategy gains – Smaller formats that offer shoppers a more convenient way to “top-up” shopping have gained in popularity, many being opened by the leading hypermarket chains themselves.
  • Shopping outside the store – Shopping done via the TV or Internet is gaining traction in Asia Pacific, with Korea leading the online shopping sector.   Koreans have embraced this “format,” with 4% of shoppers saying they use the Internet for the majority of their grocery shopping and 71% saying they use it regularly to purchase groceries and personal care items.  An additional 30% say they use TV shopping.

These and other trends are discussed in the 2010 APAC shopper trends report.