Most Asian consumers feel more optimistic about the future than those in Europe or the United States. This has led to the highest consumer optimism across China, India, and Indonesia, which is the highest in Asia-Pacific, shows the latest McKinsey Consumer Pulse Survey Report.
Indian and Indonesian respondents are particularly upbeat about their countries’ economic rebound. In contrast, China has endured a recent surge of COVID-19 and ensuing lockdowns, which dipped consumer sentiment by 12 percentage points.
Australia experienced a big drop in optimism. Japanese, historically among the least optimistic consumers in Asia, saw their outlook darken slightly.
Rising consumer optimism is typically accompanied by higher spending. As such, Indian and Indonesian consumers lead the pack. Spending has increased for more than 50% of the population in India and Indonesia. China and Japan, on the other hand, had the lowest intent to increase spending.
Also, 30-65% of consumers across Asia decreased their overall spending in the wake of inflation, which shows inflation is having an impact on the region. In India, 48% of consumers surveyed say they are planning to decrease spending amid high inflation. Notably, India's retail inflation fell from an eight-year high of 7.79% in April to 7.04% in May, staying above the Reserve Bank of India's upper tolerance limit for the fifth straight month.
However, the desire to splurge after two years of the pandemic is higher among younger consumers and higher-income groups, than the impact of inflation and global uncertainty, says the report. Australia had the greatest range among consumers by generation and income levels, while Chinese consumers largely share similar attitudes. "However, with inflation on the rise, the tide may be turning," says the report.
Some pandemic-era consumer behaviours may still be permanent like all-things digital, health, safety and sustainability, and brand experimentation. "Two years into the pandemic, these shifts appear permanent," the report says. The trend shows consumers have increased their digital activity across the board. In everything from online streaming and video chats to food delivery, consumers have become much more digitally savvy.
India experienced spikes in online fitness, telemedicine, food delivery, and e-sports, while other countries were only slightly less enthusiastic, shows the survey. Japanese consumers have wholly embraced digital engagement across demographic groups.
In the early days of the pandemic, lockdowns, economic disruption, and uncertainty led to an increase in "brand switching". For example, 60% or more of Indian and Indonesian consumers have tried a different brand since the pandemic started. The survey shows consumers continue to seek greater variety. "This trend gives new brands the opportunity to reach a wider set of consumers, while existing brands may have to reinvent their value propositions."
On how retailers and consumer goods companies can respond to these trends, the report says they must trim costs and increase resilience ahead of any headwinds, deepening their digital as well as physical engagement, reinventing customer loyalty through innovation and personalisation, and make a meaningful pivot to sustainability.