ASEAN is getting richer and luxury brands would be best served to pay close attention.
In Beyond the “Crazy Rich”: The Mass Affluent of Southeast Asia, a study conducted by Boston Consulting Group (BCG), researchers found that around 136 million affluent consumers will live in the Association of Southeast Asian Nations (ASEAN) region—which includes Brunei, Cambodia, Indonesia, Laos, Malaysia, Myanmar, the Philippines, Singapore, Thailand and Vietnam—by 2030.
ASEAN nations reached a combined GDP of $6.5 trillion in 2017, according to the report. Were the region under one flag, it would be close to India in terms of the size of its economy, and it would be the world’s third most populous country, according to BCG.
It’s a “megamarket,” really, that is relatively overlooked compared to China, the United States and the EU. However, the main indicator that this market will grow increasingly favorable to luxury brands is the fact that 136 million consumers in the region will be considered “affluent” by 2030, displacing the middle class as the region’s primary growth category.
“As the mass-affluent class replaces the middle class as the driver of growth, the dynamics of Southeast Asia’s consumer market will fundamentally change,” researchers said. “Categories such as passenger cars, cosmetics, and restaurant dining will become hot growth segments, replacing categories such as household appliances, baby products, and ready-to-eat foods; similar shifts occurred when China experienced a comparable demographic shift.”
The study defines affluent as “consumers with the incomes and intent to sharply increase their acquisition of premium and luxury products” and, as it stands, roughly 5 percent to 10 percent of the population in each ASEAN country is affluent, according to BCG. However, that small segment of the population holds up to 40 percent of the region’s household wealth and is expected to increase to 21 percent of the region’s population by 2030.
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And, as BCG suggests, the affluent in ASEAN nations are in the process of upgrading their lifestyles to luxury standards, meaning most are actively seeking higher quality wardrobes, appliances and vehicles.
The “mass-affluent” income segment is growing faster than any other in the region, according to BCG, especially in the four most populous nations in ASEAN—Indonesia, the Philippines, Thailand and Vietnam. The segment is expected to grow by 8 percent per year leading up to 2030. By comparison, the middle class could grow at half that rate, or 4 percent per year.
“Despite the region’s immense cultural and economic diversity, we found that the mass affluent have strikingly similar views on lifestyle topics and attitudes toward work,” BCG researchers said. “By margins ranging from 80 percent to 90 percent, for example, the affluent consumers we surveyed in Indonesia, Malaysia, the Philippines, Singapore, Thailand, and Vietnam agreed that they want to buy products and have experiences that differentiate them from others.”
As a group, this new generation of affluents is composed of young professionals who are digitally savvy and who primarily seek exclusivity in their luxury purchases—and who also account for roughly half of all luxury spending in categories like travel, watches, apparel and cars.
BCG says more than 90 percent of the group are newly rich and have acquired their wealth through salaried work or as business owners at some point in the last decade, rather than through inheritance. Roughly two-thirds are below the age of 40 and were previously members of the middle class.
Researchers say this means brands outside of the heritage luxury segment also have a chance to capitalize on the demographic change, due to the segment’s propensity to remain price-conscious despite an increase in wealth.
“As the mass affluent replace the middle class as the driver of growth, the dynamics of Southeast Asia’s consumer market will fundamentally change,” said Aparna Bharadwaj, the head of BCG’s Center for Customer Insight. “This enormous market is important to virtually all consumer product companies, not only luxury brands.”