Outlook 2022: APAC POV
How entropy will play out in this region in the four key trends, the windows of opportunity along with the challenges.
Written by: Sharon Soh, Head of Integrated Strategy & Marketing, UM APAC.
With contributions from: Liz Shie (Senior Regional Strategist, UM APAC), Aditya Kilpady (Regional Strategy Director, UM APAC), Jesca Bantayan (Head Of Strategy, UM Philippines)
Since the start of this century, the world has been changing radically with APAC at the heart of the transformation. Many of the emerging economies in the region like China, India and Southeast Asia had been rapidly industrializing, the innovation powerhouses of China, Japan and South Korea had accelerated technological change, and digitization and mass adoption of smartphones across the region fueled interconnectedness. Whilst these disruptions on their own were not unexpected, the challenge was that they all happened at the same time and at scale, producing change in the region that had not been experienced anywhere else.
Fast forward two decades, with a pandemic that triggered the most challenging global health crisis and economic downturn, one that has also been forcing change — new needs, new behaviors, and new expectations; prompting a new reckoning across the region. In popular culture, the Chinese word for “crisis” has often been said to be written with two characters signifying “danger” and “opportunity”; in fact, the second character also means “change point”. As illustrated in David K. Hurst’s book on ‘Crisis & Renewal’, crisis is the driving force behind any significant change-renewal, transforming organizations from a stable performance mode into a more flexible learning mode, as accepted organizational beliefs, structures and routines are shaken up.
In response to the 1997 Asian Financial Crisis, chaebols, massive mostly family-run business conglomerates that play a central role in South Korea’s economy, shifted business focus from the reliance on low-value exports characteristic of a high-growth economy towards technology and knowledge-intensive products and services. By marrying their strengths in technology and manufacturing with great design, branding, and marketing, they were able to compete more effectively with their Japanese and U.S. counterparts. Today, these chaebols remain a driving force of South Korea’s GDP and has solidified the country as a global innovation leader.
Similarly, the 2002 SARS outbreak in China too proved to be a turning point for both Alibaba and JD.com, now China’s largest top two leading e-commerce companies. Alibaba, then a four-year old B2B e-commerce company, capitalized on international companies turning to online sourcing of Chinese goods amidst business travel restrictions to China; meanwhile, JD.com pivoted from a chain of small electronic shops with just twelve offline stores in Beijing, to launch their e-commerce platform, focusing the bulk of their resources on building it.
Like the crises of before, COVID has been bruising for the APAC economy, and whilst much uncertainty remains, the region has once again shown resilience in the face of this extraordinary shock. According to reports from the International Monetary Fund, GDP growth has proved relatively stable throughout the pandemic with APAC’s GDP contracting by 1.5% in 2020 while the world economy shrank by 3.32%. The region has rebounded faster too with 2021 showing growth of 6.57% as compared to global growth of 5.95%. Even so, as we enter the endemic phase of this crisis, it is well worth noting that the road ahead will remain challenging, with the ongoing change and disorder continuing to play out over the next few years.
Looking ahead, with many of the Asian economies still having a great deal of charge in them, how can lessons from the past alongside the entropy of today be used to fuel a brighter Asian future and bring to bear ‘The Asian Century’ as proclaimed by McKinsey? We identify four ways to which entropy will play out globally and explain the windows of opportunity and highlight the challenges for the APAC region.
Power to the People
When countries went into lockdowns and movement restrictions two years ago, content interactions and preferences started to shift dramatically overnight. As inherently social creatures, social distancing has inevitably propelled many to turn to digital media and technology to stay physically distant but socially connected. In the throes of the pandemic, crisis related news had been a mainstay but with a power shift from institutions alone to communities and people, as many did not just rely on traditional news channels for the latest updates but instead turned to social media sources. Media platforms and consumers alike got creative with new formats as well as new ways of content creation and distribution. Weibo, the most popular micro-blogging site in China, launched their Wuhan Lockdown Diary feature enabling many to record their daily lives during the extensive quarantine of the city. Across the country, Douyin was also used to create social and entertainment content to give encouragement and support to those in lockdown.
As personal interactions move from physical to virtual, so too has purchase behaviours evolved. Consumers have been seeking new ways to not just buy products and services that fulfil basic needs but also shop for items that make their isolation more comfortable and their days brighter, fuelling the social commerce growth and adoption already seen across APAC. In particular, livestream shopping — a convergence of several current trends in the region including video streaming, influencers, social communities and online commerce, has boomed. This has in turn accelerated the influencer economy in APAC, projected to witness market growth of 32.8% CAGR during the period of 2019–2025. The power of these individuals is epitomised in top Chinese influencers Austin Li and Viya. During the Double 11 Shopping Festival in November last year, Austin reportedly sold $1.8 billion worth of goods in a 12.5-hour-livestream on Taobao whilst Viya racked up a transaction volume of about $1.3 billion in 14.5 hours, per a CNBC report.
Indeed, the influencer economy in APAC is significant and it is not just limited to the selling of consumer goods. Many professional services have also jumped onto the bandwagon as seen in the rise of medical vloggers and influencers. With content ranging from daily vlogs, to general medical advice, and insights on the latest health trends, vlogs from medical practitioners are becoming more and more popular on social media, playing a highly complementary role to the digital health ecosystems in APAC that are flourishing as a result of the pandemic.
The lockdowns are also giving people more time to look at their finances and the past two years have seen an explosion in the popularity of fintech influencers (aka finfluencers) in markets like India, as millions of new investors entered the market attracted by new-age broking firms and their easy-to-use apps. As reported in a recent news article, India has a low financial literacy rate of 27%, which explains why first-time investors, especially those from suburban and rural areas, are drawn to the educational videos on YouTube by these finfluencers.
Outside the booming influencer economy that empowers individual content creators, APAC consumers are also elated by the increasingly borderless fandom communities. For the past decade, Korean pop culture has been a dominant force, with K-pop and K-drama idols fueling fervent fandoms across the region and globally as well. Recently, we have seen celebrities from other markets like China and Thailand become increasingly popular too, amassing fans not only in their home markets but also from the rest of the region, and collectively driving an increasingly powerful fan economy. In Hong Kong, amidst the city’s uncertain social environment, the debut of the boy group Mirror from the variety show King Maker, has ignited a resurgence of enthusiasm for Canto-pop — and with it, a broader hometown pride.
Today’s fans are also highly aware that their idols’ commercial value depended on their financial support, from generating publicity for their idols to buying the products or services endorsed by their idols to even “gifting” virtual money to these idols or influencers on livestreams for them to exchange in the real world. These acts are no longer just out of the belief that the products or services endorsed by celebrities are good, but rather the purchase is a means to further increase the commercial value of their idols. For example, Produce Camp 2021, a Chinese talent show that aired in February last year, raised an average of $6.13 million per contestant from its audience, who were eager to help their favorite idols win.
Without a doubt, this shift in power towards creators, influencers, users and fans can be both exciting and daunting for marketers. With the consumers of today wanting to participate, create and remix more than ever before, brand marketing will have to be powered by co-creation and collaboration in order to build greater authenticity and credibility. This will inadvertently cause some discomfort as it means giving creators and influencers creative control over the brand. After all, it would be unlikely an influencer can spread the brand message as well as a commercially-minded and trained marketer. That said, the answer is not quite as binary — power to the people doesn’t mean brands retain no power. On the contrary, there is great power that brands can harness from the participatory enthusiasm of APAC consumers.
As the perceived commercial orientation of posts affects consumer trust in influencers, allowing them to choose their content will boost its validity and, in turn, make for more authentic brand messages; especially as every influencer has their own unique aesthetic and communication style that resonates with their audiences. On the one hand, marketers know their brand, and on the other, influencers know their audiences. The two should work in tandem and therefore, the first order of collaboration is in building an authentic relationship between brand and creator or influencer.
Lifecycle Loyalty
‘It costs five times more to acquire new customers than to retain current customers’ — is an adage often heard in marketing. The pandemic has compelled customers to shift their expectations more rapidly than we have seen at any other time in history. Underlying attitudes and beliefs have altered, purchase behaviors have evolved, product usage patterns have changed; and with the fragmentation from digital acceleration, customer loyalty has been eroding with the splurge of choices that have come up.
One of the biggest shift in consumer mindsets and attitudes towards brands is sustainability. The pandemic has made consumers more conscious of the products they purchase and use or consume, and more than half of Asians are influenced on where not to spend their money based on the impact that products or services have on the environment and the society they live in. Furthermore, 63% of them do not feel that sustainability is their sole responsibility, per a recent Kantar study, and want brands to embrace this new mindset and sensibility, helping them in their journey of social and environmental purpose. The new consumer lens to lifecycle loyalty will now include the sourcing of ingredients, packaging, down to how it is disposed or replaced. A great example of this growing concern is the trend around clean beauty which exemplifies the need for responsible sourcing wherein consumers are looking for cruelty-free and sustainable ingredients. Brands in Australia, Sukin and Akin, are proponents of this emerging trend; The Body Shop, a global powerhouse and a brand heavily present in APAC, underpins its brand values with its responsibly sourced ingredients.
Another shift in culture is also reflected in how second hand marketplaces are thriving in the region. Affluent Asian boomers have traditionally turned away from second-hand goods as it was deemed a cultural taboo. Used items carried bad spirits or the energy of its previous owner and there was a social stigma that anything pre-owned was for the impecunious. Fast forward to today, second-hand goods are ironically now perceived as tasteful vintage items as millennials find joy in thrifting virtually on mobile marketplaces. As reported in an article by Forbes, the second-hand luxury market in APAC was forecasted to be worth $36 billion in 2021 with investors fighting for a share as marked by the recent success of luxury resale platform Vestiaire Collective, raising $64 million in capital to venture into Asia. Singapore-based Carousell is also one of the largest and fastest-growing second hand marketplaces in Southeast Asia. Operating across eight markets, the mobile-first marketplace has recorded over 250 million listings and tens of millions of users since its launch in 2012, with its most recent funding round bagging $56 million from the OLX Group.
The pandemic has disrupted our lives in more ways than one, and many new behaviors developed during the pandemic will likely persist, perhaps impacting customer loyalty patterns forever. The acceleration of online shopping and use of delivery service apps has led to convenience now being one of the main factors for driving customer loyalty. A survey by GlobalData showed that more than 63% of APAC consumers sought products that would save them time and effort, and many brands are now placing greater emphasis on delivering convenience as part of their brand experience. Case in point being Starbucks who recently announced an integrated partnership with Grab, Southeast Asia’s leading super-app. Tapping into a range of Grab services through the partnership, customers across the six markets will be able to have more ways to order and pay in-stores as well as enjoy their Starbucks orders sooner, deepening their connection to Starbucks with these more convenient and personalized experiences.
As product purchase continues to shift online, the role of digital platforms and the use of data and technology will become more important, not only to drive sales but to also help better manage loyalty. The evolution of digital platform-based ecosystems has led to greater mutual dependencies and collaboration, and companies are learning to drive growth and loyalty by pooling synergies around a fluid partnership within an ecosystem. China’s Alibaba 88VIP members-only subscription leverages its ecosystem of services and partnership with brands to enhance loyalty for both its platform and the brands that they work with. 88VIP membership rewards Alibaba’s customers with content on Youku Tudou, discounts on Ele.me and free same-day delivery and discounts across Taobao and Tmall. In addition, brands get data from Alibaba’s digital tools that help them bind customers tightly to the platform, and manufacturers also get data about shoppers so that they can tailor products to consumer needs.
The sophisticated data ecosystems in China have also given rise to a new trend towards private traffic and owned channels. Private traffic describes an online audience pool for which brands have more control of; for example, the traffic to a brand’s website, brand apps, and brand social accounts. Brands today want to generate more revenue from private traffic, reduce the cost of customer acquisition and maximize their loyalty, thereby increasing return on investment. With owned sites, apps, social accounts like WeChat and Weibo, and WeChat mini-programs, brands can collect valuable leads and nurture customer relationships by developing personalized experiences.
Coming out of the pandemic, companies will need to reimagine their approach to customer loyalty and retention. Business success in the new era will be about using this inflection point as an opportunity to drive transformative change in the way they interact with customers by ensuring emotional relevance, creating personalized experiences and unlocking ecosystem opportunities in data and technology.
The Multiplayer Internet
Buzz around the metaverse — an immersive online virtual-reality enabled environment whereby user interactions mimic the real world, has taken the world by storm. Whilst most of the hype stems from the West, interest is building up in the East given APAC’s acceleration in innovation and technology through the course of the pandemic. Across the region, markets are racing to become the frontrunner of this new alternate universe even as experts believe that the reality is still far off.
Certainly, the Asian consumer is primed to embrace the metaverse if the popularity of multiplayer gaming is anything to go by, alongside the explosion of online gaming during the pandemic. Consumers in markets like China and Southeast Asia love to play together in competitive games which leads to community building, and a survey by GameStart reveals that 60% of gamers here prefer to play with friends, with the top ten grossing games having a multiplayer component of sorts. According to data company Milieu, who surveyed 6,000 individuals from across countries in the Southeast Asia, it seems that most people are excited about the prospect of living in a full on metaverse, with 72% saying that they had positive feelings towards metaverse technology. It is therefore not surprising that many game and non-fungible token (NFT) developers in the subregion are jumping on the bandwagon. Singapore tech company BuzzAR for instance, has recently acquired The Cooking Game VR, a Facebook Oculus Spotlight virtual reality simulation game, joining Facebook to co-create a metaverse ecosystem.
A recent investor report by Morgan Stanley has also estimated that China’s market for the virtual space could be valued up to US$8 trillion, with companies tech giants like TikTok, ByteDance, Alibaba and Tencent driving it. The incumbency of these companies in the areas of social media and gaming makes them well placed to stake a claim on the future of the metaverse. Tencent, for instance, has identified a few pathways to the metaverse including developing highly interactive games and placing multiple games under one common infrastructure that enables users to be creators, creating a social network that is gamified and supports much more programmable experiences, as well as real-world community experiences enhanced by AR and VR technologies. ByteDance, on the other hand, has been reported to be testing a new metaverse-like social network app, Paiduoduo, which is designed to let users interact in a virtual community. Meanwhile, Alibaba has recently led a US$60 million investment in Chinese augmented reality glass maker Nreal.
As these tech giants and internet start-ups alike race to capitalize on the metaverse craze, niche innovations will begin to shift to more mainstream. For instance, virtual idols in China are expected to become more popular as the metaverse developments are poised to provide a bigger stage for these meta-human influencers. With animation technology becoming more realistic and celebrity scandals more frequent, top Chinese virtual idols like AYAYI, currently with a fanbase of 770,000 on Douyin, will appeal to marketers looking for new ways to promote their brands to the consumer.
Consumers themselves are starting to create their own use cases of the metaverse. An Indian couple from Tamil Nadu recently held a metaverse wedding reception attended by five hundred guests, to circumvent the limitations to guest count due to the pandemic. Start-up company TardiVerse helped create a Hogwarts-themed metaverse for the reception and a virtual avatar of the bride’s late father even presided over it. The virtual celebrations were hosted on the Polygon blockchain, where a 12-piece NFT collection was created, including digital avatars in the wedding and a copy of the wedding invitation. This first-of-its-kind virtual event created waves in the country and the NFT collection was purchased and resold within nanoseconds of the drop, reflecting the craze for the metaverse happening also in India. Indeed, the country will likely play a key role in the evolution and growth of metaverse technology given its large user base of video games, social media networks, and ecommerce in addition to its engineering prowess. India’s position as the third major pole outside the U.S. and Europe for Western tech giants like Meta will also be a huge advantage for the market, giving it the opportunity to help shape this next version of the multiplayer internet.
Whilst the pandemic has put a grinding halt to live events over the past two years, it is anticipated that recovery is in sight with 32% of the live music market’s growth in 2020–2025 for instance originating from APAC. Organizers of large scale events have turned to the virtual world as an alternative venue, leveraging technology to simulate the real world experience as much as possible. In Hong Kong, a virtual version of the Coliseum, the city’s iconic pop concert stadium, has been built on Microsoft’s gaming platform Minecraft, with every detail of a live concert packed in, from on-site ticket checking, body temperature measuring to seat searching. Last year, popular four-member boy group, C AllStar, held one of Asia’s first in-game concert at the virtual coliseum, incarnating Minecraft game characters. For the Japanese, their famous Shibuya Halloween Parade also went virtual last year. Dubbed the Au 5G Halloween Fes, the online celebration was held on local social media platform Cluster with various live-streamed music performances, games and talk sessions on virtual stages. Anyone in the world could join in for free from a computer or smartphone, and those with a VR headset could even enjoy a full 3D experience of the party. The online festival also incorporated a feature whereby attendees could create their own 3D avatar through a smartphone app or via body scanning booths set up at popular departmental stores.
At this point in time, the metaverse is being conceptualized, developed and used in parts, and time will only tell if there will be a convergence or it will remain splintered like how the internet currently is. And like any new technology wave that goes through various phases, the metaverse will evolve over time. As marketers and brands seek to dip their toes in, the key principles of testing and learning should still hold true — brands need to firstly define a relevant role to play and the value that they add, after which a flexible and adaptable approach has to be adopted as consumer behaviors continue to change and the metaverse unfolds.
The Great Escape
The lack of delineation between professional and personal life, along with the fear of catching COVID, has increased the rate of burnout amongst workers in APAC. According to Microsoft’s Work Trend Index, nearly one in three workers in the region have had an increased sense of burnout six months into the pandemic. Additionally, it appears that this stress has not only been felt by adults, Gen Z across APAC have also been having a particularly tough time, with the consultancy Sandpiper reporting that 75% of the Gen Z in APAC have been dealing with elevated stress levels. Indeed, this is the generation that will have to live with the huge social and economic impact of the pandemic for many years to come during the prime of their lives and careers.
As a means to cope with the stress, many have been turning to the digital realm for refuge. The Digital Society Index, an annual global survey on consumer interaction with technology, has shown that consumers are interacting with technology in more positive ways during the pandemic and key Asian markets are amongst the most optimistic towards adopting new technology. Nearly a third say technology has helped them to connect with family, friends and the greater world during the pandemic, as well as relax and unwind during this particularly stressful period.
Perhaps the industry that had to pivot the most and leverage technology in meaningful ways has been travel and tourism. Many brands have had to rely on virtual escapism in order to sustain engagement and experience of their brand through the pandemic. A great example has been Ritz-Carlton who launched a new campaign ‘A Gift Like No Other’ in APAC. The campaign centered on giving and receiving gifts as meaningful connections, and featured the gifts as a collection of unforgettable and immersive experiences across leisure destinations such as Bali, Chengdu, Kyoto, Maldives, Nanjing, Nikko, Shanghai, and Xi’an.
Different industries are also coming together in creative ways to offer new experiences and avenues to escape. For instance, In Australia for instance, Sony has collaborated with three Australian restaurants and Deliveroo to launch PlayStation To Plate, bringing together the adjacent passion points of food and gaming, which have been key sources of escapism for many during the pandemic. The partnership saw food that was featured in games like The Last Of Us Part 2 and Uncharted: Legacy of Thieves being made available for order as PlayStation To Plate meals at participating restaurants and also through Deliveroo.
Whilst Asian markets in general may be less cynical of technology and more likely to see its benefits. Yet, at the same time, a growing number feel that technology is increasing inequality and many also still feel that the pace of technological change is too fast, with the Japanese amongst the more skeptical of technological benefits. Concerns like gaming addiction for instance has been high on the agenda for governments of countries like China, Japan, South Korea, and Singapore, that have witnessed explosive growth in online gaming during the pandemic as many turned to it as a means to escape.
Last year, China introduced new restrictions to limit the time under-18s can spend gaming online, allowing these young gamers to only play on public holidays and Fridays to Sundays from 8pm to 9pm. These new laws also place the responsibility on gaming companies and many have launched new methods such as facial recognition technology and algorithms, to ensure that young people are adhering to the restrictions. Brands like OREO in India have started to tap into some of these growing concerns by championing messages that urge consumers to ‘Disconnect To Connect’. In its relationship-themed campaign featuring togetherness with family and close friends, the brand communicated a simple message about getting away from technological devices to enjoy quality time with family.
It is clear that the pandemic has placed a bigger spotlight on these tech-fueled conundrums and implications. These issues has been even more stark with the Gen Z. According to the earlier Sandpiper study, whilst a quarter of the Gen Z respondents were grateful for social media as a means to connect, a larger number revealed that it has also had a negative impact on their mental condition, given the sheer volume of negative news stories flooding their timelines. Also, with the lockdown sparking a drive for betterment amongst many, social media has been inundated with stories of people picking up a new hobby like cooking and baking, or resuming an old one. “Do-it-yourself” has become a trend borne partly out of necessity and partly out of fashion, and Gen Z consumers have had a mixed response to them. Some were spurred into action making an effort to better themselves whilst others saw all the activities on their feed as a constant pressure to stay busy.
As we emerge on the other side of the pandemic and prepare ourselves for a post-COVID future, as what McKinsey has declared — the next normal is going to be different, and it will not mean going back to the conditions that prevailed in 2019 and before. Just as the terms “pre-war” and “post-war” are commonly used to describe the 20th century, generations to come will likely discuss the pre-COVID and post-COVID eras. In APAC, the former had been about economic development, urbanization, and digitization of certain economies, which brought about disruptions that happened simultaneously at scale and with some degrees of predictability. In contrast, the latter has resulted in disruptions that have given rise to much more uncertainty across industries as the entire world experienced them without precedence. For brands to navigate the age of entropy, they will not only have to look at changing and transforming business fundamentals but also embrace the contradictions of engaging meaningfully with the opportunities and issues of the post-COVID era.
