Professional Documents
Culture Documents
J2 Retail Markets in Asia
J2 Retail Markets in Asia
J2 Retail Markets in Asia
Nori KAWAZU
NRI Papers No. 182
March 1, 2013
G iven that Japan’s domestic market is shrinking, Japanese companies have been paying more
and more attention to overseas markets. In particular, if China and India are included in the
equation, the GDP of the Asian region has already exceeded that of North America or the Euro-
pean Union (EU). The total GDP for the ASEAN countries has grown to the same level as the GDP
of each of three significant emerging economies, that is, Brazil, Russia and India. This paper ex-
amines five of these ASEAN countries, namely, Indonesia, the Philippines, Vietnam, Thailand and
Malaysia. All of these countries have a high proportion of young people and will continue to enjoy
this demographic bonus for some time to come, presenting significant potential for economic
growth. These countries are expected to see their middle classes grow in terms of population and
provide the engine that will drive growth in the ASEAN countries.
Nomura Research Institute (NRI) has conducted a consumer survey in the major cities of the
Southeast Asian region. The results of this survey revealed that despite there being major differ-
ences in consumption, lifestyles and culture, there were some commonalities in terms of the ma-
turity of consumption in each country. However, the pace of the expansion of the middle classes
and the rate of growth vary country by country. Therefore, when selecting target markets, compa-
nies must collect sufficient information to form a clear view of the markets.
The retail markets of Southeast Asia are presently exhibiting a high rate of growth and offer a
large scope for further growth in the future. While the overall trend is for the government of each
country to relax the regulations governing foreign participation in its markets, the climate still
remains somewhat unstable. Therefore, prior to and after entering these markets, it is necessary to
carefully check the development status of infrastructure, trends in government policies and other
matters that can be present as risks in doing business. Although there are many challenges and
obstacles to overcome, Southeast Asia is definitely an attractive new market for business develop-
ment. It is still not too late to start moving towards market entry.
I Why the Current Emphasis In addition, the proportion of young people in these
countries is high, and they will continue to enjoy this
on Southeast Asia? demographic bonus for many years to come, a topic
which is discussed later in this paper. Combined with
1 Asian economies greet their largest-ever increasing direct investment by foreign-owned compa-
growth phase nies, governments’ promotion of economic reform, in-
dustrial advances and measures for promoting
Recent years have seen Japan’s domestic market shrink- industrialization, such advantage gives rise to the poten-
ing such that, regardless of the industry, overseas mar- tial for significant economic growth, which is the re-
kets have been attracting more and more attention. gion’s greatest appeal.
As of 2012, of the world’s population of 7 billion, 60
percent (4.2 billion) live in Asia. The United Nations 2 Economic growth in major ASEAN
predicts that the population of Asia will continue to countries
grow steadily with the majority of growth occurring in
China and India. As a result, Asia’s population will A look at the trends in the economic growth of each
reach 5.1 billion by 2050. Given that there is no pros- ASEAN country over the last few years reveals that just
pect of any significant future population growth in de- like Japan, many were affected by the global financial
veloped regions such as North America and Europe, it crisis triggered by the collapse of Lehman Brothers in
goes without saying that among the world’s consumer September 2008 (Figure 2). Nevertheless, while the sit-
markets, those in Asia will take on more and more im- uation differs from country to country, the general over-
portance. all trend is towards recovery.
While the population of Asia has been growing steadi- Indonesia is notable in that it is typical of a country
ly, so too has its economy. In 2011, the nominal gross that is rich in resources and has a thriving agriculture
domestic product (GDP) of the Asian region including based on ample usable land. The country has a steadily
China and India had already exceeded that of North growing economy. As its population continues to grow,
America and the European Union (EU). While the aver- the country is expected to become an economic power-
age rate of growth between 2010 and 2015 is predicted house (Figure 3). The next challenge that Indonesia
to be 4.2 percent in North America and 3.4 percent in the must take on to ensure the continued growth of its econ-
EU, the rate in Asia is expected to be much higher, at 8.4 omy is the transition from primary to secondary indus-
percent. tries.
If we confine our examination to the total GDP of the The trends in per capita GDP (Figure 4) indicate that
ASEAN (Association of Southeast Asian Nations) among the ASEAN countries, Malaysia exhibits a par-
countries, we find that it has reached the same level as ticularly high rate of growth. The structural reforms un-
each of the BRIC countries, with the exception of Chi- dertaken by Malaysia’s government in various fields
na, that is, Brazil, Russia and India (Figure 1). with the goal of “becoming a fully developed country by
Figure 1. Nominal GDP (gross domestic product) in 2010 and predicted nominal GDP in 2015
Total GDP of ASEAN countries, Japan’s
GDP and GDP of each BRIC country GDP of ASEAN countries
Indonesia 707
1,853
Total of ASEAN countries
2,867 1,212
Malaysia 238
336
5,459 189
Japan Philippines
6,380 269
319
Thailand 461
5,878
China 223
10,062 Singapore
305
1,538 Brunei 13
India 18
2,516 104
Vietnam
176
2,143
Brazil Cambodia 12
3,166 19
2010 Laos 6
10
2010
1,487
Russia 2015 43 2015
2,811 Myanmar 61
0 5,000 10,000 15,000(Billion dollars) 0 200 400 600 800 1,000 1,200 1,400 (Billion dollars)
Notes: ASEAN = Association of Southeast Asian Nations, BRIC = Brazil, Russia, India and China.
Source: Compiled based on “World Economic Outlook Database, 2011,” the International Monetary Fund (IMF).
Philippines
–5 Thailand
Japan
– 10
2005 2006 2007 2008 2009 2010 2011(Year)
Source: Compiled based on IMF World Economic Outlook, April 2012.
Indonesia
250
200 Philippines
Japan Vietnam
150
Thailand
100 Myanmar
50
Malaysia
0
1980 1983 1986 1989 1992 1995 1998 2001 2004 2007 2010 2012 (Year)
(estimate)
Source: Compiled based on IMF World Economic Outlook, April 2012.
10,000 Malaysia
8,000
Indonesia
6,000 Vietnam Thailand
Philippines
4,000
Myanmar
2,000
0
1990 1992 1994 1996 1998 2000 2002 2004 2006 2008 2010 2012 (Year)
(estimate)
Source: Compiled based on IMF World Economic Outlook, April 2012.
2020” are paying off and the country has a steadily 3 Period of demographic bonus forms the
growing economy. Compared to its neighbors, Malaysia basis for economic growth
enjoys stable social conditions and security, and is build-
ing a solid position as an “honor student” among the The period of demographic bonus refers to the period
ASEAN countries. during which the working-age population (those aged
Thailand was the first of the ASEAN countries to be between 15 and 64) is at least double the size of the rest
successful in making manufacturing its major industry. of the population (the dependent population referring to
Despite a period of no growth after the floods of 2011, those aged 14 and below and elderly people aged 65 and
the country has continued to show steady growth in above). This demographic advantage stimulates domes-
comparison with its neighbors. tic consumption, making high economic growth a likeli-
However, during the same period, the Philippines, hood. Counter to demographic bonus is the concept of
Vietnam and Myanmar failed to achieve similar growth. demographic onus. Demographic onus refers to the state
When ASEAN was formed in 1967, the Philippines was where the dependent population is on the increase. Ja-
expected to grow. However, the country was not able to pan enjoyed a period of demographic bonus between
foster its own industries. The country now depends on 1965 and 1990. However, the country is currently in a
its citizens working abroad to send money home to fund period of demographic disadvantage.
domestic consumption. While the country attempts to According to estimates by the United Nations, many
revitalize its economy by promoting tourism, the con- of the ASEAN countries are currently in a period of de-
tinuing security deterioration hinders such development. mographic bonus (Figure 5), and this trend is expected
While Vietnam is a socialist country, it has just en- to continue for some time. Specifically, South Korea is
tered a phase where its main goal is economic growth. expected to be in this period between around 1990 and
As such, compared to its neighbors, Vietnam faces the 2020, Thailand between around 1995 and 2030, China
challenges of macroeconomic instability including ex- between around 2000 and 2030, Vietnam between
change rates. around 2005 and 2040 and Indonesia between around
Given that Myanmar has only recently transitioned 2010 and 2040. Furthermore, India, which is particu-
back to a civilian government after many years of mili- larly significant given its huge population, is expected to
tary rule, increasing attention is being paid to this un- enter its period of demographic bonus in 2020.
tapped market. Since 2012, when economic sanctions
imposed by the United States and the EU were relaxed, 4 Complex area with each country having
interest in the market has been increasing rapidly. Nev- its own languages and culture
ertheless, the lack of foreign currency, the predominance
of primary and food processing industries (the country Up to this point, Southeast Asia has been seen as a single,
lacks the technology needed for industrialization) and all-encompassing area. However, a look at the area from
an underdeveloped infrastructure have all stood in the the perspective of markets and consumer trends reveals
way of growth. some surprising differences between countries. As shown
Figure 5. Demographic structure of India, major ASEAN countries, China, South Korea and Japan
Under 15 years 15 – 64 years 65 years and over
India 35 60 5
Indonesia 29 66 5
Philippines 34 62 4
Vietnam 24 69 6
Thailand 21 71 8
Malaysia 27 68 5
China 23 70 7
South Korea 16 73 11
Japan 13 63 23
0 10 20 30 40 50 60 70 80 90 100 (%)
Source: UN, Demographic Yearbook system, Demographic Yearbook 2009 – 2010.
Table 1. Southeast Asia is a complex area consisting of countries having their own languages and culture
Country Currency Official language Major ethnic group Religion Major industries
Indonesia Rupiah (IDR) Indonesian Malay Islam (89%) Manufacturing (24%), agriculture, forestry and fishery
(15%), commerce, hotels and restaurants (14%), mining
(12%)
Philippines Philippine Peso Filipino, English Malay Roman Catholicism Agriculture, forestry and fishery (34% of the working
(PHP) (83%) population is engaged in these industries)
Vietnam Dong (VND) Vietnamese Kinh (about 86%) Buddhism (80%) Agriculture, forestry and fishery, mining, light industries
Thailand Baht (THB) Thai Thai Buddhism (94%) Agriculture (more than 40% of the working population is
engaged in agriculture, which accounts for 12% of GDP),
manufacturing (around 15% of the working population is
engaged in manufacturing, which accounts for about 34%
of GDP and about 90% of exports)
Malaysia Ringgit (MYR) Malay Malay (66%) Islam (61%) Manufacturing (electrical equipment), agriculture and
Chinese (25%) forestry (natural rubber, palm oil, lumber), mining (tin,
Indian (8%) crude oil, liquefied natural gas (LNG))
Sources: Compiled based on basic information on countries and regions published by Japan’s Ministry of Foreign Affairs, IMF World Economic Outlook April
2012, reports published by the Japan External Trade Organization (JETRO) and statistics published by Japan’s Ministry of Internal Affairs and Communications.
Note: Population in the middle and upper income segments represents the sum of people in the high income and upper-middle income segments as specified
below, where income refers to household disposable income.
s (IGH INCOME SEGMENT !NNUAL INCOME OF OR MORE
s 5PPER
MIDDLE INCOME SEGMENT !NNUAL INCOME OF n
s ,OWER
MIDDLE INCOME SEGMENT !NNUAL INCOME OF n
3OURCES #OMPILED BASED ON BASIC INFORMATION ON COUNTRIES AND REGIONS PUBLISHED BY *APANS -INISTRY OF &OREIGN !FFAIRS )-&