By Oliver Tonby and Jonathan Woetzel
Half of the world’s spending growth will come from Asia over the next decade, but do we really know Asia’s consumers? In this diverse region where 2,300 languages are spoken, a consumer might be a South Korean Insta-granny, newly conversant in social media; a Japanese young person living alone whose social life is largely online, and may even have a personalized AI friend for company; or a high-spending—and high-borrowing—Chinese Gen Zer; or an Indonesian eco-conscious shopper prepared to pay more for sustainable packaging and products.
This kaleidoscope of consumers in this highly diverse regional economy—the fastest growing in the world—offers a $10 trillion opportunity between now and 2030, according to new McKinsey Global Institute research. Globally, one of every two households in the upper-income and above category is expected to be in Asia, and one of every two transactions in the world is likely to be made by consumers in this region.
The challenge is knowing more about them, how they shop, and what forces are changing their needs and preferences. Let’s look at some of these consumers.
The over-60s are expected to account for one-third of consumption growth in the period to 2030. In Asia’s advanced economies, that share is two-thirds. The aging trend has been apparent in Asia for some years, but the seniors market is changing, notably because so many of the older age group are now active online.
In Japan and South Korea, more than 90% of seniors are expected to be online by 2030; the share in China is expected to exceed two-thirds. Because so many elderly were housebound during the pandemic, this trend has accelerated. By the end of 2020, China’s over 60s accounted for more than 11% of the country’s internet users, almost doubling their share in only nine months.
Senior out-of-pocket spending on healthcare alone is expected to grow by as much as $250 billion between 2020 and 2030, and an increasing share of that will be consumed digitally. Some companies have started to capitalize on this trend. One offers an artificial intelligence (AI)-driven home care kit delivered by smartphone that includes, among other functions, a fingertip oximeter, an electrocardiogram, and a smart squeeze ball.
People shunning social life and preferring to stay at home pre-dated self-isolation and lockdowns during the pandemic in Japan. Otaku, which describes a young person obsessed with computers at the expense of social skills, and hikikomori, or acute social withdrawal, are well-known features of modern Japanese life. But the household of one is spreading across Asia.
Single-person households now account for one-third of all households in advanced Asian economies. This is the “lonely economy”. One consequence has been soaring pet ownership. In South Korea, the increase has been 60% over the past ten years. Robotic companions powered by AI have been emerging. An AI-powered chatbot launched in China now has hundreds of millions of global users.
Single households are driving growth in entertainment, delivery services, single experiences (including dining and travelling), and may even lead to a reshaping of cities as demand for single-unit housing increases.
The High-Spending—High-Borrowing—Digital Natives
So-called “digital natives” born between 1980 and 2012 and including members of Generation Z and millennials—already account for over one-third of Asia’s consumption.
Thirty three percent of Gen Zers spend more than six hours a day on their mobile phones, voraciously consuming video content. They are twice as likely to buy brands that set them apart than members of Generation X (born between 1965 and 1979). Asia’s digital generation tends to use non-Asian social-media platforms, but largely follow local social-media influencers, and prefer local e-commerce and digital payments platforms.
Members of this generation are generally optimistic about their financial future, and tend to be more willing to borrow to consume. In China, half of all indebted consumers are younger than 30 and are driving additional online consumption in categories such as apparel and consumer goods. One note of caution is that almost 30% of their new debt is being used to “recycle” old debt.
Asia is on the front line of climate risk, accounting for two-thirds of the global risk of economic disruption emanating from changes in the natural world. Concern is rising in Asia.
In a recent Ipsos poll, 88% of Indian consumers said that they had made changes to the products and services they buy because they were concerned about climate change, the highest share of any country. In a recent World Values Survey, the share of Malaysian and Thai respondents who said they believe the environment should be prioritized over economic growth increased respectively by 12 and 8 percentage points from ten years ago (as a comparison, this change was of 6 percentage points on average for the five largest European economies).
No wonder that some Asia’s consumers are displaying rising eco-consciousness in their shopping preferences. Willingness to pay for more sustainable products is rising according to a McKinsey survey, in some countries matching or even surpassing willingness among their counterparts in Europe and the United States. China, India, and Indonesia top the ranking for willingness to pay for sustainable packaging. Although sustainable alternatives are more expensive—exceeding 30% more in some categories—potentially limiting growth in green products, as incomes in Asia continue to rise that impediment may lessen.
The scale of the Asian economy is well-known; miss Asia and you miss half the consumption growth that will occur in the world over the next ten years. But sheer numbers is not the whole story. The region’s consumers are diverse, multifaceted, and changing rapidly and in sometimes surprising ways, notably as technological change accelerates. Regardless of where you live, some of the leading-edge trends being forged in Asia may be coming to a store—or digital platform—near you.
1 China’s youth debt report, Nielsen, 2019, dx2025.com; Research report on Chinese residents’ leverage ratio and household consumer credit issues, Southwestern University of Finance and Economics and Ant Financial, 199IT, March 2020, 199it.com; and Credit consumption survey: Half of the post-90s generation, nearly 30% of the population uses loans to support loans, Rong360, August 2018, rong360.com.