How Asia-Pacific Must Respond To The New, Post-COVID-19 Consumer

in Feature

By Patrick Winter, Nobuko Kobayashi and Joonyoung Byeon, EY

The changing preferences of Asia-Pacific consumers are creating opportunities for businesses that embrace an agile mindset.

In brief
  • COVID-19 is affecting consumption trends across Asia-Pacific, with nuances between regions.
  • A range of key success factors are determining sector winners, with the benchmark set by China’s retail leaders.
  • Businesses in all regions need to adapt to survive and thrive in the new economy, as disruption will continue

Across Asia-Pacific, an already strong preference for digital, contactless consumption is rapidly growing and likely to continue unabated. The EY Future Consumer Index shows that the pandemic has disrupted consumer mindsets and priorities when choosing products, with shifts toward safer, healthier, and more trusted products. More than 80% of consumers in China (81%) and Indonesia (86%) are more aware and cautious about physical health, in contrast to some countries in Europe, such as Denmark (46%), Norway (46%) and Sweden (44%). While Japanese consumers have become increasingly conservative, Chinese consumers, adopting a “Hibernate and spend” mindset, will pay a premium for products that promote health and wellness.

The sudden shift to safety and health has created a window for changing consumers’ brand loyalty. In the short term, it may be hard for some businesses to retain customers. However, in the long term, brands that satisfy changed consumer priorities can improve loyalty.

A prevailing trend toward frugality and a focus on value means sales of non-essential products are likely to keep falling. The exception is China, where lockdowns have been lifted quickly and the government has supported production and consumption through its “back to normal” strategy, with policies on cutting taxes and subsidies for prospective industries such as semiconductor, electric vehicle, display and other IT manufacturing. China also has the world’s largest middle class which continues to grow. Optimistic Chinese consumers show little propensity to reduce spending and a strong belief that their income level and purchasing power will increase for an extended period of time.

Corporate social responsibility has been thrust into the spotlight by COVID-19. Consumers overwhelmingly agree that a company’s behavior – its commitment to society and employees – is as important as the products or services it sells. Sixty-two percent of the consumers grouped in the “Cautiously extravagant” segment in the EY Future Consumer Index indicate they would be more likely to purchase from companies that they feel are doing good for society. This trend is likely to prevail as long as COVID-19 is a concern, cementing shifts in consumer mindsets.

Brands will do well to purposefully articulate company values and show their response to changing customer needs through every consumer touch point. As consumers move at scale to digital commerce, trust and transparency will be critical.

Success Factors Of Dominant Players

In the digital commerce shake-up post-COVID-19, there are four key success factors for companies:

  1. Most dominant players – whether e-commerce, PC/ mobile messengers or online-to-offline (O2O) services – use their platforms to form virtuous cycles that build their user base and leverage big data, offering an excellent user experience, from personalised offers to online communities.
  2. They provide value in a range of products and services to attract the new, more price-sensitive consumer, by investing heavily in logistics and distribution, often taking on a risk of negative profit. They use their economies of scale to rapidly reduce costs.
  3. They adopt their own payment systems. In China and Southeast Asia, access to traditional forms of banking and credit is low. Instead, customers have embraced alternative and innovative cashless ecosystems for digital transactions. This is in contrast to developed countries such as Australia and New Zealand where consumers still more consistently rely upon traditional payment methods.
  4. Dominant players focus on the speed of last-mile delivery – the final leg of delivery to the customer’s door – to differentiate themselves from competitors. For example, Alibaba offers a 30-minute delivery of groceries from its 65 locations for destinations within three kilometers.

Chasing The China Benchmark

Even pre-COVID-19, China was leading Asia-Pacific in digital commerce innovation, with its strong governmental support, low-cost mobile phones and vast population of tech-savvy users eager to quickly adopt the next new technology.

Businesses in other Asia-Pacific regions are moving in the same direction, concentrating on fast market entry, fast user uptake and rapid adoption of technology.

The practice of leapfrogging such as going straight to wireless rather than cabling up an entire country is now a common phenomenon in Asia-Pacific. Malaysia for instance has a significantly higher penetration rate of mobile phones compared to landlines. Indonesia has also leapfrogged straight to wireless communications.

In Southeast Asia, government efforts to promote digital transformation, including investment in wireless networks, are having the effect of boosting e-commerce growth.

However, when it comes to fast adoption of digital technology, e-commerce companies in China also leverage inorganic growth, through investment in startups, mergers and acquisitions (M&A), and alliances between competitive platforms. Furthermore, major Chinese e-commerce companies also invest heavily in research and development (R&D). Southeast Asian markets and others would benefit from embracing these strategies too.

Thriving In A World Where Disruption Is A Fact Of Life

How the shifts in consumer behavior will develop going forward is still unclear, but it opens up a world of possibility for new behaviors and needs.

According to EY Capital Confidence Barometer (CCB), 68% of retail companies are prioritising new investments in essential digital and technology: augmented reality/ virtual reality, artificial intelligence, robotics, blockchain and internet of things. During this critical period when consumers are open to trying new brands, there is a significant first mover advantage.

Digitisation and innovation should happen not just in R&D, but at scale across the entire enterprise. This is only possible in agile organisations where processes are concise and superfluid. Being agile today also requires brands to quickly create new and improved digital touchpoints, ensuring a seamless digital experience in the long term.

  • Brands must be focused on customer-centricity. Customers expect companies to know more about them and what, how, and when they want their goods and services. Business must take advantage of the vast amount of data in order to make immediate decisions, which requires data analytics skills and the ability to link insights into actions.
  • With 83% of Asia-Pacific CCB respondents having adjusted their supply chain footprint or planning, now is the time for building a resilient supply chain in preparation for future shocks and events. But for business leaders facing an economic recession, they must ask whether customers will accept the costs that arise from more diversification.
  • In the wake of COVID-19 and heightened national security concerns there have also been reports of a move away from globalisation to regionalisation. Companies need to be aware of how they are particularly placed against these changes and to actively prepare for them. Companies should also set themselves up for success in the future by adopting a more comprehensive and integrated perspective when managing risk. This perspective would consider elements such as geopolitical issues, M&A restrictions, resilience of critical third parties and vendors, cyberthreats, health and safety concerns to name just a few.


Asia-Pacific businesses must respond quickly and adapt to new consumer behaviors that have been impacted by COVID-19. In order to thrive, not just survive, they must learn from digital commerce leaders, diversify supply chains, localise products for new markets, use acquisitions to harness new markets and innovations, and maintain trust and transparency. Adopting these key success factors will allow Asia-Pacific businesses to succeed where competitors are lagging, and continue to grow, even in the face of long-term disruption.


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