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Burgeoning consumer demand for convenience driving rapid convenience channel growth
Jakarta, May 29, 2019 – As consumer demand for convenience soars across Southeast Asia, convenience retail channels are experiencing record growth levels, surpassing growth rates in any other retail channel, according to a new study by global measurement company, Nielsen.
Nielsen’s What’s Next for Southeast Asia report, which explores the changing FMCG retail landscape and consumer needs, highlights that FMCG sales growth in convenience stores across Southeast Asia reached 8.3% in the past year. Malaysia saw the strongest growth in the region (up 17%), followed by Vietnam (up 13%), the Philippines (up 10%), Indonesia (up 8%) and Thailand (up 7%). Small format store numbers have also seen exponential growth in recent years – there are close to 73,000 convenience stores across the region as at 2018 and this number is increasing by 10% year-on-year, while the number of mini-market stores in the region is close to 50,000, growing at 4.7% annually.
“We’ve been seeing solid growth in the convenience and mini-market channels across Southeast Asia for some time now, but over the past year or so that growth has really hit fever pitch,” notes Vaughan Ryan, Nielsen’s Managing Director of Southeast Asia. “Consumers throughout the region are living increasingly fast-paced lives, and this lifestyle shift is driving increasing demand for on-the-go offerings which, in turn, is driving growth in the convenience and mini-markets channels.”
“Notably, the two channels play different and evolving roles in consumers’ lives. Convenience has moved from providing impulse products, such as snacks, beverages and tobacco, to competing against quick-service restaurants by expanding their range of ready-to-eat food and impulse items, and adding in many other services and products to make consumers’ lives easier. Mini-markets are providing close-to-home convenience in everyday grocery shopping, as people struggle for time to visit larger format stores, particularly in heavily congested cities.” Ryan continues.
Looking across the total Southeast Asia FMCG landscape, buoyant economic factors coupled with strong consumer confidence levels are fuelling consumers’ willingness to spend, resulting in solid overall growth in FMCG. The Philippines saw the highest overall growth in the region in the past year (up 8.7%), followed by Vietnam (5.2%) and Myanmar (4.7%). Comparatively, global FMCG year-on-year growth was just 3.4%.
“The combination of rising consumer optimism and a relatively strong economic outlook in Southeast Asia means that the region is drawing increasing attention from big global companies and local companies alike as they seek out new opportunities for growth,” emphases Ryan.“But that growth can be elusive if companies don’t take the time to understand local consumer needs and wants. With increasing internet penetration and more exposure to various brands, products and offerings, consumers across the region are becoming more savvy and discerning in their purchasing decisions. Tailored offerings that tap into local tastes and purchasing behaviors is critical for success.”
Zooming in on some of the more locally nuanced trends, the retail landscape is undergoing a change in Vietnam on account of rising consumer demand and preference for frequent shopping trips for everyday needs. This is contributing to strong store growth across the nation’s 1,812 mini-markets (up 45.5% year-on-year) in 2017.
Similar trends are observed in Indonesia in the same year, which has the largest number of minimarkets in the region (43,826 stores), and is growing at 3.2% year-on-year. In Indonesia, with growing middle class and increasingly busy life, proximity and convenience have become very important to consumers. They want to spend less time to reach stores especially in key cities where congestion is a big burden.
“As a result of middle class growth, the number of mini markets has reached more than forty thousands with more than one thousands added every year. The channel contributed 21% of FMCG sales value and grew 8% in 2018 (vs 1% total market), with 75% of consumers shop in this channel and visit on average twice a week.” said Wiwy Sasongko Executive Director, Head of Retail Vertical Nielsen Indonesia.
In Malaysia, while hypermarkets still hold considerable footfall (61% in 2018) and have steady store count over the last two years, mini-markets are on the rise, contributing to 43% of FMCG retail value and increasing number of stores by 7% to 1,386 stores from 2016 to 2018. Convenience and drugstores stores increased by 3% over the same period.
In the Philippines the middle class population is on the rise thanks to the increasing number of overseas and Business Process Outsourcing (BPO) workers. As the pace of life continues to increase for these consumers, they are seeking close-to-home stores to fulfil their needs, and this is driving growth in small format supermarkets, mini-markets and convenience stores. Meanwhile, in Thailand convenience commands a 58.3% share of trade in 2018 (up 5.5% since 2016) with over a quarter of consumers (29%) saying they visit a convenience store between two to three times a week.
In Singapore, consumers are seeking convenience from FMCG retailers in the form of online shopping and digital payments. Three out of five Singaporean consumers (60%) favour cashless transactions and a sizeable majority (75%) say they prefer to buy food and groceries online.
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ABOUT WHAT’S NEXT FOR SOUTHEAST ASIA
The Nielsen What’s Next for Southeast Asia study presents changing face of FMCG retail landscape in the region lead by consumer lifestyle changes, rapid urbanisation, digital penetration and consumer product preferences across seven markets in Southeast Asia region. This study highlights the growth of convenience lead FMCG retail channels for each of the seven markets along with prevailing economic indicators, rising consumer spending ability and evolving retail channel formats. The insights will assist retailers and manufacturers in identifying growth opportunities through convenience lead retail channel strategy in Southeast Asia region and implementing FMCG strategies that will drive consumer uptake in FMCG across diverse segments.
Nielsen Holdings plc (NYSE: NLSN) is a global measurement and data analytics company that provides the most complete and trusted view available of consumers and markets worldwide. Our approach marries proprietary Nielsen data with other data sources to help clients around the world understand what’s happening now, what’s happening next, and how to best act on this knowledge. For more than 90 years Nielsen has provided data and analytics based on scientific rigor and innovation, continually developing new ways to answer the most important questions facing the media, advertising, retail and fast-moving consumer goods industries. An S&P 500 company, Nielsen has operations in over 100 countries, covering more than 90% of the world’s population. For more information, visit www.nielsen.com.
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