Inflation hits SEA digital spending: Which areas are consumers cutting back on?

Inflated prices of goods are causing Southeast Asian consumers to reduce their expenditures this year. According to Blackbox-ADNA’s recent study which surveyed more than nine thousand adults across six Southeast Asian countries, 12% are purchasing from cheaper brands. 

More specifically, 18% of Indonesian consumers shared this sentiment followed by 16% in Vietnam, and 13% in the Philippines. Meanwhile, only 9% in Malaysia and 5% in Singapore plan to purchase from cheaper brands as a way to reduce spending. Instead, Malaysians plan to eat cheaper meals at home (30%) and buy more items on discount (26%) while Singaporeans plan to cut back on out-of-home dining/restaurants (35%) and eat cheaper meals at home (27%). 

According to the study, high-income shoppers in the region are more insulated from inflation and are hence, less likely to alter their shopping behaviour. However, this does not stand true for low-income shoppers who are said to be taking various actions in the past six months to save money in order to cut costs. Household goods are becoming more expensive across all household purchases, which according to the study, ranks as one of the top two most critical issues regionally, and in almost all Southeast Asia.

Meanwhile, along with cutting back on their expenditure, consumers are also exploring money-saving tactics such as applying discounts, cashback rewards and other deals. These tactics appear to incentivise 44% of Southeast Asian shoppers to shop online as opposed to shopping at brick-and-mortar stores. This rings true for consumers purchasing local goods as well. The study found that 33% of shoppers enjoy shopping online due to discounts and sales as well as reward programmes (17%).

They were also drawn to other benefits such as convenience (43%), variety of choice (25%), getting the latest trends fast (19%), getting the things not available locally (17%), and price (11%). A third of those surveyed also prefer to shop online for local deliveries. Those in Singapore (35%) are most likely to do so followed by Vietnam (34%), Malaysia (33%), Thailand (31%), the Philippines and Indonesia (29%).

There are several eCommerce platforms that Southeast Asian consumers usually turn to and the survey ranked Shopee and Lazada (93%) the highest in user favorability, with Amazon (91%) hot on their heels, followed by Shein (85%) and AliExpress (73%).

ECommerce isn't spared from inflation

It is not all a bed of roses for online shopping and eCommerce players. Southeast Asians do acknowledge that they have some major bugbears with shopping online. Their top three challenges with online shopping are wrong size or wrong order delivered (50%); goods not turning up (29%); and unreliable quality of goods (27%).

At the same time, online shopping has not been spared by inflation and digital spend in the region has also been impacted this year. While Southeast Asians are still turning to eCommerce sites, 70% say that they are more likely to wait and purchase items during peak online sale seasons such as Amazon Prime Day and Singles Day Sale. Such deal-hunting behaviour is more pronounced in the Singapore (85%), Malaysia (81%) and Indonesia (71%) markets.

Across the board, Southeast Asian consumers are worried about general price rises across all household purchases (33%); rising interest rates (32%); rising fuel prices/transport costs (31%); rising food prices (30%); and rising utility prices (30%).

Southeast Asians are unanimous in their belief that the two biggest causes of the current high inflation are the aftereffects of COVID on the global economy (63%), and the Russia-Ukraine war (41%). Poor/bad government policies (18%) round up the top three perceived causes for the current high inflation regionally; this factor is especially pronounced in Malaysia (28%) and the Philippines (18%).

Nishant Kaushal, global head of data, strategy and solutions of ADNA, said that this study validates a common fear of inflation greatly impacting most of the population, while only the rich are able to deal with the repercussions of the inflated prices.

Kaushal also explained that hard selling tactics and fear-based marketing would add to the stress that Southeast Asian households are already facing, and that it is important for marketers to display genuine empathy for their consumers in order to win them over.

David Black, CEO of Blackbox Research said the study shows that not even eCommerce has been spared by the recent onslaught of high inflation. "The rapid rise in digital spending across Southeast Asia that we saw during the pandemic now faces a reality check. Moving forward, competition is going to intensify and stronger value propositions from e-commerce platforms will become much more important," he added.