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Other / InternationalSoutheast Asia’s emerging middle class enjoys higher living standards. As hundreds of millions of Asians move from the lower to middle class, they increasingly enjoy leisure activities such as travelling abroad.
The Organisation for Economic Co-operation and Development (OECD) defines the middle class as households earning between 75% and 200% of the median national income. The Organisation predicts that the world’s middle class population will reach 4.9 billion by 2030, with 66% of these from Asian countries.
Consulting firm Bain & Company estimates that 50 million new middle-class consumers from Indonesia, Malaysia, the Philippines, Thailand and Vietnam will contribute to the region’s $300 billion middle-class disposable income by 2022.
Japan as a popular Southeast Asian middle-class destination
According to recent data published by the Japan National Tourism Organisation, the number of Thai tourists to Japan has surpassed 1 million, reaching 1.13 million in 2018. Since the Japanese government loosened visa requirements for Thai nationals in 2013, the number of tourists has risen significantly.
The number of visitors from Vietnam and the Philippines to Japan has also grown by 26% and 19% respectively compared to the previous year. It is expected that tourists from Southeast Asia will comprise the majority of the Japanese government’s goal of 60 million visitors by 2030.
China’s middle class is also on the rise, forecasted by McKinsey & Company to reach 550 million by 2022. Its most popular destinations are Thailand and Japan, according to statistics from the China National Tourism Administration. But Australia has also recorded rising numbers of Chinese visitors. In 2018, 1.3 million visited Down Under, marking a 2.9% growth compared to the previous year.
Furthermore, Chinese tourists account for more than 15% of the total inbound market and spent a total of $8.2 billion within the country.
Japanese electronics and cosmetics popular with Southeast Asian travellers
Japan also benefits from the spending of their foreign guests. The Japan Tourism Agency (JTA) estimates that in the first three months of 2019 tourists from Vietnam spend an average of $498 each on shopping in Japan. Thai tourists spend about $370 in Japanese stores, while Indonesians and Filipinos spend around $277 each. In comparison, tourists from higher income regions such as the U.S. and Europe spent significantly less on shopping than southeast Asians in Japan, a mere $185.
Bestsellers with Southeast Asian tourists are electronics and cosmetics from Japan that are not available back home.
Targeting the Southeast Asian middle class: An investment
The United Nations Conference on Trade and Development (UNCTAD) described Southeast Asia last year as the world’s foreign investment growth point. Some major investment deals were made in sectors geared towards middle-class consumers. The ASEAN and UNCTAD concluded last year that the region reached an all-time foreign investment high of $137 billion in 2017.
However, targeting the middle class requires a specific approach. Based on a Bain & Company survey, about 77% of business leaders in the region said that the new group of middle-class consumers could help them significantly grow their business. However, only 15% of those executives indicated that they are fully prepared for them. More than 50% of the executives said they lack the right products or services. 60% admitted that they lack a clear marketing strategy.
