Recently, new consumer brands across various sectors, like Heytea, Nayuki, Pop Mart, Perfect Diary, Neiwai, and Banana, have targeted Southeast Asia for their overseas expansion. The proximity of Southeast Asia helps reduce supply chain issues, and the cultural similarities make marketing easier.
However, the main reason for choosing Southeast Asia is its market potential. The World Economic Forum predicts that by 2030, 70% of ASEAN’s population will be middle class, and the consumer market will grow to $4 trillion.
With GDP growth leading globally and a highly dynamic young consumer base, Southeast Asia is reminiscent of other rapidly growing regions. Currently, the market concentration in Southeast Asia is limited, with insufficient supply across various categories and price ranges. The increasing consumer capacity and relative lack of product supply leave room for brands to explore opportunities, but there are still challenges.
Challenges
Many brands have ventured into Southeast Asia in recent years, facing numerous challenges. The market’s ecosystem is evolving rapidly, presenting both opportunities and competition. For overseas businesses, scalability and localization have become significant hurdles.
South Asia’s infrastructure, from payment systems to logistics, is still developing, and the geographical and cultural diversity across countries adds to the challenge. In some regions, the need for localization makes purely cross-border models unsustainable. Moreover, relying solely on e-commerce is insufficient, with many offline channels and multi-channel operations increasing complexity.
Southeast Asian consumers still prioritize cost-effectiveness. A recent TikTok for Business report on global consumer trends shows that Southeast Asian consumers value cost-effectiveness, with product value and promotions being critical drivers of purchases.
The consumer mindset in Southeast Asia also poses challenges. A 2023 survey revealed that only 40.8% of Southeast Asian consumers are loyal to their favourite brands, lower than the global average. However, they are open to new experiences, foreign cultures, and brands, influenced by trendy trends, social media content, and celebrity endorsements.
For example, the trendy toy culture from Japan and South Korea is growing in Southeast Asia, attracting brands like Pop Mart and 52Toys. Creating new experiences, ideas, technologies, and products for these consumers is both an opportunity and a challenge.
Identifying Market Gaps
Despite the challenges, some brands have successfully established themselves in Southeast Asia, particularly in niche markets. For example, Mixue Ice Cream has opened thousands of stores in Vietnam and Indonesia. Increased e-commerce penetration and platforms like TikTok have helped beauty brands Mistine and Y.O.U stand out amid competition from Western and Japanese brands.
Currently, businesses are continually exploring and filling niche market gaps.
Petsup, a Southeast Asian pet brand, mainly deals in pet food and treats. Founder Panda noted that they introduced transparent soup cans in the Philippines, addressing hydration for cats and owners’ coowners about ingredient safety, previously unavailable in the market. But how do users recognize and accept these new products and brands?
To promote new products and brands, Petsup chose TikTok, leveraging its proactive product push to build brand recognition and exposure quickly. This strategy brought significant visibility and conversion for Petsup.
Co-founder Kinder mentioned that their TikTok investments focus on live streaming, videos, and influencer collaborations and participating in major promotional events like Double 11 and Double 12, which boost sales to 2-3 times normal levels. The exposure from TikTok also enhanced sales on other e-commerce platforms, gradually increasing brand awareness and trust and leading to higher repeat purchase rates.
Similar niche demands, like health consumption, are also emerging. Research indicates a growing trend towards health consumption in Southeast Asia, with an increased focus on physical and mental well-being, driving sales of health foods, smart home appliances, and other products.
For new consumer brands, it’s crucial to seize niche market opportunities by identifying gaps and launching differentiated, localized products. Additionally, leveraging e-commerce platforms and social media for promotion, especially TikTok, which can rapidly increase exposure, is essential.
Building Channels, Scale, and Brand
Channel and market momentum can help brands quickly create popular products. However, becoming a mature brand with multi-channel operations, a diverse product range, and strong brand loyalty is a much longer journey.
Given the high proportion of offline consumption and fragmented channels in Southeast Asia, brands reaching a particular stage of development must enhance brand influence by entering offline channels and conducting joint marketing.
For example, Dreame Technology, a home appliance brand, entered Southeast Asia at the end of 2021, covering a full range of products from hair dryers to vacuum cleaners and floor washers. It operates online through platforms like Shopee, Lazada, TikTok, and Tokopedia offline through appliance stores in Southeast Asia and set up self-operated stores.
Dreame has developed an online and offline synergy strategy for launching new products in different countries and channels. In Southeast Asia, during offline events like product launches in Indonesia and Singapore, Dreame coordinates TikTok live streams, including official and influencer live streams, to increase product and brand exposure.
In early 2024, Dreame signed Baifern Pimchanok as a brand ambassador in Southeast Asia. This collaboration with platform advertising aims to attract traffic to major promotions and online stores, enhancing brand awareness.
The experience of Dreame proves that high-ticket consumer electronics brands have market potential in Southeast Asia.
Furthermore, research shows Southeast Asian consumers value cost-effectiveness, which means getting good value for money rather than just low prices. They have mature consumption habits for high-ticket categories like 3C products, requiring merchants to demonstrate product value fully. Southeast Asia’s diverse sales channels can better meet consumer needs by combining direct and distributive sales.
Predicting Southeast Asia’s development path as the next China is overly optimistic and simplistic. However, Chinese entrepreneurs and their capabilities can find room to flourish in these new markets.
The first step is identifying needs by focusing on market gaps and opportunity tracks. Subsequently, utilizing mature strategies from the domestic market, such as live commerce and short video marketing, combined with local market and cultural characteristics, can gradually expand influence and channel reach, leading to promising growth for Southeast Asian brands.
