According to American consultancy firm Boston Consulting Group (BCG), the middle and affluent class in Myanmar will double in size, accounting for 15% of the country’s population by the year 2020 should the country’s economic reforms sustain its momentum. BCG defines the middle and affluent class as those with a monthly per capita income of more than US$120.
Riding the Wave of Consumerism
Majority of the country’s middle and affluent class population live in city centers or urban areas such as Yangon – the country’s capital. The number of F&B and retail outlets is on the increase despite the high rentals and property rates, the variety of products and services on offer continues to expand, premium international brands are now readily available off the shelves and the typical customer has for the first time, the luxury of choice, in his own country. As a result, consumer buying power will continue to be concentrated in the capital city of Yangon for now.
Consumerism is defined as a continued expansion of individuals’ needs and wants for products and services. In economic-sense, it translates to buying more, having more of everything, signifying the multiplicity of requirements beyond what is basic for survival. This has extended the human propensity to consume, and since businesses can thrive only by creating demand for their products and services, they fuel the fire for wants.
Fast Moving Consumer Goods (FMCG)
According to Nielsen, almost half of the typical consumer’s monthly expenditure goes to necessities such as food and groceries, household products and personal care products. Myanmar’s consumers are becoming more brand-aware. International brands and products have become almost symbolic of an individual’s status among the middle and affluent class. As the market demand and purchasing power grow, consumers will continue to expect more brand options in the market.
Myanmar’s underdeveloped retail sector continues to be an opportunity for international brands. The country’s retail sector is estimated to account for 15% of the country’s GDP and is expected to grow significantly in FY2017-2018. Although traditional trade still dominates the market, modern trade is rapidly growing as the number of modern retail outlets reached 700 in 2015-2016, according to the Myanmar Retail Association. Local consumers still do patronize traditional markets, however as lifestyle changes, these consumers may instead visit supermarkets and convenience stores.
Myanmar has progressed on the path of economic development, evidently so in the past few years and retail is one of the key sectors that will see unprecedented growth as rapid developments take place. In addition, the benefit to this comes in the form of job creation, and increased spending which will spur further growth.
The rising middle class in Myanmar has captured the enthusiasm of global businesses, and those that can fully harness the middle class potential will usually be the most successful. In Myanmar, the Singapore brand is well received due to our cultural similarities and a huge Myanmar diaspora community in Singapore. There is good potential for more food & beverage, luxury retail, and other lifestyle-type companies to expand into Myanmar.
Local partners are eager to partner foreign firms because they believe that they can grow rapidly in the shortest amount of time and expand their varieties of products and services to be made available to the local consumers. Brands such as Coca-Cola and Unilever have both opened local manufacturing facilities and have shown commitment in making further investments.
Moving towards the digital economy
As smartphone penetration continues to accelerate in Myanmar, the next phase of digital adoption will be e-commerce and mobile banking. While the e-commerce industry is still in the infant stage, majority of visitor traffic comes from smart phones, with consumers showing appreciation of the convenience of shopping on the go. With the country gravitating towards integrating smartphones actively in their daily lives, this is where tech start-ups can come in to cater to the basic needs of consumers especially in the financial, healthcare and educational sectors, thus boosting Small and Medium-sized Enterprises (SME) innovation. While social media continues to be the predominant mode of engagement, businesses should effectively integrate online and offline marketing through a ‘customer oriented’ approach.
Market growth, healthy consumer spending and competition come from demand driven markets which sees supply keeping pace with it. This change is slowly becoming evident and businesses are adapting fast. Change is imminently visible in every aspect of life in Myanmar and consumerism is just one part of it. Being thrifty and spending in moderation is slowly fading and instead the show of one’s wealth and status is becoming more evident.
Industrialization is slowly but surely picking up. As consumers search for higher quality products, it is no surprise that most retailers import their products from countries such as Japan, China, Thailand, and Korea. The country’s cheap labour has already attracted international apparel brands to buy textile from Myanmar, and the textile industry has seen much progress since then. In addition, Myanmar’s large population and massive land area place it in a good position as an alternative manufacturing hub for other Asian countries, complementary to neighbouring Thailand and Vietnam. Singapore manufacturers are already looking towards Myanmar as an option.
Myanmar’s growth is not just limited to its capital city of Yangon, as the country targets secondary cities such as Mandalay. As earning capabilities improve, so will spending power, and eventually consumerism will reach an even higher level.