lution CPG 2023 study, encompassing insights from 3,000 respondents across six SEA countries – Indonesia, Malaysia, Philippines, Singapore, Thailand, and Vietnam – economic anxieties are particularly pronounced in Malaysia and the Philippines.  A staggering 56 per cent of Malaysians and 68 per cent of Filipinos express significant concerns about their financial well-being, while the majority in these countries (67 per cent and 71 per cent, respectively) worry about the strength of their local economy. As the region looks ahead to 2024, consumers across SEA are actively adjusting their spending behaviours to cope with economic challenges. A substantial 57 per cent are opting for more affordable groceries to manage expenses, and this trend is expected to persist in the coming six months. The story so far “Consumers in Southeast Asia have been burned by their experiences in the last few years and are therefore more cautious in the aftermath of the pandemic. Thus, they are cutting back on their spending across categories to replenish savings lost during the pandemic,” Sonya David, Dentsu Media’s head of strategy in Singapore, told Inside Retail. She also went on to say that while in some parts of the world, consumers are cutting out discretionary and entertainment-related spending, in Southeast Asia consumers are downgrading from premium options to more basic and therefore more economical choices. “This shift to a ‘savings’ mode is due to the experience during the pandemic and the impact of the rollercoaster of the last two to three years. There appears to be a consensus among consumers towards more rational ways of shopping especially on non-necessary categories,” Mimi Lu, Dentsu Media’s head of strategy in APAC, told Inside Retail. Lu also went on to say that this effort to preserve a solid financial base to weather potential incoming negative macroeconomic conditions – “their country’s economy” was the number one concern for a significant number of consumers polled. “This implies that many Southeast Asian consumers don’t feel they have a government safety net to fall back on and believe they will need to rely on their personal wealth. Accompanying this, we will likely see an increase in low-risk financial products and savings-skewed insurance products,” she added. The challenges In Malaysia and the Philippines, a significant percentage of respondents expressed concerns about their financial well-being. Roki Ferrer, head of data at Dentsu Philippines, said that despite being tagged as the most resilient country in Southeast Asia, the Philippines does not have it easy given some inflections in economic conditions. “2023 ended at 6.0 per cent inflation higher than 2022, with food and non-alcoholic beverages contributing to 53 per cent of headline inflation. That puts pressure on Filipinos where 95 per cent (68 per cent first mention) say that their household expenditure on food has increased the past three months,” he told Inside Retail. Additionally, in a country where around 70 per cent live on or below the poverty line and rice is the top food item purchased, the price of rice rose almost 20 per cent. He also noted that a high proportion of households in the Philippines are single-income in a context where the national minimum daily wage is 610 Philippine pesos, or approximately US$10.90.  The average household size is 4.1. This means that lower-middle and low-income families are regularly under immense financial pressure.  “Anecdotally, 2022 being a big national election year created ‘artificial prosperity’ for this segment. This dissipated in 2023, adding to the rationalising and penny-pinching behaviour we are observing,” he noted. Ferrer also said that in Malaysia, the impact of economic conditions on residents has been largely managed by the government through falling inflation across the market and continued delivery of subsidies to lower and mid-income segments on essentials like fuel, staple food items, healthcare and public transport.  “However, the depreciation of the Ringgit and a declining consumer sentiment and business conditions index means that consumers are likely to be increasingly cautious about their spending behaviour,” he elaborated. The recent budget session in Malaysia has tabled a change in fuel subsidies that will affect consumer spending power and might also impact the cost of goods and services in  Malaysia.  “This is further magnified by the increase in the overnight policy rate and increased commodity prices. In addition to economic factors, the broader global situation like the  Israel-Palestine war is also a deciding factor on how consumers wield their buying power,” he said. Emerging trends According to the team at Dentsu, brands are investing in creating better online environments for consumers and are promoting deeper engagement over and above delivering incentives and discounts. The team has observed more diversity in loyalty programme design. It is no longer only about rewarding people who buy the most, but also those who engage and influence the most.  Value exchanges (or engagement drivers) are now increasingly personalised to the customer as brands have access to more data about their customers than ever. For example, Xiaomi gave early access to testing of new products to their most loyal “early adopter” customers. Across Southeast Asia, consumers are continuing to embrace small-format grocery retail and shopping locally. This is driven by convenience, but also by a renewed love for homegrown brands and products. The emergence of this “hyper-localism” represents an opportunity for international brands to collaborate with local brands and support local produce, craft and heritage. Nonetheless, brands should also bear in mind that hybrid retail and a seamless omnichannel experience are preferred. Near term, inflationary pressures in the region are likely to continue driving consumers to search online for better prices, as will the growing use of super apps for multiple needs.  However, as consumers continue to return to physical stores post-pandemic, a tactile and human experience in-store is becoming important.  Marketplaces are also using a more complex, gamified approach to loyalty programmes to drive up engagement such as allowing people to use their loyalty points to “win” chances of bigger discounts.