Big Picture: The open Silk Road

Sarah Homewood
By Sarah Homewood | 5 November 2015
 

In the 16 October issue of AdNews Magazine journalist Sarah Homewood investigated the opportunity for brands and agencies looking to take advantage of the growth in Asia. You can read it all below. But if you want it as soon as it goes to press, you better subscribe here.

There are 44 countries in Asia and in those countries live 4.427 billion people. More than half the world’s population. For many marketers and agencies that adds up to a big opportunity, especially when Australia's largest metropolis is home to but a measly 4.3 million.

It is little surprise then when you ask businesses where their future focus lies - for many it’s Asia. With a tough economic outlook looming for Australia, reports that this country has a slower economy than Greece, and fears we could slip into a recession, the booming Asian nations are appealing. Even despite China’s rocky economy and growth slowdown.

Con Frantzeskos, CEO of agency Penso agrees, saying the rise of capitalism in the Asian region has meant that the economies are changing and growing, people are emerging from poverty and then moving from what might be called a manufacturing and exporting style of economy to one that is more about consumption and service.

“You’re going to see this maturing of Asia, and as markets are freed up, government has become more sophisticated, trade has freed up and markets have become more mature,” Frantzeskos explains. “We’re a growth consultancy. We’re a growth agency. We’re looking to grow and Asia is clearly booming.”

In June last year, Mondelez's Ben Wicks, was promoted from leading the company’s chocolate brands portfolio in Australia to take on a regional role across Asia Pacific, taking in South East Asia, China, India and Japan – albeit based out of Melbourne. Wicks too, cites the shift in the economy and the culture of countries like China and India as a huge opportunity.

“It’s a tremendously exciting region - we’re bullish about it as a business,” he says.

“The emergence of the middle-class particularly the Indian, Indonesian, and in the Philippines, means a significant amount of people coming into a greater level of disposable income. For us as a snacking business, we know that as GDP increases, disposable increases, snacking behaviour increases. All this bodes well for the range and the type of products we have.”

You only have to look at the numbers to see Asia is where the growth is in advertising too, despite the negative knock-on effect of China’s recent rockiness.

In the last month alone, Warc, Carat and ZenithOptimedia, have all released global ad expenditure figures. One thing that is clear from them all is the continued strength of Asia. All cite India and China as countries that are set to have the highest growth over the next year, along with the Phillipines, Vietnam and India that are all expecting double digit growth.

There is not one Asia

Talking about Asia as one region fundamentally undercooks the diversity and complexity of the region. But that doesn’t help the many marketers who are increasingly being given APAC responsibilities.

Wicks says when it comes to tackling his broad remit, he aims to find a balance between a wider human truth that crosses borders and something that is also culturally relevant in some 14 countries.

“We try and find trends that are universal – it’s culturally diverse,” Wicks says. “I know Europe is culturally diverse, but when you compare Australia and New Zealand to India, to China, to Indonesia, from a cultural standpoint, there's distinct differences between those geographies.

“What we try and find are the trends that are broadly relevant, that are applicable to most geographies and try to find a balance between a big human truth and delivering that in a way has strong cultural insight.”

Many global firms are still headquartered in New York or London while plenty of global and Australian firms have heads of APAC marketing based out of Australia.

However, to really make a difference and to have a shot at being able to communicate with consumers in a region where some 200 languages are spoken, Singapore-based global CEO of Lowe Proferro, Wayne Arnold, says a good first step is to actually be on the ground. He’s been based there for years after working in both London and New York and is one of few global agency CEOs based in the region.

“I got really annoyed at the Americans and the Brits saying: 'Asia is really, really important' and then going back to their nice leather chair in Soho House [London members club] and drinking a bourbon or a pint of beer. They'd visit Asia once a year, go to Shanghai and stay in the Mandarin Oriental. They'd spend two days, they fly in, fly out and that was Asia ticked,” Arnold says.

“Three hundred million people legally live in America, versus 1.3 billion living in China and 4.4 billion across the region. This region's bigger, but to put my money where my mouth was, if I was going to say ‘I believe Asia is the biggest, most important and the most interesting continent on the planet right now’ and I had to do it from here.”

China: cooling but not cold

ZenithOptimedia's recent forecasts note that while China’s ad market has not been substantially affected by the turmoil in its stock market, the slowing economy and concerns about the potential for future growth has caused advertisers to moderate their spending, and it’s had a global impact.

Zenith predicts ad spend growth in China to fall from 10.5% in 2014 to 7.8% in 2015, but that’s still twice as fast as the global ad market and places China as the 13th fastest growing ad market of the 81 it looks at. Warc also predicts ad spend in China in 2016 is going to be slightly less than what it experienced in 2015, however it is still sitting in the top three countries for future ad spend.

So, while China's economy and share market has taken a beating, APAC CEO of Dentsu Aegis Network, Nick Waters, says it’s not wise to overstate it. “Most of our clients in China are finding it much harder to get growth now. Some sectors are in contraction, the automotive sector being the one that’s receiving the most attention," Waters says.

"Companies such as Volkswagen and BMW have both cited reduction of sales in China for their relatively poor results in their earnings calls in the last few months. That is very real, it’s not limited to the automotive sector. The luxury goods sector is also under some more pressure. So, there’s a cooling factor around Asia Pacific, but I wouldn’t overstate it. We do still have growth. China is still growing.

“From a long-term perspective, what the Chinese authorities are trying to do is heat up their economy from a manufacturing export-based one to a domestic demand one that has long-term positive implications through the marketing services industry."

India: innovation within tradition

Just last week, WPP CEO, Sir Martin Sorrell, addressed the media in Mumbai after a meeting with India’s prime minister, Narendra Modi, saying he is more optimistic about India than he was before.Sorrell told the trade press there that he viewed India as a clear number one in the BRIC [Brazil, Russia, India, and China] group of countries.

“I remain an unabashed bull of all four countries. I’m more bullish about India now then I was when I came here last, which was about a year or so ago,” he told Campaign Asia.

India’s growth is indisputable, but the diversity across a nation with 1.28 billion people cannot be glossed over. Much of how the country's business and communities operate is still very much dictated by traditions and culture. It can be daunting for a Western business hoping to grow there.

M&C Saatchi's group innovation director, Ben Cooper, was on the innovation panel for Spikes Asia, which awarded the Grand Prix for the Life Saving Dot created by Grey For Good, Grey Group Singapore’s philanthropic arm, in collaboration with NGO Neelvasant Medical Foundation and Research Centre.

Cooper says the campaign showed him the innovation that can occur within tradition. The 'dot' refers to a bindi which many Indian women wear on their forehead every day. Together, the agency and medical organisation created the ‘dot’ which delivers a woman's daily dose of iodine to combat high rates of deficiency.

“In Western cultures, we have to be constantly amazed all the time, but what you see [in Asia] is a lot of brutally simple ideas that are coming out of the region that are culturally relevant to the diversity in those countries,” Cooper says.

He explains that he was able to see the brilliance in the idea from a fellow judge on the panel, an Indian, who remarked: “Do you know how hard it is to change something in India?”

“It made me draw focus and say: 'Christ you’re right, it’s set in traditional, what is modern India?Modern India may be in capitals, but there is a lot of India where it just is what it is, and then you can truly realise how monumental what it is that has been created.”

Mobile on the orient express

Asia is in the midst of a digital revolution that is being led mostly by China. A report published by The Economist, in collaboration with Dentsu Aegis this year, highlighted several things that would impact the way business is done, but also impact how consumers interact with brands across the region.

Asia is way ahead in mobile, and there’s a lot that Australian marketers can learn from the region. In 2014, Asia had 3.3 billion mobile phone subscriptions, or nearly one for every man, woman and child. By 2019, it is predicted the region will have almost 4.3 billion mobile subscriptions, or 117 for every 100 people.

Across large swathes of Asia, people skipped the entire desktop generation and went straight to mobile. Back in 2011, South Korean supermarket Homeplus created a virtual supermarket in subway stations that allowed commuters to use QR codes to scan items and shop for home delivery while they waited for trains. It was replicated by supermarkets around the world in the proceeding years, including Woolworths in 2012. That’s just one campaign that shows how Asia is a step ahead when it comes to mobile, and keeping one eye on what is going on there will help marketers here be better at mobile.

Maya Hari, Twitter’s director of sales product specialists, APAC, Americas and Emerging Markets, says: “In emerging and developed Asia, marketers are shifting a majority of their attention to mobile - to acquire, engage and re-engage customers where they are, particularly in spaces like e-commerce. This is also backed by the desire to know richer deeper and more granular audience insights that are afforded by the mobile platform. Alexander Kleinberg, managing director of Twitter’s MoPub, Asia Pacific and Japan, adds that while the shift towards programmatic in mobile has been slower, the advanced nature of mobile in those markets is an advantage.

Australia tends to follow Western markets in terms of brand spend patterns, and that means we have seen a strong shift from brands in Australia to mobile, and specifically mobile programmatic. In key Asian markets like Japan, Korea, and Greater China, the advantage in those markets is the advanced nature of their mobile markets generally, which bodes well for brands being able to reach their target users via mobile apps.

Another side effect of more people in Asia being connected to the internet is the rise of e-commerce. According to The Economist’s Intelligence Unit, more than 8% of all retail sales in China are now conducted online, and these figures are set to keep growing. By 2018, e-commerce in China will make up more than 16% of retail sales, with similar patterns unfolding in the rest of Asia too. However, e-commerce is quickly moving to m-commerce due to the rise of the mobile, with KPMG noting the value of m-commerce in China amounted to US$7.8 billion in 2012, but will grow to US$41.4 billion this year. While the overall value of online commerce in China is set to grow by 35% each year, the value of m-commerce is growing twice as fast - by 74%.

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