It’s Time to Turn to Asia for Growth

The Asian middle class is rapidly transforming. Is your company ready?

Tim Gohoc | UPS

In past years, Asia’s cheap labor and production methods were global differentiators that powered economic growth. But another factor is propelling China’s new growth: a middle-class expansion in Asia’s emerging markets.

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The Asian middle class is projected to reach 3.3 billion by 2030.

The Organization for Economic Cooperation and Development projects that the Asian middle class will reach 3.3 billion by 2030.

This may result in a middle-class effect where the size of the middle class is proportional to economic growth. We know these middle-class consumers will bolster the global economy and boost Asia’s economy even more.

Asia Pacific’s share of global consumption will rise to nearly 40 percent by 2035, according to IHS Markit.

The Philippines is a striking example of this growing trend. In 2015, the Philippines’ top export destinations were Japan, followed by the United States, Europe and China. Filipino businesses need to take this projected growth of Asian consumers into account when developing a long-term business strategy.

Although Japan is the Philippines’ largest export partner, particularly for electronic equipment, there are opportunities to deepen its trade with other neighbors in East and Southeast Asia. To achieve this growth, Filipino businesses must address diverse markets in Asia and take advantage of the existing free trade agreement with these neighboring countries.

Make supply chain efficiency a priority

According to a recent UPS-commissioned study, Made in China 2.0, 82 percent of Chinese purchasers say manufacturers or suppliers that offer faster and more efficient supply chains are more competitive.

Leading manufacturers in China are no longer just competing on price – an efficient supply chain can boost sales and enhance the customer experience.

In particular, manufacturers in the electronics, automotive and high-tech industries will have to improve their supply chain to meet time-sensitive customer demands.

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One way Filipino manufacturers can improve supply chain efficiency is through a mapping session with their logistics partner. This will help businesses uncover opportunities to reduce costs, improve service and address pressing problems.

For instance, they may find that some shipments are less urgent than others. These shipments could be placed on less-premium shipping services to help manage costs. Ultimately, changes made to the supply chain would reduce internal costs and boost profitability.

Build a responsive customer experience

Today’s professional purchasers are looking for distributors and manufacturers that can provide a seamless, cross-channel experience – closer to the consumer-brand model.

This would help purchasers find information at various touch points, such as on the manufacturer’s website, a brochure or through the sales person.

Difficulty retrieving product details (46 percent) and difficulty getting answers to product-related questions (41 percent) were among the common complaints shared by professional purchasers in China, Japan and South Korea surveyed in the UPS Industrial Buying Dynamics Survey.

To secure more orders and build loyalty among professional purchasers, manufacturers and distributors need to make product details and specifications more visible and use high-resolution images on both their online and offline channels.

The same study also affirms the importance of an efficient supply chain and how it is a big part of the overall customer experience. Purchasers from China, Japan and South Korea take into consideration the speed of the delivery, the range of shipping modes and the option to use a single carrier to optimize the shipping process. But many of them are left unfulfilled.

Manufacturers and distributors need to offer shipping modes that best fit a purchaser’s needs and provide timely and accurate updates.

A logistics company can act as a one-stop shop by providing multiple shipping modes, managing deliveries based on timelines, handling documentation, facilitating customs clearance and sending timely updates to recipients. Working with a logistics provider that offers all these services would help Filipino manufacturers keep customers satisfied, while focusing on their core services.

Direct to end consumers

Today’s technology enables manufacturers to directly sell to end consumers, rather than just in bulk to distributors.

Diversification of sales channels is useful for manufacturers because it helps them lessen dependence on a single revenue stream. Moreover, direct selling to end consumers also provides higher margins.

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Sixty percent of leading Chinese companies are selling to a mix of B2B and B2C customers.

The Made in China 2.0 study shows that 60 percent of leading Chinese companies are selling to a mix of B2B and B2C customers.

However, when selling directly to the end consumers, manufacturers have to keep their purchasing habits in mind.

A robust returns policy and free shipping are important factors to Asian online shoppers. The UPS Pulse of the Online Shopper Asia Study found that nine in 10 Asian online shoppers will review returns policies before purchasing, and seven in 10 view free shipping as an important factor when making a purchase online.

It’s important for Filipino manufacturers to work with their logistics provider to find ways to cater to these demands or risk losing potential consumers to competitors.

Value creation

As Asian consumers become increasingly sophisticated, Filipino manufacturers – and all manufacturers with a global focus – need to arm themselves with the knowledge, skills and tools necessary to differentiate themselves.

Through supply chain improvements, manufacturers and distributors can move away from price competition and toward value creation, while also appealing to more consumers in Asia for their long-term profitability.

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Tim Gohoc is Director of Strategy and Service Expansion, UPS Asia.

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