2022 – A YEAR OF INDUSTRY RESILIENCE IN ASIA PACIFIC LONGER TERM POWERFUL MOMENTUM BUILDS DRIVEN BY RISE OF MIDDLE CLASS IN SEVERAL KEY MARKETS
COMMENTARY FROM SUNIL TULI, PRESIDENT OF APTRA & CEO KING POWER GROUP (HONG KONG)
SINGAPORE 20 DECEMBER 2022
As we approach the end of 2022, we can look back on this as the year Travel Retail showed its true resilience, despite the array of economic headwinds.
Supply chain disruption, soaring interest rates, labour shortages and the war in Ukraine have driven persistent inflation to new highs and fuelled market volatility. These headwinds were all discussed during the APTRA Exchange panel at the Trinity Forum last month.
The outlook for 2023 is capricious, especially for a retail industry that relies on tourism, with our consumer base facing intense challenges impacting their confidence and their travel spending. The OECD predicts global annual GDP growth of just 2.2% in 2023, but 5 of the top 10 countries in 2023 are in Asia Pacific, outperforming that global figure with India leading the region’s predictions at 5.7% and Indonesia at 4.8%, ahead of China at 4.7%.
Although extended travel restrictions in APAC have held back regional recovery, there are now encouraging signs of growth in ATV vs 2019 and APTRA remains optimistic that the region will get back on track to lead industry growth and that key Asian nationalities will shape how the industry looks in the future. When exactly that acceleration starts depends, of course, on the scale of covid cases as restrictions in China ease and on the Chinese government’s international travel policy. But with Hong Kong’s borders fully open since 14 December and Trip.com reporting an instant flight search surge of over 2000%, there is a clear message of the scale of the pent-up demand coming our way. Given the ongoing challenges of supply and staffing, the question is, are we ready?
Longer-term, positive and powerful tailwinds are creating a momentum that Travel Retail in APAC needs to shape up for. The rise of the middle class in Asia is generating most of the global consumer growth, with the World Data Lab, in October 2021, projecting middle class growth of 6% pa in China and India, dwarfing the 0.5% anticipated growth this decade in the West. If the pandemic does turns out to be a relatively short pause in the world’s economic shift in the greater scheme of things, more than 1 billion Asians – 75% of whom are in India and China – will join the middle class by 2030, even despite the current downward revision of economic growth forecasts.
Travel Retail must be ready to meet and exceed the evolving expectations of these eager consumers. That means welcoming product innovation from suppliers and helping them maximise the brand-building potential of travel retail, giving prime space to new retail categories such as Wellness, and confidently reinventing travel retail as an omnichannel marketplace, optimising collaboration along the extended consumer journey; a hybrid future blending digital and physical worlds.
Combining compelling digital engagement and unforgettable in-store retail experience that personifies the excitement of travel will resonate with this new generation of digital native travellers and explorers. This is no time for complacency on the scale of passenger growth alone. We need to invest in developing deep understanding of the desires and drivers of shoppers in India and China and to keep pace with trends in other key growth emerging markets, including Vietnam, Thailand, Indonesia and Malaysia.
Then there’s the changing retail dynamic driven by the rise of socially conscious consumers everywhere who are looking to vote with their dollars; from eco-friendly products made from renewable resources and minimal environmental impact to ethically made and sourced items produced with fair wages and labour practices.
So as we welcome 2023 with industry resilience, let’s encourage an intrepid collective mindset in our people, our businesses and our industry as a whole – accepting we will always face ever-changing circumstances and unpredictable turbulence, building our agility to adapt and stabilise business in the face of economic stress and inevitable challenges. An inclusive human-centric approach in how we all contribute to the evolving culture of Travel Retail will bring many rewards, improving the appeal of our industry to the rich diversity of the workforce across Asia Pacific to help resolve current issues around recruitment and people retention.
As we’ve said many times before; we are stronger together and on behalf of the APTRA Board and the Executive Team, a huge thank you to our members for their continued support of APTRA. We’d especially like to call out the active collaboration and support of so many in partnering with us in the increasingly complicated landscape of government regulation. APTRA is a very small team in a very large and complicated market of over 45 countries and the whole industry benefits greatly from the sharing of key market insights and contacts.
APTRA will hold elections in May 2023 at the end of the current board’s tenure. Applications for board positions are open to new, current and previous members and we will start the process in April. The APTRA Exchange will return in person in May as part of the TFWA Asia Pacific conference and we will be hosting specialist webinars, with more details coming in January. When the market fully re-opens, we will reinstate appropriate research to help our members understand the intricacies of consumer trends in this new post-COVID era.