Member's News - January 2, 2020
KPMG – APAC Economies Amid the Pandemic

The “black swan” event of 2020, COVID-19, has significantly affected the global economy. We can claim that Hong Kong experienced four black swan events: social unrest, COVID-19, a global and a local economic recession. However, Hong Kong’s characteristics of resilience remain, and entrepreneurs are actively looking for ways to adapt and adjust to this inflection point for most industries. With free trade agreements in place with some of the member states of the Association of Southeast Asian Nations (ASEAN) and a highly educated workforce with an international mind-set, Hong Kong continues to act as a gateway to ASEAN for both Chinese and multinational corporations.

Mainland China’s economy has seen growth in both exports and foreign direct investment in 2020. China recovered from COVID-19 quickly and has restarted its economy while other countries are trying to fully contain theirs. As stimulus plans have been used in many advanced economies to stabilize economic growth, consumption demand has remained high. This demand and supply gap strengthened China’s role as a production base and investment destination.[1]

The Asia Pacific in general has been able to control the pandemic with some limitations on social interactions and movements of people. Asia has started to scale up in terms of manufacturing capabilities. Over the past few years, we have seen the relocation of parts of production capacities to ASEAN countries. However, Mainland China’s export levels still amount to over 90 percent of Asia’s total exports.[2]

A recent major event in the region was the signing of the Regional Comprehensive Economic Partnership (RCEP) among 15 economies on 15th November 2020.  This agreement aims to further strengthen economic collaboration in the region through reduced tariffs, e-commerce development, etc. It should also allow more flexibility and collaboration for supply chain deployment in the region. The realisation of RCEP’s benefits will take some time, but this is a significant step forward in building the economy together in APAC.

As economies in the region navigate a perfect storm, we will share some of our observations in two areas: changing consumer behaviours and digitalisation in retail.



Globally, a different customer has emerged with new behaviours and decision-making criteria. KPMG has undertaken research based on more than 75,000 consumer survey responses taken over four months from 12 markets globally[3]. The findings point to a rapid shift in how customers view the world in their respective regions. COVID-19 is forcing all sectors to reconsider their business models, their capital structure, and their routes to market. The report highlights four macro trends that are expected to shape how these considerations need to be made.

Economic Impact

  • 43% of surveyed consumers feel vulnerable, anxious or overwhelmed about their financial security in 2021. Net spending over the next six to 12 months is expected to be down by 21%, while 36% of surveyed consumers prioritise savings over other types of expenditure. At the same time, 63% consider value for money as a key purchase driver.
  • There is, however, a polarizing effect and long-term risks. While more than 40% of consumers feel worse off, 14% feel better off and 45% feel financially comfortable. Organisations will need to segment their customers with a view to meeting the increasingly different needs of these groups. In the long term, as government subsidies decrease, it is likely that more consumers will be negatively impacted.
  • Efforts by companies to rightsize and optimise costs are expected to add to economic woes. Organisations need to understand the economic impact on their customer base to identify risks and opportunities.

Erosion of Trust

  • Concerns around personal safety has led to a decrease in trust in brands. Chinese consumers, by comparison, have shown more confidence in brands. This could be due to the timing of the experience of COVID-19 and China’s ability to recover sooner than the rest of world.
  • Reputational risk is precarious if corporate values do not meet those of customers. Companies can put more effort in sharing their sense of purpose, strive to meet the safety needs of customers and employees, as well as their commitment to environmental and social policies.

Rise of Digital

  • Digital channels have been able to fill in the gap caused by restrictions in social interaction due to COVID-19. Overall, there is an 18% increase in the use of digital channels, and 45% of surveyed consumers are expected to continue using digital channels as their main way of interacting with brands in the future.
  • In Mainland China there is an increase of 9% in using applications and messenger applications, as well as a 5% increase in using webchats for support. In Hong Kong SAR, there is a 10% increase in website usage, 9% increase in the use of applications, and a 6% increase in the use of messenger applications for support.
  • Adoption of digital is a way to reduce costs to serve and meet customer demand for e-commerce. A few areas to bear in mind: cyber risk management should not be omitted; product offering simplification can improve the online purchase experience; brand differentiation is needed when establishing an online presence to capture the attention of platform users quickly enough.

Home is the New Hub

  • Holidays abroad lose relevance as consumers choose to shelter, at least in the short term, closer to home. Some 20% consumers surveyed preferred to stay at home as much as possible, while only 29% are confident they will go back to entertainment and leisure venues.
  • In-home experiences and investments are the higher priority of consumers, such as purchases of furniture or electronics. Home cooking will be prevalent compared to dining out due to restrictions in social gatherings and risks of infection.
  • As working from home becomes mainstream, companies should seek to tap into the growth of the community, the demand for localisation, and new “essentials”.


Leading from the four macro trends are the existing retail trends[4] that have accelerated and need to be prioritised.

Business Models and Partnerships

  • The increase in the use of mobile applications has accelerated the evolution of business models from “owning of assets” to “owning of access”. Strategic partnerships are needed in order to transform swiftly to adapt to customer needs.

Declining Margins and Productivity, Cost of Doing Business

  • Disruption of traditional business operations has increased the cost of doing business while profit margins are declining.
  • The need for digital technologies and data analytics for driving profitable growth has been accelerated by COVID-19.
  • A cost optimisation strategy needs to be well planned and holistic. This requires collaboration with the entire supply chain in order for everyone to survive.
  • Retailers will also need to upskill their current workforce as their business models evolve.

Purpose and Reputation, Sustainability and Higher Purpose

  • Customers, especially the younger generations, want to buy from companies that stand for something bigger than profits, something that they value.
  • Particular focus will be placed on those that help society respond and recover from the current COVID-19 reality.
  • Companies need to go the extra mile to support their customers and employees through these challenging times. Employees will naturally be engaged as valuable customer agents and ambassadors for the brand.
  • Transparency, sustainability, and environmental, social, and governance (ESG) are areas that customers are increasingly demanding from businesses. Companies will need to be able to communicate to customers their actions and achievements in caring for the social good.

Customer Power

  • With online channels being developed rapidly, customers’ expectations are also inflated: they demand unlimited selection, instant delivery, transparent pricing, accurate personalization, flexible payments, etc.
  • Retailers are putting more resources into customer loyalty programmes, data, and analytics, and other technology enablers that enhance the shopping experience, to make it safer, easier, and more efficient.


The changes in consumer behaviours and the economy imply a shift of mindset in the way we do business. The fundamental purpose of companies can sustain them, while collaborations with both suppliers and competitors are ways to survive the current perfect storm, adapt to the changes, and foster the development of the industries in which they operate.


[1] 10 Macroeconomic Trends in 2021, KPMG China, December 2020

[2] KPMG analysis

[3] Responding to consumer trends in the new reality, KPMG International, November 2020

[4] Global retail trends 2020, KPMG International, May 2020


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