
The effects of inflation are long drawn as we come to the end of 2022. The causes are clear. Governments the world over attempted to soften the blow when Covid-19 shocked the globe with exorbitant fiscal expenditure. The abrupt halt to day-to-day economic activity was balanced with stimulus packages to keep economies around the world chugging along. Digital spending spiked as everyone worked from home and ordered goods and services online. As we transition towards some degree of normalcy, we are finally feeling the impact of these changes.
The time of easy money with low interest rates and cheap goods and services has ended. Commodity prices are now going up, and that is adding to global inflation. The war in Ukraine has only accelerated the rise in inflation. As prices go up, the immediate reaction is to spend less, save for a rainy day, and that is exactly what might seem to have reduced digital spends.
But has it? Are Southeast Asians showing fatigue in digital spends? Blackbox and ADNA dived deep into the impact of inflation with an exhaustive survey. Here’s what we found –
Household expenses have shot up
Household expense is a broad category that includes food, utility bills like electricity and water, and pretty much every collective expense of a household. Philippines and Vietnam are the most concerned at 38% each. Singaporeans, at 33%, are also heavily impacted by this. It is clear, then, that every Southeast Asian country is facing the brunt of rising household expenses; however, Malaysians and Indonesians are relatively less concerned.

Concerns over daily expenditure are potentially reflective in the policy measures countries have placed to combat rising inflation. The Singapore Government, for example, had announced a 1.5 billion SGD support package to help Singaporeans cope with inflation. Thailand has a similar support package system to aid vulnerable Thais. Malaysia has plans to introduce targeted fuel subsidies for lower and middle-income Malaysians, critical given how fuel prices have knock-on effects on the prices of other goods and services. Indonesia also has a similar fuel subsidy policy. Vietnam has even reduced taxes on essential and strategic commodities to combat rising prices. Meanwhile, the Philippines has seen limited success in curbing inflationary pressures, with the central bank already reaching the limits of its monetary policy tools.
Online Shopping reigns supreme for Southeast Asians
Our study shows how e-commerce platforms have stepped up over the years to capture the bulk of the shopping market. We found that 44% of Southeast Asians prefer to buy online. This is unsurprising given how the likes of Shopee and Lazada have aggressively targeted the wallets of online shoppers in Southeast Asia. The love for online shopping and e-commerce platforms might stem from past promotions to entice shoppers, offering numerous monthly sales, priority delivery and fuss-free returns.
A distant second at 17% is a major shopping mall or central shopping street (14%). This is perhaps a relic of past shopping tendencies with major Southeast Asian cities being home to prominent shopping areas such as Orchard Road in Singapore or Pathum Wan in Bangkok, Thailand.

Our survey highlights that Southeast Asians' overall proportion of online/digital purchase in 2022 has decreased by 9% compared to 2021. However, 70% of Southeast Asians are still likely to shop online if offered the right deals by e-commerce platforms, signifying that even though a bit of shopper fatigue has crept in, there is still ample scope to continue the momentum.

Loans are more expensive
Economic stability typically results in larger propensity for major purchases and taking up significant loans. Without any threats to job security, the risk of being unable to finance a loan is reduced.
When Covid struck, loans were easy to come by at very low interest rates since liquidity was relatively high (i.e., people had a lot of cash on hand and in banks). However, as inflation steadily rose, central banks began raising their interest rates, making it tougher for commercial banks to maintain low rates on loans. Tangibly, this has meant that loans for housing, vehicles, and businesses have steadily gotten more expensive.
In our survey, 21% of Southeast Asians believe rising interest rates is their biggest financial problem. Indonesians, at 26%, are especially concerned with Bank Indonesia raising interest rates significantly in October 2022, a move meant to mitigate the risk of core inflation though the rupiah’s relative weak currency status has made Indonesia vulnerable to global inflation. Singaporeans (20%) are understandably concerned as housing prices and loans have steadily gone up in 2022.

Actions taken by Southeast Asians to counter inflation
To reduce the impact of inflation, 14% of polled Southeast Asians have taken a second job. This raises questions about the adequacy of wages with more online anecdotes of employers lowballing employees or creating hostile working conditions.
In the last six months, 90% of Southeast Asians have cut down on spending or reduced household expenses. Fewer people are dining at restaurants, preferring to opt for home-cooked meals more often instead. Even brands that charge a premium are being given a miss for more budget-friendly brands.

Other extreme reductions are being more judicious in using electricity and lesser spending on the kids. Interestingly, Singaporeans (20%) stand out for cutting back on food delivery spending. This does not bode well for the likes of Grab and Foodpanda, companies which are already facing challenges improving their revenue streams.

Inflation has certainly dampened the shopping enthusiasm for many in Southeast Asia. Discounts and going for cheaper, yet trustable brands have been the go-to for many Southeast Asian shoppers. This is indicative of the staying power of online shopping. Shoppers in the region are looking for a good deal, especially in this current economic climate. This will open doors for e-commerce platforms to carve out new opportunities with better deals and provide a bang for the buck experience for shoppers.
Inflation will likely be the story for the next few years. That does not mean shoppers will just stop spending. Retailers will need to find new strategies to connect with shoppers and provide a better deal for them. Get in touch with us at connect@blackbox.com.sg to understand what these new strategies might be.