Saturated Asia: Growth Without Demand

All companies in Asia are experiencing a rapid slowdown in growth. When you play the game of Asian conspicuous consumption, you quickly hit a roadblock. Then, when you look at emerging market (EM) GDP growth rates, you're perplexed as to why GDP is potentially outpacing real consumption.

Asian companies quickly reach their total addressable market as they open more retail locations. However, each additional location leads to a decline in same-store sales. Why? Because the company—or the market segment—has already saturated its addressable market. The catch-22 is that if they don’t expand, a competitor will—so hitting the wall only accelerates.

Wages don’t support increased purchasing power, and the expansion in retail locations serves more as a convenience for existing consumers than as a driver of new demand. As the company potentially takes on leverage to scale further, it encounters market saturation and eventually begins to pull back.