The next billion consumers
September 09, 2011
What is behind the trend?
• China, followed by India and other emerging Asian economies, is creating a vast new population of consumers, whose growth will continue into the coming decade.
• These consumers will breach the $5,000 annual household income level, while some will push deeper into the “global middle class” and consume even more.
• Yet this new middle class will be considerably poorer than today’s middle class in the advanced economies. In China, for example, peak income will average about $18,000 per year in current dollars—more like a giant Poland than another US.
• As a result, advanced economies will still account for 40 percent of the growth in consumer spending power.
What does it mean for business?
• This is a large market but at a much lower price point for many purchases. Due to the new consumers’ relatively lower incomes, the overall basket of goods and services will differ from what consumers in advanced economies purchase.
• Companies will need to target emerging markets with a different cost structure. Expect price points to remain at a lower level rather than assuming migration upwards across all products.
• Marketers will have a transient opportunity to impact the tastes of those moving into the middle class.
Two-thirds of the population growth in the global middle class will come from just China and India
Yet, China, India and other developing countries will still be about 5 to 10 times poorer per capita than advanced countries…
…so in terms of final consumption, China’s and India’s new consumers will contribute only a little more than one-fourth of total consumption growth through 2020
The US will continue to dominate the ranks of the “global upper-middle class”