Brands must serve new consumers

22 October 2012

LONDON: Brand owners must prepare for a "global revolution" in the balance of consumer power, as shoppers from emerging markets assume the ascendancy, a report by HSBC has argued.

According to the firm, some 1.3bn people, or 40% of the world's population, will achieve middle class status – defined by earnings of more than $3,000 per year – by 2030, rising to 2.6bn by 2050.

The Philippines will post the largest annual uptick, of more than 5%, on this measure, which would mean an increase of average salary from $1,215 in 2010 to $10,893 in 2050.

China took second in terms of per capita income growth, with a lift of just under 5% a year, as figures rise from $2,579 to $17,759, and help it overtake the US as the biggest economy.

Peru claimed third, as earnings are pegged to increase from $2,913 to $18,940. India was fourth, with similar forecast annual growth of over 4%, yielding an expansion from $790 to $5,060.

Demographic trends also favour many developing nations, as countries like India, Pakistan and Egypt all have populations with a median age below 25 years old.

"There are parts of the world where incomes are rising. They're young and they're ready to shop," said Karen Ward an HSBC economist. "We have this huge shift in the geography of final demand... It's going to be the emerging market consumer driving growth from here."

As an example of this shift in action, people with "very low" incomes of less than $1,000 spend 43% of their earnings on food, a proportion standing at 35% for those with "low" salaries of under $3,000.

By contrast, the "high" earning segment, boasting incomes of over $15,000, allocate just 10.6% of their outgoings to food, indicating that they possess more disposable resources to spend elsewhere.

In showing how this process will impact brands, the study predicted that 56% of global financial services consumption should come from emerging markets by 2050, up from 18% in 2010.

These totals hit 57% and 35% in turn for clothing, the analysis added. Similarly, the share of activity in the consumer electronics sector that is attributable to fast-growth economies will more than double between 2010 and 2050, reaching 55%.

Data sourced from HSBC; additional content by Warc staff