Consumer spending to surge

25 May 2012

NEW YORK: Global consumer spending levels are due to increase by more than $10tr by the end of this decade, offering substantial opportunities for brand owners, a new study has predicted.

AT Kearney, the consultancy, forecast that shopper expenditure on goods and services, after accounting for inflation, would reach $40tr by 2020, measured against the total of $28tr registered during 2010.

When dividing up this incremental $12tr in outlay, durable goods and services were pegged to take an 18% share, transport was on 17%, healthcare logged 14%, and food and soft drinks recorded 11%.

By market, the US is anticipated to deliver 25% of spending growth, ahead of China on 19%, India on 7% and Brazil on 5%. Russia, Japan, Indonesia and the UK should post 3% apiece on this metric.

More specifically, the report identified four key demographics which brand owners can target as they seek to progress.

The first is the "basic consumer", with per capital spending of $4,000 a year, and needing low cost products. By 2020, the 700m people in this group will be worth £900bn, two figures shrinking over time as affluence rises.

Such shoppers generally dedicate the majority of their disposable income to staples like personal care brands and food, with the latter category taking $275bn from this audience by 2020.

Elsewhere, "emerging consumers" will comprise 3.4bn customers by 2020, and hold a potential net worth of $10tr. Transport, food, durable goods and services will each draw an extra $1tr from this source by that date.

Another 600m people should fit the profile of "escalating consumers" at the end of the decade, presenting a $3.6tr opportunity. Two sub-sets of this audience are the "new rich" or "emerging wealthy".

"Consumers focus less on the basics, with fairly balanced expenditure on personal care, entertainment, and leisure items. There is typically a spike in telecom spending," the study argued.

Finally, the "established consumer", living in mature markets, housing 1.3bn people, will be worth $25tr by 2020. Luxury goods, services and experiences are areas of particular focus among this cohort.

"One of the key findings of the study is that consumers behave predictably as a country's wealth increases and consumption patterns mature," said Hana Ben-Shabat, a partner at AT Kearney.

Data sourced from AT Kearney; additional content by Warc staff