The importance of urbanisation at a global level cannot be underestimated as it is transforming the world we live in. Euromonitor forecasts that by 2030, 70% of households worldwide will be in urban areas and that the growth in urban households globally is faster than that of total households, highlighting where the investment opportunities lie. This shift in household dynamics corresponds to changing population structure where we expect 60.2% of the world’s inhabitants to be urban dwellers in the same year. There will be an extra 598 million urban households in 2030 compared to 2010 although the corresponding trend of smaller households is also driving household numbers upwards. Urban consumers enjoy higher incomes than their rural counterparts with a leaning towards higher skills and educational attainment, so urbanisation results in greater consumer market gains. Despite obvious growth opportunities, the rise in the number of cities is accompanied by numerous challenges, especially when it is unplanned.
The rising proportion of urban households creates huge opportunities especially in emerging markets where urbanisation is occurring rapidly and from a low base. Euromonitor predicts that emerging and developing countries will account for three-quarters of total urban households in 2030. We will see heightened demand for all sorts of household goods and services; the construction sector will benefit from the need for more housing; and urban planning and infrastructure investment will rise.
Companies must strategise for the differences between urban and rural consumer demand. Urban households have a higher propensity for spending but will be smaller in size owing to greater population densities as well as being fewer in occupancy numbers (the global ageing trend also exacerbates the move towards smaller households). More households will require compact products and many urban consumers seek convenience to satisfy the needs of professionals “on the go”. Single-person households will be the fastest growing household type globally over 2014-2030.
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- Developed economies are at a more advanced stage of urbanisation owing to their earlier industrialisation with 83.4% of total households already in urban areas in 2013 compared to 54.4% in emerging and developing countries. Australasia and North America had the highest proportions of urban households in 2013 followed by Latin America;
- Conversely, urban household proportions are lowest in Asia Pacific at 49.9% in 2013 and the Middle East and Africa at 60.1%. In Asia, this corresponds with the higher proportion of people employed in agriculture, hunting, forestry and fishing which was 50.8% in India in 2013, for example. As a result, the majority of households in India are rural (67.2% in 2013) but this is forecast to decline to 57.5% by 2030;
- However, due to sheer population numbers, emerging countries are home to the majority of the world’s urban households (69.6% in 2013) and this will increase as emerging countries drive urban household growth. The Middle East and Africa will see the largest expansion in urban households between 2010 and 2030 growing by 90.1% followed by Asia Pacific at 68.3%. These are particularly high rates as they are expanding from a low base but to put the figures into context, in Asia Pacific, this equates to 322 million new urban households, which is more than the total number of households in the Middle East and Africa in 2013;
- Households are getting smaller as birth and fertility rates drop while urban households tend to be smaller in occupancy numbers than rural households. Euromonitor forecasts that the average number of occupants per urban household globally will be 3.0 in 2030 versus 4.4 for rural households. Developed economies will continue to have fewer people at 2.3 on average per urban household in the same year compared to 3.2 in emerging markets;
- Consumer spending is also greater in highly populated urbanised areas than in rural areas so more urban households will stimulate consumer spending. In Australia, New South Wales which is home to Sydney, had the highest total consumer spend in the country in 2013 at US$272 billion.
On the other hand, urbanisation creates many problems such as rising crime, higher pollution and congestion levels, pressure on natural resources and urban public services as well as urban poverty or infrastructure deficits, which can end up hindering business environments especially if bottlenecks arise.