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High-income earners in emerging economies are a diverse group and what constitutes a high income is dramatically different across countries. The relative wealth of the highest earners, when compared to low and middle income consumers within their own countries, can also be poles apart. Winning over this group can be crucial for market success particularly in categories such as transport, education and hotels and catering where they dominate consumer spending.

A Seven-Fold Difference

Looking at the disposable incomes of decile 10 households – the highest earning 10% of households – across the world’s largest 20 emerging markets, reveals stark differences.  The richest of the rich are in Saudi Arabia where decile 10 incomes are more than 7 times higher than the rich in Pakistan, the lowest-earning decile 10 households in this ranking. A decile 10 Pakistani household earns US$17,332 which places it on a par with the lowest earning 20% of households in the USA.

Average Disposable Income of a Decile 10 Household in the World’s 20 Largest Emerging Markets: 2013

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Source: Euromonitor International from national statistics

Note:  Deciles are calculated by ranking all of the households in a country by disposable income level, from the lowest-earning to the highest earning. The ranking is then split into 10 equal sized groups of households. Decile 1 refers to the lowest earning 10%, through to Decile 10, which refers to the highest earning 10% of households.

Saudi Arabia and Mexico stand out as the only two countries with decile 10 incomes over US$100,000, which places the well-off in these two countries at a similar level to their decile 10 counterparts in Spain and the Netherlands.

A Question of Priorities

Spending patterns also vary dramatically. In part due to the sharp differences in income levels. For instance, decile 10 households in Pakistan must still devote more than half of their budgets to the essentials of food and housing. In Saudi Arabia, this figure is much lower: 35%. This leaves high-income Saudi Arabian households with more money (both proportionally and in actual figures) to spend on discretionary items such as hotels and catering.

Consumer Expenditure by Decile 10 Households in Pakistan and Saudi Arabia: 2013

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Source: Euromonitor International from national statistics

Note:  Deciles are calculated by ranking all of the households in a country by disposable income level, from the lowest-earning to the highest earning. The ranking is then split into 10 equal sized groups of households. Decile 1 refers to the lowest earning 10%, through to Decile 10, which refers to the highest earning 10% of households.

High-Income Earners Can Dominate the Consumer Landscape

The importance of decile 10 households in a country’s consumer market also varies substantially. From South Africa where almost half of all disposable income earned in the country is earned by decile 10 households, through to Poland where the proportion is just 25%. This helps to explain why in South Africa decile 10 households account for 48% of all spending on leisure and recreation and 46% of all spending on transport; and the equivalent figures in Poland are less than 30%.

Across all countries the importance of decile 10 to the consumer landscape varies by type of spending. Education, hotels and catering and transport are the three most income-dependent spending categories. Alcoholic drinks and tobacco is the least – even beating food and non-alcoholic drinks. The all-pervasive nature of communications is also evident by its relative lack of income dependence.

Decile 10 Spending as a % of all Spending in Selected Emerging Markets: 2013

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Source: Euromonitor International from national statistics

Note:  Data refer to the world’s 20 largest emerging markets. Deciles are calculated by ranking all of the households in a country by disposable income level, from the lowest-earning to the highest earning. The ranking is then split into 10 equal sized groups of households. Decile 1 refers to the lowest earning 10%, through to Decile 10, which refers to the highest earning 10% of households.

Why Does it Matter?

Put simply, if you are operating in the transport sector in South Africa, 10% of households in the country form half of your potential consumer market. The same is true of communications in Egypt, Education in Brazil and hotels and catering in Iran. This segment may be small, but its influence is considerable.

 

 

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