Megatrends
The most influential Megatrends set to shape the world through 2030, identified by Euromonitor International, help businesses better anticipate market developments and lead change for their industries.
Learn MoreIn 2015, there were over 290 million households with an annual disposable income below US$10,000 (in purchasing power parity – PPP terms) who can barely afford discretionary spending (that is, spending on items other than food, non-alcoholic beverages and housing).
Yet, large multinationals are paying greater attention to these low-income households at the bottom of the pyramid (BOP), as this is a largely untapped market that may offer businesses a new growth avenue they need in the present time of slow economic growth and uncertainties.
In targeting low-income consumers, however, it is important to recognise that, even with limited purchasing power, poor consumers can still be highly diverse. Companies that acknowledge and address diversity at the BOP can expect to reap significant rewards, as seen in the example of Haier Group which recorded strong growth in the sales of automatic washing machines in China and other key markets by responding to the needs of low-income consumers.
Source: Euromonitor International Competitor Analytics
Take Nigeria and Vietnam for example: these two countries are among the major emerging economies that have captured a lot of attention from international consumer goods businesses in recent years. The BOP markets in both countries are very similar in terms of size, with around 13.5 million households with an annual disposable income below US$10,000 (in PPP terms) in 2015.
But beyond the similarity of the BOP market size, the differences between Nigeria and Vietnam are truly remarkable:
Source: Euromonitor International from national statistics
Returning to the case study of China’s Haier Group: back in 1985 it was near bankruptcy, but it managed to turn fortunes around to become one of the world’s largest manufacturers of household appliances. A key part of Haier’s successful transformation was down to its ability to understand and cater for the diversity at the low-end of the consumer durables market:
Innovations like these have popularised Haier’s washers among low-income communities in many countries and helped boost the company’s market share significantly. In 2015, Haier Group captured 18.9% of the global market of automatic washing machines, up from 7.3% ten years earlier.
Click here to read more on strategies for Doing Business at the Bottom of the Pyramid.