Deception of Expanding Urban Populations

Over the next 15 years, the world’s urban population growth will be fed by the two principal regions – Middle East and Africa (MEA) and Asia Pacific – which together will account for 84% (or 986 million people) of the global urban population increase. While the process of urbanisation is good news for many consumer goods and services companies, as it is traditionally related to the spread of modern lifestyles in emerging countries, over the next 15 years living standards in most emerging metropolises will remain well below the current averages of the developed world.

Forecast Urban Population Growth by Region, 2014-2030


Source: Euromonitor International

Consumer purchasing power to rise, but will it rise enough?

Partly thanks to rapid economic growth, cities of Asia Pacific and MEA are anticipated to lead per capita consumer expenditure growth among the world’s 1,050 metropolises over 2014-2030. In fact, 87% of the world’s top 200 growth cities will be located in Asia Pacific and MEA, featuring an average yearly growth of 5.3% (at constant 2014 prices). This compares favourably to the developed world, which is estimated to see its per capita consumer spending increase at only 1.5% per annum. However, it should be taken into account that metropolises of Asia Pacific and MEA are mostly growing from a very low base, hence regardless of the large percentage surge, their personal spending level will continue to be relatively low.

Consumer Expenditure in Cities of Asia Pacific and MEA in 2030, US$ Per Capita (Constant 2014 Prices and Exchange Rates)


Source: Euromonitor International

So, although Asia Pacific and MEA are forecast to witness unparalleled increases in their urban populations (which ultimately means increasing pools of consumers in cities), their market potential for advanced consumer goods and services is likely to remain limited. Due to the relatively low consumer spending power across cities of Asia Pacific and MEA, spending on food and non-alcoholic beverages is forecast to remain persistently high, ranging from 10% of total consumer expenditure in Abu Dhabi (United Arab Emirates) to 57% in Abuja (Nigeria) as of 2030. To compare, the average for the developed world was 10% in 2014. Highly pronounced necessity spending will leave the majority of urban consumers of Asia Pacific and MEA with relatively little capacity for discretionary spending, including home appliances, electronic items, transport means and leisure activities – goods and services that would potentially make consumer lives more convenient.

Marketing to an expanding pool of urban consumers

As a result, consumer approachability by marketing and sales actions, which are perceived as standard in the developed world, is expected to stay limited in Asia Pacific and MEA. For instance, let’s consider online marketing and e-commerce. Cities generally feature higher connectivity and spread than rural areas. For example, only 42% of households possessed an internet enabled computer in China in 2014, while the proportion peaked at 73% in Beijing in the same year. Similarly, just 8% of households have an internet enabled computer in Nigeria, compared to a 42% share recorded in the country’s capital Abuja.

Regardless of these subnational differences, reaching urban consumers in many cities of Asia Pacific and MEA is anticipated to remain relatively complicated over the coming 15 years. In 2030, only 71 out of 326 cities in Asia Pacific and MEA that are covered by Passport Cities will feature ownership above 80% of households (which is the current average for the developed world). Moreover, the majority of those cities will be located in the developed countries (Japan, South Korea, Taiwan) or relatively rich Middle Eastern countries (Saudi Arabia, UAE, Qatar, Kuwait).

There will, however, be a few cities in Asia Pacific and MEA that are anticipated to more or less reach the average internet spread of the developed world. Those will mostly emerge in Malaysia, Kazakhstan, China and Morocco, which will undoubtedly expand retailing opportunities in those countries. Consumers of the remaining cities of Asia Pacific and MEA might prove to be more accessible by less advanced marketing channels, including TV and mobile phones, which are fairly widespread even by the standards of the developed world.

Possession of Internet Enabled Computer in Cities of Asia Pacific and MEA in 2030, % of Households