Top 3 Drivers of Consumer Expenditure in Emerging and Developing Economies
With emerging and developing countries accounting for nearly 90.0% of the global population and in the context of sluggish demand growth in developed markets, insight into what drives and shapes demand in emerging markets is vital in helping businesses grow and succeed. Euromonitor International forecasts that between 2015 and 2030, real consumer spending growth in emerging and developing markets will be three times faster than in developed markets. The top three drivers of this long-term gain will be population growth, rapid urbanisation and rising incomes.
Population and Consumer Expenditure in Emerging and Developing Countries: 2009-2030
Source: Euromonitor International from national statistics/Eurostat/UN/OECD
Note: Data for 2015-2030 are forecast; Consumer expenditure data are in constant 2014 prices, fixed exchange rates.
1. Young and growing population
- Between 2015 and 2030, the population of emerging and developing countries is set to expand by 17.4%, over three times faster than the rate of developed countries. This ebullient expansion will add another 1.1 billion consumers to emerging and developing markets during the period of 2015-2030;
- By 2030, emerging and developing countries will continue to have a young age profile, with half of the population expected to be below 32.5 years of age. Businesses can tap into the potential of this young and fast-growing population, which will define and drive consumer expenditure on a wide range of categories, from transport and clothing and footwear to housing, education and communications;
- Although the population aged below 30 across emerging and developing economies will rise by 5.0% between 2015 and 2030, businesses should note that in some key markets including Brazil, China and Indonesia the population aged below 30 is declining. In these markets, consumer spending on health goods and medical services is set to grow robustly due to population ageing.
2. Rapid urbanisation
- Emerging market economies are undergoing rapid urbanisation, with Sub-Saharan Africa set to be the region with the fastest urbanisation rate globally. Between 2015 and 2030, the urban population will expand by 70.1% in Sub-Saharan Africa, compared to 34.7% in Asia Pacific, 17.7% in Latin America and 3.2% in Eastern Europe;
- Urban consumers generally enjoy higher incomes than their rural counterparts because urban jobs tend to be more productive and better paid than rural agricultural jobs, while urbanisation makes it easier for companies to reach consumers;
- Urbanisation also gives rise to new social and demographic trends – such as falling number of children, smaller household sizes, rising number of single-person households and apartment dwelling – that contribute to driving consumer demand and create new business opportunities.
3. Rising incomes
- Consumers across emerging markets are enjoying rising disposable incomes, which leads to middle class expansion, rising consumer expectations and greater gains in consumer expenditure. The rise of the middle class in China, India, Brazil and other major emerging markets is driving consumer expenditure as well as changing consumption patterns towards more discretionary spending and a greater focus on status-related items. Businesses previously target mainly low-income consumers will now need to move up the value chain to meet the expectations of increasingly demanding and sophisticated consumers in emerging markets;
- It is important to note that women’s disposable incomes are also rising markedly thanks to improved access to education for girls and greater labour force participation by women. Between 2009 and 2014, the average annual disposable income for women in the BRIC countries rose by 37.8% in real terms, compared to only 1.1% in developed countries. As women often make most of purchasing decisions within the household, women’s rising disposable incomes will create huge opportunities and businesses will therefore need to pay closer attention to the female consumer in emerging markets.
Want to learn more? Download the Top 10 Global Consumer Trends for 2015.