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.
Thanks to a burgeoning middle class and rising disposable incomes, consumer spending on discretionary items – that is, all items except food, non-alcoholic beverages and housing – has been rising in the BRIC countries of Brazil, Russia, India and China. This overall upward trend in discretionary spending promises many an opportunity for international consumer goods businesses. A closer examination of the BRIC consumers, however, reveals interesting differences in the saving and spending behaviours across the BRIC. For example, Chinese consumers have a strong inclination to delay immediate consumption in favour of saving for the future whilst Brazilians place a greater importance on living in the present and consistently have a higher proportion of discretionary spending in total consumer expenditure. Insights into the differences in discretionary spending by BRIC consumers are important in helping companies develop suitable products and tailor their business strategies to specific markets for long-term success.
Did You Know?
In 2020, total consumer expenditure in the BRIC countries will reach US$10.3 billion (in constant 2012 prices, fixed 2012 exchange rates), up by 52.8% in real terms over 2013. In 2020, the BRIC bloc will account for 40.4% of the world’s population, but only 19.7% of the global consumer market, suggesting that disposable incomes will remain relatively low by international standards but at the same time there are still significant untapped potential for consumer goods businesses;
China will record the highest real growth in consumer expenditure, at 67.6% over the 2013-2020 period, reflecting the country’s shift from an export-dependent economy to a consumption-driven one. Nevertheless, despite rising disposable incomes and spending, China will still have the lowest proportion of discretionary spending in total consumer expenditure – at 59.3% in 2020, compared to 57.1% in 2013. This partly reflects the strong inclination by Chinese consumers to delay immediate consumption in favour of saving for the future due to the inadequate provision of social welfare, but also the high costs of living in China, especially in major cities;
By contrast, Brazilian consumers place a great importance on living in the moment, as demonstrated by the consistently high proportion of discretionary spending in total consumer expenditure in Brazil. Despite slowing economic growth since the 2008-2009 global financial crisis, consumer expenditure in Brazil has continued to grow robustly, driven by a consumer credit boom;
Russia will be the only country among the BRICs, whose discretionary spending as a proportion of consumer expenditure in 2020 (at 60.7%) will be lower than the proportion recorded in 2007 prior to the 2008-2009 global financial crisis (62.5%). Consumer confidence in Russia has not fully recovered from the crisis. Russia also has the smallest consumer market in total consumer expenditure terms of all the BRIC countries and will likely to remain so in the period through to 2020;
India lags behind other BRIC countries with the lowest per capita consumer expenditure, at US$872.8 in 2012 compared to US$2,196.6 in China – the country with the second lowest level of per capita consumer expenditure. Nevertheless, Indian consumers devoted 56.5% of total consumer expenditure to discretionary spending in 2012, a proportion that was comparable to China in the same year. In 2020, Euromonitor International forecasts that discretionary spending by Indian consumers will reach 60.5% of total consumer expenditure, slightly higher than 59.5% expected in China.