NEW YORK: Brands must seek to serve ageing and upper middle class
consumers in advanced markets, alongside less affluent customers in
fast-growth economies, Bain & Company has argued.
In a new report,
the firm predicted "pockets" of financial instability would remain
going forward, but also forecast global GDP should expand by 3.6%
annually in the longer term, hitting $90tr in 2020, some 40% higher than
today.
The fact an extra 1.3bn households will cross the $5,000
per year earnings threshold required to take part in purchase activities
beyond mere subsistence, taking the total to 4.8bn in all, could
contribute $10tr to this process.
China and India are in line to
supply two-thirds of growth in terms of household numbers, although per
capita income in these nations is only set to stand at $9,000 and $3,000
in turn by 2020, versus $58,000 in the US and $53,000 in Japan.
"Emerging
market consumers will seek a different basket of goods than those
purchased by shoppers in advanced markets, due to their lower incomes,"
Bain & Co said. "To target the new consumers effectively,
multinational companies will need a different cost structure."
Indeed,
the US and other Western countries will deliver $6tr in growth by 2020,
measured against $3.5tr combined for China and India, thanks to their
larger proportion of upper middle class residents, and ageing
populations.
In an example of this shift in action, ageing
citizens in geographies like Japan and Western Europe are anticipated to
drive demand for high-tech healthcare services and solutions,
generating $4tr over the forecast period.
More broadly, "soft
innovation" aimed at affluent shoppers, and based on creating
substitutes for "common consumer purchases" - or what Bain called
"everything the same, but nicer" - might yield an additional $5tr.
Recent
offerings fitting this description include Apple's iPad, Twitter, Whole
Foods and H&M, all encouraging original types of consumption, often
at a price or entry premium, and typically "marketing or process
intensive".
The coffee sector, a $135bn category, provides a
further case study, having been revolutionised by higher-end lines like
Starbucks' Via and Nestlé's Nespresso, boosting value sales by 80% from
2000-10, when volumes rose by a more modest 21%.
"Nearly every
company will need to invest in soft innovations and the marketing,
customer service and other soft skills that create them," Bain & Co
said. "If they do not, they will be left behind by their competitors who
do."
Elsewhere, the consultancy identified infrastructure
investments and militarisation as both being worth $1tr by 2020, while
rising commodity costs and spending on alternative energy were valued at
$3tr.
Data sourced from Bain & Co; additional content by Warc staff, 27 September 2011
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