Urban world: The
global consumers to watch
Dramatic
demographic shifts are transforming the world’s consumer landscape. Our new
research finds just three groups of consumers are set to generate half of
global urban consumption growth from 2015 to 2030.
Until the turn of this
century, population growth
generated more than half of all global consumption. But between 2015 and 2030,
three-quarters of global consumption growth will be driven by individuals
spending more. This shift has profound implications for companies. What’s now
important are emerging demographics: the latest report from the McKinsey
Global Institute (MGI) finds that nine groups will generate three-quarters of
global urban consumption growth to 2030, and just three of these will generate
half of consumption growth and have the power to reshape global consumer
markets over the next 15 years.
1.
The retiring and elderly in developed economies
This group will grow by more than one-third in number,
from 164 million in 2015 to 222 million in 2030. It will generate 51 percent of
urban consumption growth in developed countries and 19 percent of global urban
consumption growth. To give an idea of its dominance, the 60-plus age group
will account for 60 percent of total urban consumption growth in Western Europe
and Northeast Asia (Japan and South Korea). A closer look at this cohort
reveals several findings:
·
These
consumers spend more per head than younger people, largely because of heavy
spending on healthcare. But their consumption is about more than healthcare. In
the United States, this group will contribute more than 40 percent of
consumption growth in housing, transport, and entertainment.
·
By
2030, we expect to see a wider variation in purchasing power among the elderly
than we see today. While many in the 60-plus age group are wealthy, others have
not saved sufficiently to see them through retirement. Income inequality in the
United States among those aged 65 and older continues to rise.
·
People
over 50 bought nearly two-thirds of the new cars sold in the United States in
2011.
·
The
elderly increasingly want to “age in place.” A decade ago, those aged 55 and
older accounted for less than one-third of all US spending on home improvement.
By 2011, this share was more than 45 percent.
2.
China’s working-age population
By 2030, this group will expand by 20 percent—an
additional 100 million people—and per capita consumption is expected to more
than double. By 2030, China’s working-age population will account for 12 cents
of every dollar spent in cities worldwide. This group has the potential to
reshape global consumption just as the West’s baby boomers, the richest
generation in history, did in their prime years. Some highlights from MGI’s
research:
·
China
is expected to spend 12.5 percent of all consumption growth on education for
those under 30—higher than any other country apart from Sweden (12.6 percent).
·
The
2016 McKinsey Global Sentiment Survey of more than 22,000 consumers finds that
nearly 30 percent of these Chinese consumers are willing to pay more for new
and innovative household products—double the share of their counterparts in
North America and Western Europe.1
·
These
individuals are more optimistic about their financial future and more willing
to spend a greater share of their disposable income than previous generations.
3.
North America’s working-age population
The numbers and per capita consumption of this group
will grow modestly, by 7 percent and 24 percent, respectively, from 2015 to
2030. And MGI research finds that many younger consumers are under income
pressure, are poorer than the previous generation, and are more cost conscious.
Some notable aspects of this group:
·
Today,
the median net worth of the top 20 percent of young-adult households is eight
times that of the other 80 percent; in 2000, that multiple was four times.
·
This
group is becoming more ethnically diverse. In the United States, for instance,
the share of Hispanic young adults (aged 15 to 34) tripled from 7 percent in
1980 to 21 percent in 2012.
·
Compared
with older cohorts, young adults are 10 to 20 percentage points more likely to
consider and use sharing-economy services for everything from accommodation to
car rental to furnishings.
MGI has developed a framework that incorporates all the
factors that influence consumption. Tracking consumer attitudes and behavior is
not sufficient if companies are going to capture key consumer markets. They
need to understand the core drivers of consumption such as income and age,
characteristics such as ethnic mix and education, and the timing of key decisions
such as getting married, having children, and buying a house.
We see three fundamental implications of this research
for corporate strategy:
·
Footprint matters. With consumption increasingly dependent
on per capita spending, footprint matters. Companies also need to continually
adapt to evolving demographics and consumption patterns of cities—and even in
neighborhoods within cities.
·
Tailor products. Companies with the skills to develop
tailored products and services to meet the needs of an increasingly complex
consumer landscape can prosper. The variety of consumers that companies can
serve has arguably never been more rich and diverse, both across regions and
within them. In many markets, companies may need to strengthen their skills in
managing overlapping products and brands.
·
Look closely at services. The growing share of
services in overall consumption will, directly or indirectly, have an impact on
all consumer-facing businesses. Services are growing faster than overall
consumption as consumers spend a rising share of their income on, for example,
travel and healthcare in aging developed markets and education in China’s
cities. At the same time, many traditional products incorporate complementary
digital or physical services, and some products are being replaced by services.
About the Authors
Richard
Dobbs, James Manyika, and Jonathan
Woetzel are directors of the McKinsey Global Institute, where Jaana
Remes is a principal; Jesko Perrey is a director in
the Düsseldorf office; Greg Kelly is a director in the Atlanta
office;Kanaka Pattabiraman is a consultant in the Silicon Valley
office; and Hemant Sharma is a consultant in the San Francisco
office.Article Actions
http://www.mckinsey.com/global-themes/urbanization/urban-world-the-global-consumers-to-watch?cid=other-eml-alt-mgi-mck-oth-1603
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