The main reason for the economic growth anticipated is the sheer consuming power of the middle class in emerging market economies. Roughly 2.5 billion people in the emerging markets can spend between 10 and 100 dollars per day. This is five times the amount of the same consumer category in the 34 member countries of the Organization for Economic Cooperation and Development (OECD) and represents tremendous consumer potential – for Swiss exporters, as well. Two thirds of the world's growth will originate from emerging countries in 2030.
Young, Expanding Consumer Group
Whereas the population in the developed world is aging excessively, the emerging markets are characterized by a younger, expanding consumer group. By 2050 there will only be five people under the age of 65 for every four over the age of 65 in Japan. Already, there are only two people under the age of 65 for each person over the age of 65 in Europe. New models are being sought for retirement provision, and flexible working models beyond the retirement age are becoming increasingly important in this context.
Population Growth Calls for Investment in Infrastructure
In the emerging markets, the ratio of the older population to the younger population is still rising slightly, but it is still only half what it was in Europe in the 1960s. Based on Credit Suisse's Global Wealth Report 2014, the middle class is projected to grow by 30 percent in the emerging markets as early as 2019. Three-quarters of this growth is to come from Asia. Population growth in the emerging countries and the anticipated increase in income are supporting global economic growth and will require sizable government investments into infrastructure.
Currency Depreciation and Inflation Affecting Household Income
Along with AC Nielsen, an international market research institute, Credit Suisse conducts an annual survey of consumers in emerging markets, most recently the Emerging Consumer Survey 2015. Last year, approximately 16,000 households were surveyed in eight countries. The data collected is focused on these four areas: financial situation, inflation expectations, development of household income, and planned purchases.
Russia Suffers from Weak Ruble
The financial situation is improving in the households of Indonesia and India as well as in China. At the same time, Russia is suffering from the weakness of the ruble. Consumers are most confident in terms of household income growth in Indonesia and Brazil.
Consumers Focusing on Mobility, Travel, and E-Commerce
Increasing wealth correlates directly to car ownership. Since 2010, China has seen 13 percent annual growth in licensed cars. India and Indonesia will be the next countries to exhibit the same development. Stricter regulations in conjunction with pollution control are affecting the automotive market in China, however. Major potential can be seen in the Asia-Pacific region for manufacturers in the supply sector that are continuously improving energy efficiency as well as safety in the automotive sector.
Consumers Taking Longer and More Frequent Vacations
The rise in mobility is not only visible in the automotive industry. The frequency and length requested for vacation is also on the rise. Growth in this area is a solid 13 percent per year. The desire for vacation and the intention to spend money on it is most pronounced in Mexico and India, whereas China has exhibited a slight decline despite continuing to be the largest market in absolute terms. According to the United Nations World Tourism Organization (UNWTO), China and Southeast Asia will account for approximately 40 percent of the growth in the tourism sector in the years to come.
Strong Growth in Online Segment
Increasing penetration of the internet into the most remote corners of the world, elevated purchasing power among consumers, and an underdeveloped retail infrastructure are driving e commerce demand for products in the emerging markets. The success of the Chinese trading platform Alibaba is perhaps the best known example of this. The Consumer Survey anticipates strong growth in the online segment within the emerging markets. Of the Chinese consumers surveyed, 65 percent made their purchases on the internet. It is projected that overall e-commerce penetration in Asia is likely to soon exceed that of the western world. Whereas goods equivalent to USD 400 billion were sold online in 2013, the Asia-Pacific region is projected to exceed the threshold of USD 1 trillion in 2017. By comparison, experts from market research institute eMarketer anticipate that online sales in the United States will rise from USD 430 billion to USD 660 billion by 2017.
Digitalization Affecting All Sectors
The boom in digital business transactions is affecting all sectors, whether it is due to a lack of infrastructure or to time constraints and convenience. Products that are offered efficiently online and securely transported to the purchaser are increasingly obtaining the growth potential desired in the online channel. E-commerce also offers a relatively cost-effective entry into a new market that should not be overlooked when competing for consumers in emerging market economies.