“Rumors of my death have been greatly exaggerated,” Mark Twain once wrote, and I feel something along the same lines when I hear, yet again, that the emerging market consumer is finished. The fact is emerging market consumers are very much alive.
Even a cursory read of the world’s press, or casual Google search makes this abundantly clear, to say nothing of anecdotal evidence and the earnings reports of companies benefitting from robust consumer spending in emerging markets.
Let’s look at a few factoids regarding one of the two largest emerging markets: India.
In India, consumer spending is growing by more than 20% a year, according to the Economist Intelligence Unit (EIU),1 and the Boston Consulting Group predicts gross consumer spending there will rise from under $1.5 trillion in 2015 to over $3.5 trillion by 2020.2 To put that in perspective, U.S. consumer spending ranges between $11 trillion and $12 trillion a year.
Looking further out, India is expected to climb from the world’s 12th largest consumption market to the fifth largest in just 10 years, McKinsey Global Institute notes.3 The size of this opportunity explains why many companies, including home appliance maker Bosch & Siemens, are planning to manufacture more products in India.4 The nation’s vast potential for rapid economic growth was also a compelling draw for Johnson Controls, a U.S. maker of car batteries and heating and ventilation equipment, which recently formed a joint venture with Japanese manufacturer Hitachi to make air conditioners there.5
Mobile Technology Will Drive Consumer Spending in India
According to Cisco, India is already the second-largest smartphone market in the world.6 As with everywhere else, the ability to buy products and services with one’s phone encourages even more buying, period. In nearly every product you can think of, online purchasing is a driver of demand.
Indians’ health consciousness―or perhaps just worry over their health―is even showing up in spending on health insurance, another industry benefitting from rising incomes. Worries about health are understandable, especially for those who live in India’s major cities, whose air quality is among the worst in the world, according to the World Health Organization.9 The pollution is unlikely to abate anytime soon, as the passenger vehicle market is growing faster than any other sizeable market in the world.10 And speaking of cars, we could turn to the world’s largest car market―also the world’s largest emerging market―China. But that discussion can wait for another day.11
For now, suffice it to say that the facts show that the rumors of the demise of the emerging market consumer are greatly exaggerated.
This blog was originally published on May 17, 2016.
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