Wherever they are… people like buying stuff – the things that make life more comfortable, more fun, more interesting, and more pleasurable.
All over the world – especially in emerging markets in Asia – people are earning more money. That means more disposable income… continually improvements in living conditions… and increased consumer spending.
And the Asian consumer boom – the appetite for stuff – is just getting started…
The gap between developed markets and emerging markets is closing
A report by professional services firm PricewaterhouseCoopers (PwC) shows the incredible growth happening in Asia right now.
The chart below shows the forecast change in GDP per capita (at purchasing power parity – which adjusts for price level differences across countries) between 2016 to 2050 for the G7 (the Group of Seven, which is a group of major developed economies) and the E7 (a group of big emerging economies).
Average GDP per capita in developed markets will still be a lot higher than in emerging markets in 2050. But the gap is closing fast.
In 2016, U.S. GDP per capita was around four times the size of China’s and nine times the size of India’s. By 2050, U.S. GDP is expected to only be around double China’s, and just three times that of India.
I’ve talked a lot about how China is seeing a massive middle-class boom. Back in 2000, just 4 percent of China’s urban population was considered middle class. By 2022, that figure will be a massive 76 percent. That means that there are expected to be 550 million middle-class people in China. That would make China’s middle class alone big enough to be the third-most populous country in the world.
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And India isn’t far behind. According to the World Economic Forum, India’s middle class could grow larger than China’s by 2027.
Think tank Brookings Institute suggests that by 2030, two-thirds of the global middle class will be living in Asia.
The giant Asian consumer boom
All of these new middle-class consumers will spend more money – a lot more.
Take a look at the chart from global investment firm KKR below.
The graph shows that middle-class consumption in developed countries has peaked. Average annual per capita spending is at around US$19,000, which is a lot. But growth is flat-lining at an annual growth rate of between 0.5 and 1 percent.
Meanwhile, average annual per capita spending in emerging markets, at US$8,500, is much lower. There, though, consumption is growing at 6 to 10 percent a year. So consumption in emerging markets is growing three times faster than developed markets.
This difference in growth has enormous implications. Just consider this: In 2022, the global middle class could be consuming around US$10 trillion more than in 2016… and US$8 trillion of that new spending will be in Asia.
Chinese consumption alone is set to rise by 55 percent – to reach US$6.5 trillion – by 2020. That’s an increase of US$2.3 trillion – which is like adding a new consumer market 1.3 times larger than the U.K.’s current consumer market. And Indian consumption is set to grow to US$4 trillion by 2025… which would make India the third-largest consumer market in absolute terms in the world – just behind the U.S. and China.
By 2030, Asia as a whole will account for nearly 60 percent of global middle-class consumption. To put that in perspective: In 2010, North America and Europe accounted for about 60 percent of middle-class consumption.
But unlike their developed counterparts, emerging market consumers plan on doing a lot of their spending on mobile devices.
The mobile revolution in Asia
Just as millions of people in the U.S. order the latest bestseller on Amazon… and millions more in China get the next big designer brand on Alibaba… more and more people in Asia are turning to online retail. But not on traditional desktop computers… on their mobile phones.
Mobile phone usage grew at a compound annual growth rate (CAGR) of almost 50 percent between 2013 and 2015 in India.
And internet use on mobile devices in countries like India, Indonesia, Thailand and China (at between 60 and 80 percent of total online traffic) is much higher than in developed countries like the U.S. and UK (where it is just over 40 percent), according to a Kleiner Perkins internet trends survey.
And that’s creating huge opportunities for companies in the mobile payments market. KKR estimates that mobile payments in Southeast Asia will grow from less than US$15 billion a year today to US$32 billion a year by 2021. Mobile payments are growing rapidly in emerging markets as more and more people have access to mobile phones and the internet.
China has been at the forefront of the mobile payment revolution in Asia. Companies like Alibaba, Tencent and JD.com have created a booming mobile payment market… one that has risen from US$15 billion in 2011 to US$9 trillion today, according to iResearch Consulting Group. But we’re also seeing strong companies emerge in India, Indonesia and Vietnam.
So if the emerging markets e-commerce sector isn’t on your radar yet, it should be.
Publisher, Stansberry Churchouse Research