Urbanization, Digitalization, Work-Life Integration Weighing on Worldwide Economy and Consumers
Fifty-five percent of the global population will live in urban areas this year and the median age will reach 30, according to Euromonitor International research.
Political and economic instability are a given for the year ahead, but urbanization, digitalization, work-life integration, risk of increased trade barriers and the growing importance of the bottom of the pyramid are some of the other factors expected to affect citizens and businesses around the world, according to a new Euromonitor International report.
Released Thursday, “Global Economies and Consumers in 2017” is filled with statistics, predictions and information. In 2017, researchers expect consumer expenditure to rise by 2.3 percent in real terms, with the average U.S. household saving $3,609 and the U.S. still accounting for nearly one in three dollars spent globally.
Despite a slowing economy, Chinese consumers will continue to see one of the largest increases in spending, and expenditure in emerging economies overall will grow by more than twice that of developed markets, according to the report. Abjua, Nigeria and Doha, Qatar, for example, are expected to grow by 4 percent and 3 percent, respectively.
The report referenced President Trump’s pledge to invest $1 trillion in infrastructure in the next 10 years, noting that is broadly believed to include airports, highways, bridges and pipelines.
“Whether this plan can be implemented depends on Congressional support, but Trump intends to involve the private sector by enticing them with a tax break,” according to the research.
Euromonitor analysts recommended that luxury goods businesses stay centered on key developed cities. While Buenos Aires is on track to add 30,000 households with an income above $100,000, New York and San Francisco will add more than 100,000 high-income households.
The Middle East will still have the most affluent hubs in the world, with Dubai leading the charge with an upswing in high-income households. This year there will be nearly 101 million households with more than $100,000 in annual income and 74 percent will live in 1,150 cities.
Euromonitor International estimated that $1.3 trillion in goods (9.6 percent of all goods sold) will be purchased online and apparel and footwear will be the driving force in terms of absolute value sales with about $31.4 billion expected to be added.
As shoppers become more at ease about the melding of brick-and-mortar and digital, they are getting used to click-and-collect, store pick-ups and store returns, researchers noted. Given that, Asia Pacific’s “rising middle-class and mobile-first mind-set is a key region driving this category’s digital expansion,” according to the report. Interestingly, online sales account for a small percentage of total sales in many Asian nations, and about one-fifth of apparel and footwear sales in China and South Korea are made via digital channels.
In emerging and developing markets, real consumer spending growth is expected to increase this year by 3.8 percent (a 0.5 percent uptick compared to last year). The overall outlook is for continuing weak growth following six consecutive years of deceleration. While Asia, especially China, India and the Association of Southeast Asian Nations, will be the main drivers of growth, prospects elsewhere will be uneven due to widely diverging recoveries and persistently low commodity prices, the report said.
And city life is only about to get more crowded. Fifty-five percent of the global population will live in urban areas this year and the median age will reach 30. The global urban population will hit 4.1 billion this year compared to 3.3 billion in 2007. The shift to more compact city dwellings should create new consumption trends and bolster demand for new services. Urbanization should also fortify economic growth as more diverse businesses are attracted to cities.
The report highlighted how the bottom of the pyramid (BOP) is gaining importance with companies facing a “subdued growth outlook” with the five top markets being India, Nigeria, China, Indonesia and South Africa. Focusing more on the BOP also helps to eradicate poverty, reduce income inequality and improve the business environment. But the squeezed middle class is not to be overlooked or besieged with discounted goods, as was the norm after the global financial crisis. Developing quality products at a fair price is a better strategy, according to analysts.