New Delhi: A report from McKinsey Global Institute indicates a notable transition in global consumption patterns, moving away from North America and Western Europe towards India and emerging Asia.
This shift underscores the increasing significance of these regions in the global economy, fueled by rising income levels, demographic changes, and shifting consumer preferences.
The report states, "Consumption pools are shifting from North America and Western Europe to emerging Asia and India.... Developing countries will provide a growing share of global labor supply and consumption, making their productivity and prosperity vital for global growth."
By 2050, India and emerging Asia are expected to represent 30 percent of global consumption at purchasing-power parity (PPP), a considerable rise from just 12 percent in 1997. In contrast, Advanced Asia, North America, and Western Europe are anticipated to account for only 30 percent of global consumption, a significant drop from their combined 60 percent share in 1997.
This transition carries significant implications for businesses around the world. Companies in both developed and developing regions will need to adjust to this changing market landscape.
As income levels and consumption behaviors evolve in later-wave regions like India and emerging Asia, businesses must realign their strategies to meet the distinct tastes and preferences of these markets.
Developing and scaling products that cater to the specific needs of these regions will be essential for seizing growth opportunities.
In the discussion of demographic changes, "first wave" and "later wave" regions denote the order in which various countries or areas undergo demographic transitions, such as an increase in elderly populations or a decrease in the working-age demographic.
The report emphasized the influence of demographics on future consumption trends. By the year 2050, it is projected that seniors will represent 25% of global consumption, a figure that has doubled since 1997.
At the same time, developing nations are expected to play a crucial role not only in the global labor market but also as significant contributors to consumption growth. The economic prosperity and productivity of these areas will be essential for maintaining global economic expansion.
Nevertheless, the report warned that entering these markets could be challenging. Many later-wave countries, such as India, face intricate legal and governance issues and are susceptible to conflicts, complicating market entry and growth.
Moreover, affordability will be a vital consideration as companies aim to reach a broader consumer demographic in these regions.
Over the next quarter-century, nations in later-wave regions are anticipated to account for over half of global consumption, driven by their rapidly expanding youth populations and rising income levels.
This transition underscores the necessity for businesses to innovate and adapt in order to succeed in an evolving global marketplace.
