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Global consumer groups to watch
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The Urban World Is Diverging.
And So Are Consumers
Nine groups of consumers are set to generate three-fourths
of global urban consumption growth from 2015-30
WORKING-AGE CONSUMERS
IN CHINA
BY JAANA REMES AND JONATHAN WOETZEL
%
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ISSUE NO. 3
higher than that of younger consumers.
Companies that continue to focus their
efforts on what they perceive to be the
glamorous youth market are going to be
out of step with the times. No company
can afford to let out-of-date stereotypes
about elderly consumers get in the way
of today’s biggest growth opportunity.
Spending by the over 60s is not only
about health care, although that is
naturally an important category. In the
United States, this group will contribute
more than 40 percent of consumption
growth in housing, transport, and
entertainment. People over 50 bought
more than 60 percent of the new cars sold
in the United States in 2010, up from less
than 40 percent in 2001, according to one
study. Meanwhile, another important point
is that the elderly increasingly want to age
in their own homes. A decade ago, US
citizens aged 55 and older accounted for
less than one-third of all US spending on
home improvement. By 2011, this share
was more than 45 percent.
This generation of elderly is very
different from their predecessors—these
are baby boomers who have repeatedly
broken the mould in terms of their
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SUMMER 2017
The urbanization that has been
responsible for much of the growth
within developed-world cities is slowing,
creating a divergence in the urban world.
This means executives need to identify
and understand the target consumer
groups who are still spending robustly—
who is buying, where they live, and what
they want to purchase.
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EMERGING MARKETS BUSINESS
The first group is the 60-plus age group in
developed economies. This group is set to
be the most important consumer growth
market over the next 15 years, generating
more than one-fifth of global consumption
growth. The number of people who fall
into this category is set to grow by more
than one-third to stand at 222 million in
2030, and their per capita consumption is
THE OVER 60S IN
DEVELOPED COUNTRIES
McKinsey Global Institute (MGI) has
identified nine groups of key urban
consumers to watch, which are together
set to generate three-quarters of global
urban consumption growth from 2015
to 2030. Three of these have the scale
and purchasing power to shape global
consumption, contributing about half
of urban consumption growth over
the next 15 years.
Executives need
to build deep
understanding
of target consumer
groups who are still
spending robustly.
WHO ARE THE KEY CONSUMERS
TO WATCH?
AT A GLANCE
and whose population growth is slowing,
the easy days of urban growth are over.
Population declined in six percent of the
world’s largest cities between 2000 and
2015—most of them in developed
economies. In Japan, 40 percent of large
cities, in the Western Europe 33 percent,
and in US cities 17 percent are already
experiencing declining populations.
So the urban world is diverging.
Not every city will be a growth market
and the characteristics of urban markets
will vary enormously. Executives need
to build deep understanding of target
consumer groups who are still spending
robustly—who is buying, where they
live, and what they want to purchase.
ities are crucial for the
growth and prosperity of
the world. Large cities
generate about 75 percent
of global GDP today and
will fuel 86 percent of worldwide GDP
growth between 2015 and 2030. The
economic importance of cities is evident
in virtually every region of the world.
Many metropolitan economies are already
larger than those of small nations,
and others are expanding at much
faster speed. Say you are a producer
or distributor of laundry-care products:
over the next ten years, the increase
in sales for these products in the single
city of São Paulo is poised to exceed the
expansion of all of the sales in either
France or Malaysia. Cities really matter
when executives set strategy.
Urbanization, which has been such
a powerful enabler of growth, will
continue to power emerging economies
where urban markets are expanding very
rapidly. But in developed regions of the
world that are already highly urbanized
C
The architecture of the buildings
complies with feng shui principles,
cultural activities include tai chi and
calligraphy, and staff members speak
Chinese languages as well as English.
In another example, Escapees Care
Center in Livingston, Texas, is dedicated
to retirees who want to live in their
recreational vehicles.
All other groups
Retiring and elderly
in the developed world
China
North America (15-59 years)
China (60+ years)
Latin America (15-59 years)
South Asia (15-59 years)
Southeast Asia (15-59 years)
Western Europe (15-59 years)
Northeast Asia (15-59 years)
SOURCE: McKinsey Global Institute analysis
attitudes and behavior. Unlike previous
generations, they are, for instance,
much more tech savvy. The smartphone
penetration rate in the United States is
only about 45 percent for the elderly but
is 80 percent among 35- to 44-year-olds.
As these consumers age, the over-60s of
2030 are likely to be quite comfortable
with technology and using it at the same
rate as younger consumers—although
consumer technology companies might
consider whether it is necessary to have
quite so many buttons on remotes.
Although their numbers are rising, this
60-plus age group is not a homogenous
market. For one thing, income inequality
in this group is increasing. Many of these
individuals are wealthy, but others have
not saved sufficiently for retirement. In
financial services, high-net-worth elderly
consumers are likely to demand estate
and legacy planning, while those with less
wealth may need to monetize their homes
by downsizing, renting out rooms,
or taking out reverse mortgages.
As consumers either trade up or trade
down, companies whose portfolios
consist primarily of mid-tier products
might have little to offer. They may have
to stretch their brands upward or
downward, or in both directions.
But with variety comes opportunity.
The large numbers of over 60s means
that even niche markets will be sizable
and attractive ones to go for. For instance,
elderly care and housing is increasingly
tailored to particular demands. Aegis
Gardens, a retirement community in
Fremont, California, is geared specifically
toward the needs of Asian seniors.
The second group of consumers to watch
are people of working age living in China’s
cities. Their numbers are set to rise by
more than one million to over 600 million
in just the next 15 years, and their per
capita incomes are set to more than
double over that period. By 2030, they will
be spending 12 US cents of every US$1
spent in cities worldwide. But it’s not just
their numbers and increasing spending
power that make this group such an
exciting market prospect—it’s their
attitudes. This is a generation that,
by 2030, will have lived all their lives
in post-reform China, and have very
different views from their parents.
They are willing to save less and spend
more—indeed, a 2016 McKinsey survey
of more than 22,000 consumers in 26
countries found that these individuals are
the most willing to spend rather than save
of any group of consumers in the world.
They will fuel China’s transition to
a consumer-led economy and could
shape global consumer markets just as
western baby boomers did in their prime.
Their openness to trying new and different
experiences and rising purchasing
power suggest that the products and
services they buy may become features
of the consumer markets throughout
the world—and fuel global economic
growth. The world economy needs them,
and no consumer-facing company can
afford to ignore them.
Urban incomes in China are now
hitting thresholds at which spending
on both goods and services takes off
rapidly. For instance, spending on dining
out in China starts to gather pace when
a household’s annual income hits around
US$3,000; by US$9,000 such spending is
on a steep upward trajectory. As incomes
rise, China’s annual household spending
on dining out is set to more than double.
Even those still on relatively low
incomes are investing heavily in the next »
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