It’s shopping time. Many people, especially in the northern hemisphere, participated in Black Friday and Cyber ââMonday in preparation for Christmas. For many, the 2021 shopping experience also reflects a return to normalcy in a time of endless waves of COVID-19 infections and lockdowns.
Many department stores are located in cities, reflecting two megatrends that are reshaping the global economy: the rise of the global consumer class and urbanization. Both megatrends have seen tipping points during this century. In 2008, the world became predominantly urban, and in 2019, the World Data Lab predicted that half the world would belong to the middle class or the richest. By the end of 2021, there will be 4 billion people in the global consumer class and, absent another major economic crisis, the global consumer class will reach 5.2 billion people by the end of 2021. 2030.
Urbanization will also continue steadily throughout this decade. People are moving from villages to cities to find better education, health care and jobs. In addition, in emerging markets, old villages contribute to urbanization as they develop rapidly to the point of representing a peri-urban segment. These are often the new suburbs of the world’s mega-cities such as Jakarta, Mexico City, Mumbai, SÃ£o Paulo or Lagos.
Urban areas are more prosperous than rural areas. Proximity generates innovation and allows economies of scale. In “Triumph of the City”, Edward Glaeser showed that cities are healthier, richer and better for the environment because a higher population density makes it possible to produce new goods and services on a large scale and therefore at a lower cost. for everyone. This is also why most of the world’s consumers now live in cities.
To estimate the urban consumer class, we use the UN’s urbanization projections as well as education and income measures and examine how personal spending depends on each of these factors, particularly urbanization. Projections for India are derived from survey microdata for the country.
The World Data Lab predicts that of the current 3.8 billion consumers, nearly 3.2 billion (80%) live in urban areas (see Table 1).
However, the distribution is uneven across countries, as many emerging markets are still predominantly rural. In OECD countries, almost everyone is part of the consumer class. As OECD economies are highly urbanized, around 80% of the OECD consumer class is urban. The same is true for emerging markets and developing countries, but for different reasons. The poorest countries are still predominantly rural, but only a very small portion of rural people are in the consumer class. This means that among the poorest economies, around 80 percent of consumers also live in urban areas. In Asia, where urbanization is advancing rapidly, the urban consumer class dominates with 1.7 billion people, representing about 54% of the world class of urban consumers. The Asian consumer class is not only growing in China and India. There are also several emerging markets that are under the radar, particularly Indonesia, Bangladesh, Pakistan, the Philippines, and Vietnam.
But India remains the most dynamic market for urban consumers as it remains relatively rural even though it is urbanizing rapidly. In India, the two megatrends converge at scale. Today India has around 208 million urban consumers, which will grow to around 374 million. This represents an annual growth of 6 percent. The growth of India’s urban consumer class is six times greater than the growth of the world’s population, almost double the growth of the global consumer class, and even considerably higher than the average growth of the global consumer class. urban consumers and the growing Asian consumer class (see Figure 1).
Many of us will enjoy the holiday season of the year as we look back on two difficult years dominated by the COVID-19 pandemic. Despite the massive economic impact of COVID-19 in 2020, its impact has only been temporary. The fundamental forces of global megatrends will shape this decade and they will be most visible in Asia.
Source: World Economic Forum