Understanding long-term trends in global consumer purchasing power

Seismic shifts are altering the landscape of consumer purchasing power. On the one hand, there is the shift to emerging markets. Spending power in the BRIC countries is on the rise, due to a rising middle class and large populations. In fact, spending power in China, India and Russia is predicted to treble by 2018, and Brazil is not far behind, according to a recent report by Business Monitor International (BMI).

At the same time, many Western consumers are curbing their spending, increasing savings, trading down to private label brands, eschewing conspicuous and flashy purchases, and eating at home more often. Many experts believe that a lasting change has taken place and expect at least elements of this caution to continue, with consumers being more diligent and careful in their purchases.

In addition, the sources of consumer spending are in the process of shifting in the U.S. Baby Boomers will gradually cede their position as consumption leaders to Generation X (ages 29-45), in its prime spending years, and Generation Y (ages 10-28), which has been least hit by the recession and is considered less likely to continue recession-style shopping behaviour.

With these shifts in mind, retail and consumer goods companies are:

  • Ensuring that product offerings in emerging markets are tailored specifically for consumers' lives, needs and pocketbooks
  • Reassessing techniques for market analysis so that companies can assess which attitude and behavior shifts are permanent, and which are not
  • Focusing on true rather than perceived value – food safety and quality, for example.