A new report from a global management consultancy finds that consumers in some of the world’s biggest emerging markets remain optimistic, and the economic slowdown does not appear to have affected them like it has consumers in richer economies.
Researchers from the Boston Consulting Group (BCG) found that while in the short term, consumers in Brazil, China, and India plan to tighten their belts, their longer term outlook is more bullish.
The report Keeping an Eye on the Prize: Why Emerging-Market Consumers Remain Bullish, is based on BCG’s 2013 Global Consumer Sentiment Survey, which gathers data from nearly 7,000 consumers in Brazil, China and India.
It finds that despite recent economic challenges causing consumers in Brazil, China and India to rein in their spending for now, consumer spending in these rapidly developing economies (RDEs) is growing faster than in more developed economies.
Consumers in RDEs are “trading up”
Plus, the survey highlights another continuing trend: consumers in RDEs are “trading up”. They are increasingly purchasing brands with higher price tags, especially established brands in fresh foods and home appliances.
The power of brands is strong in emerging markets, says the report, which finds that 70% of consumers surveyed in China and 67% of those in India said “brand name and reputation” is the main reason for trading up.
The report authors analyzed survey data from Brazil, China, and India, and compared it to responses from consumers also surveyed in eight African countries and nine developed economies.
They found that brand engagement is even higher in Africa than in the RDEs. Nearly 80% of consumers surveyed in Kenya, Nigeria and South Africa cited “brand name and reputation” as the main reason for trading up.
Stefano Niavas, a BCG partner based in South Africa says:
“Many Africans are in the market for certain kinds of products for the first time. So they are likely to prefer known brands that they can trust.”
The survey also found that consumers in RDEs are starting to see brands as ways of making personal statements. In Brazil, 40% of those surveyed (nearly double the proportion who said the same in developed economies), agreed with the statement: “brands say something about who I am, my values, and where I fit in.”
Jeff Walters, BCG partner and a co-author of the report, says:
“RDEs will continue to offer some of the world’s greatest growth opportunities for companies selling consumer goods and services across a broad range of categories.”
“Every year there are more things I want to buy”
Abheek Singhi, BCG partner and head of the firm’s Consumer and Retail practice in Asia-Pacific, adds:
“Consumers in emerging markets are accustomed to volatility. So as rising incomes push millions more households into the middle and affluent classes, companies should expect growing demand for everything from cars and appliances to financial services.”
The report says 53% of consumers surveyed in China and 62% of those in Brazil (about the same proportions as last year) agreed with the statement: “it seems like every year, there are more things I want to buy.” In India, the percentage surveyed who agreed with this sentiment was 66%, which is 9% more than last year.
BCG partner Olavo Cunha, who leads the firm’s Consumer Goods practice in Brazil, notes:
“While they should of course plan for fluctuations in demand, companies should continue to invest aggressively in their brands and organizations on the ground in order to win in the long term.”