February 8, 2017
Louise Keely, Board Member, Brian Anderson, Associate Program Director, and Ben Cheng, Senior Methodologist
When consumer-facing companies look around the world for growth opportunities, they tend to think about consumption growth driven by an income-based middle class. In particular, the standard approach to maximizing potential sales has been to focus on products and services designed to meet the needs and tastes of the middle class. However, our research suggests that this approach is misguided. By looking at the drivers of global consumption growth in a new way, we have identified likely purchasers across income groups and across economies.
We call these consumers Connected Spenders. They are connected because they have internet access and use the internet to research purchases and to shop. But Connected Spenders are not merely online shoppers. They are digitally savvy consumers who have enough income for discretionary purchases, are avid shoppers who punch above their income class in discretionary spending, prefer premium products, and are on the cutting edge of consuming trends. Globally, the Connected Spender population rivals that of the global middle class, but the Connected Spender cohort is growing faster than the middle class and spending more: by 2025, these consumers will account for half of global consumption. For marketers coping with a sluggish global economic environment and middle-class malaise, tapping into the Connected Spenders can help generate healthy growth.
Among the report’s key findings:
- For companies serving consumers in the modern, connected economy, income-based approaches to growth, such as seeking growth opportunities from the middle class, are insufficient. Such approaches ignore two important considerations: consumer mind-set and engagement, and access to goods and services.
- To address these shortcomings, we have developed a new approach to identify the consumers able and ready to be higher spenders. We call them Connected Spenders, and over the next decade, they will account for 46% of the world’s consumer spending, or $260 trillion.
- Connected Spenders serve as an indicator of where global consumption is headed. On average, they are younger, more urban, and more affluent than other consumers, and they display more confidence and engagement. They outspend other consumers in a variety of categories.
- Over the next decade, the number of Connected Spenders around the world will more than double, from 1.4 billion in 2015 to 3.0 billion in 2025. Their share of global consumers will rise from about 19% of global consumers to 37%. More importantly, spending by Connected Spenders will grow from about $15 trillion annually in 2015 (about 35% of global consumption) to more than $32 trillion in 2025, or 53% of global consumer spending.
- By 2025, only three mature economies—the United States, Japan, and Germany—will be among the 10 largest markets for Connected Spenders. Emerging markets such as Indonesia, Pakistan, and Nigeria will contribute significantly to global growth in the number of Connected Spenders.
- While the number of Connected Spenders will grow fastest in emerging markets, mature markets will continue to play a large role in consumer spending. By 2025, the typical Connected Spender in a mature market will spend nearly $40,000 annually, 10 times the amount of a typical Connected Spender in an emerging market.
- The most important characteristic of Connected Spenders is that they have access to the internet and everything that comes with that. The ability to participate in the digital economy hinges on that access. Over the next decade, we estimate an additional 2.3 billion consumers will gain access to the internet, and almost all of that growth will come from emerging markets.
- Connected Spenders are omnichannel shoppers, using the web for a variety of consuming activities, including researching and shopping online, sharing ideas and reviews on social media, and viewing media and advertising.
- Connected Spenders are the ideal consumer for a variety of goods and services, and consumer-facing businesses should use them as a first lens in making decisions about which markets to invest in, how to communicate with and reach consumers, and what conditions they should be monitoring across different markets.