The US’s National Intelligence Council came up with a study titled “Global Trends 2030: Alternative Worlds”. It is surprisingly cheerful report, which is odd as intelligence agencies rarely adopt a sunny perspective on the world. While the NIC’s report does address a lot of threats; such as cyber-sabotage and nuclear holocaust, it holds firm in the belief that the one thing that will make a difference economically is the strengthening of the middle class.
England had to wait a century and a half before it managed to increase their revenue per person by a hundred percent, a feat that America only took 30 years to do. China and India, on the other hand, managed to pull off the same feat, only in significantly less time and on a much larger scale, which resulted in the growth of buying population that has enough money to buy items that are more upscale or are from well-established expensive brands, such as a nice home and a good start for their offspring.
The NIC is not the only organization that came to said conclusion. Even the Boston Consulting Group is predicting that the middle class, stronger and wealthier, will take over via a billion or more people from China and India that are well-to-do that will start to appear by the year 2020. McKinsey & Co, for instance; seems to follow hill shape in the consumption of families, where demand for consumer goods initially rises when citizens earn the maximum amount possible, only to taper off towards the end.
How the West Can Appeal to the New Middle Class
Western companies are now thinking of ways on how they can be attractive to the this new segment that has the purchasing power, and how they can compete with their competition from countries that are just beginning to be economically stable. Two specific works stand out when it comes to addressing this conundrum – first is Michael Silverstein’s “The $10 Trillion Prize” and the second is J. Walter Thompson’s “What Chinese Want.”
Michael Silverstein encourages companies to go in immediately, so that they can join the first movers in hogging the best distribution channels and burn their brands into the minds of consumers early on. Additionally, he stresses the need for the assimilation of local culture. For instance, PepsiCo is aware that people from Indians will end up tasting the standard crisps bland, so they launched a new packed food that caters to people from India.
What Chinese Wants emphasizes that there is a segment that’s on the rise which is a combination of naiveté and sophistication, with Chinese retailers going so far as to get personal assistants that would orient people on how to use products from the U.S. or Europe, but these customers are also able to move quickly to newer technologies. Another example of the paradox is with online games, not everyone in China has internet connection and those with connection don’t get to access all the sites, but those who do are more likely to play online games. The same applies to online shopping.
Fighting for the Rising Middle Class
Very few companies from the West are able to ignore the fight for the rising middle class, as it has a tendency to spill into their space. Emerging market firms are now starting to use spend on products imported from the West. This is actually increasing the price of people’s basic needs. As more wallets start chasing scarce resources; everyone will be affected, and there is nothing anyone can do – but be prepared for it.
Source: The Economist