While the total global population is predicted to increase by 1billion in the next decade, middle class population, by that time is expected to be around 1.8 billion. What are apparel retailers having up their sleeves for the middle, and upper middle income population?


Middle class segment can be defined as those whose daily consumption per capita is between $2-$4, or $6-$10 per day. They belong to the middle, and upper middle income segment of the society. They might not necessarily be working for salary,and can also be running a small business; not very profitable. An important-trait of this segment is that they have a stable job, and income. The segment,which remained as a 'violet by a mossy stone' not much noticed, will gain a global spotlight in the years to come. First time in history, countries with majority population of middle income consumers are likely to emerge as a dominating source. There will be a noticeable shift in the purchasing power of these people, from the countries of the emerging economies.


Countries with Mass Middle Income:


The BRIC countries of Brazil, Russia, India, and China will emerge as dominant forces in the global economy, with much of the middle class population in these countries. By 2020, they are estimated by industry analysts to become the five largest economies. Of the five largest economies, BRIC countries will reach the fourth largest by 2020.


Following the BRIC countries will be Bangladesh, Indonesia, Egypt, Vietnam, Turkey, Mexico, Iran, Nigeria, South Korea, Pakistan, and Philippines. These 11 countries are identified as potential markets in the global radar. During 2007, the OECD countries were dominating the world's economies. Industry predictions estimate that in 2050, there will be a shift in the economy and it will be dominated by 15 developing countries, including the BRIC countries.


Next Big Spenders: the Middle Income Group:

There is a change in the spending power that is apparently shifting from the rich countries towards the countries with more middle income population. China is a growing power falling under this description, which will be joined by the BRIC countries by 2020. Simultaneously, the purchasing powers of the middle income consumers are set to be on the rise. They will have a strong influence in the global spending patterns, resource utilization, and environment.


The 'Middle Class Muscle':


By 2020, total middle class population will grow by 30% to reach 52% of the total population. Of the total middle class population, estimated to be around 1.8 billion from all around the world, 600 million will be in China. Income level of the global middle class population is approximately estimated to range between $6,000 - $30,000 p.a. They will be the biggest pressure points, proving to be a more demanding category of apparel shoppers.


During the 70s, and 80s countries such as Brazil, Mexico, Argentina, and South Korea had more number of middle income population. During 2000, the global middle class population had no representation from the Asian continent. China's population constituted to a mere 13.5% of the global population. It is predicted that by 2030, Chinese population is bound to grow by 38%. By 2030, approximately 50% of the global population will fall into the income level; $6,000-$30,000. China and India will be in the global radar, with the transition occurring in these two countries more rapidly. Contribution of these two countries towards, the middle income population, and income level will witness and sharp increase and is estimated by analysts to reach the peak by 2030.


Apparel Retailers focus on the Potential Segment:


The main growth driver of this group of population is the economic growth in these countries. Global explosion of the middle income population is opening new opportunities for apparel retailers. Along with the growth in the economic, the domestic markets in these countries start to expand, typically becoming a middle class market. Effects of their growth are seen in the consumption trends. They have more buying powers, and henceforth are more demanding, regarding the quality as well as price considerations.


The shopping interest of the middle income consumers are seen in the retail apparel sales. Apparel sales in the developing countries witnessed a year-on-year growth surpassing other products. On an average, consumers tend to spend 10% of their budget shopping for apparels. Their spending nature will be fashionable, and frugal.


Domestic markets of these countries are already filled with aggressive local players. Hence, strong international apparel brands present in the global market will have to face fierce competition in the domestic market of these emerging countries. Furthermore, business models of the global brands are based on the established markets of the developed countries. Developing countries will have different consumer needs, and a different course in required to meet the consumers of these countries. Customers from these countries should be identified, and segregated in clusters across the markets.

Global apparel makers should also contemplate teaming with knowledgeable domestic players. This will enable global apparel makers to position themselves in the domestic market of the emerging countries, and build a considerable amount of revenue and profit streams.


The growing power of the middle income population makes it the engine of global economic growth. The sustained escalation of the planet is driving the growth of the global middle class population.


References:

  1. "What is middle class about the middle classes around the world?" Abhijit V. Banerjee and Esther Duflo, Econ-www.mit.edu.
  2. "The Expanding Middle: The Exploding World Middle Class and Falling Global Inequality", Economic Research from Goldman, Goldmansachs.com.
  3. Nextbigfuture.com