Emerging middle classes drive sales of electronic goods

(Supri Suharjoto)

The emerging middle classes of developing nations are driving the sales of products such as electronic goods and beer, while increasing prosperity among a small percentage of Chinese consumers is expected to lead to an increase in luxury sales.

Emerging middle classes drive consumer spending of goods such as mobile phones, beer and high-end electronics, according to a July report published in the McKinsey Quarterly by business analyst group McKinsey & Company.

The two billion members of the middle classes in emerging markets, defined as having an annual household income between $22,500 -$56,499, currently spend $6.9 trillion per year, and that figure is expected to increase to $20 trillion during the next decade.

The number of middle class consumers with growing disposable incomes is increasing throughout emerging nations including Brazil, Russia, India and China (BRIC countries). The report found that the emerging middle classes of these countries aspire to own both products by multinational brands and more localized goods, however these consumers are only middle class in regional terms and do not have as much spending power as consumers of the same social bracket in countries such as the United States.

The report found that consumers in emerging markets and particularly in the BRIC countries are not constrained by the affordability of products such as consumer electronics, mobile phones and beverages such as beer.

Despite this, these same consumers are a lot more limited when it comes to buying products such as luxury cars, high-end designer fashions or western cosmetics which are widely available in the developed world.

Though the increase in the percentage of households predicted to be able to afford these luxury products is low, the increasing prosperity of those households that already can means that high-end or premium western manufacturers are targeting this category.

China, predicted to be the world's largest economy by 2020, is one such market where the rising prosperity of the existing middle class has led to a drive in the luxury goods market, particularly in the area of high-end fashion design.

Statistics from business monitoring site Euromonitor and reports published in the China Daily newspaper indicate that China currently accounts for 25 percent of the world's luxury goods market.