The Power of the Growing Global Middle Class (Part 2)

Editor’s Note: This is Part 2 in a 2-part series. Read Part 1 here.

In light of last year’s Brexit referendum and U.S. elections, it’s clear that middle-class consumers in mature markets such as the UK and U.S. still live in the shadow of the recent global economic recession, and aren’t happy about it.

While the U.S. middle class saw household income increase by 5.2% in 2015—the best year-over-year improvement in decades—recovery and growth remains sluggish.

This isn’t the case in key emerging markets such as China, where revenue, infrastructures and global commerce have seen stratospheric growth in the last 10 years. Quality of life has improved for many residents, too. Indeed, the global middle class has seen wild growth, and shows no signs of stopping: it’s now more than 2 billion strong, and on track to hit 4.9 billion by 2030.

As we reported yesterday, these consumers are becoming increasingly influential and affluent. Thanks to supercharged smartphone and Internet adoption (and more disposable income), the middle class in these markets are embracing m-commerce in a big way, and aren’t afraid to make cross-border purchases from overseas e-retailers. This represents a huge opportunity for companies, particularly those that conduct business online.

Today, we’ll continue our deep-dive into the promise and opportunity these new global middle-class consumers present to expanding businesses, and examine how companies smartly serve them with translated, localized online content and e-commerce experiences.

Powerful Momentum

The growth of the global middle class has certainly hinged on the increased productivity of these emerging markets, and the economic prosperity it's brought them over the past decade. Many analysts believe they've achieved a kind of momentum that can't be stopped by isolationist policies.

“These trends of urbanization, demographics and connectivity are largely geopolitics-proof,” a columnist for The Washington Post recently wrote. “It matters not who sits in the Oval Office or the Elysee Palace. Short of a cataclysmic war, these trains have left the station, and there is no looking back.”

Indeed, more than a half-billion people will be born in the next four years-most of them in Asia, Africa and Latin America, where this economic growth is hottest. A billion more people around the world will gain Internet access by 2021, bringing the total to 4 billion, or more than half of the world's population.

This has driven hundreds of companies to expand their businesses to serve overseas markets. Marquee brands have double-downed on courting these new middle-class consumers. They understand that their bottom lines are meaningfully impacted by these markets' growth.

MotionPoint customers have equally impressive foresight, says one of our own analysts. According to Victoria Bloyer, an Online Strategist for MotionPoint’s Global Growth team, these companies are moving into new markets where the middle class is growing … and they’re seeing compelling results.

"The activity of many of our customers-especially a recent wave of newer clients-is very telling," Victoria explains. "The expansion of one of our cruise-industry clients into Latin America clearly illustrates that middle-class consumers there have more and more disposable income. The e-commerce moves of another client, a global furniture retailer, in the Middle East reveals that more and more people there want to, and can afford to, furnish their homes with a well-known foreign brand."

An increase in MotionPoint-powered translated, localized websites for the Chinese-speaking market also shows that growing businesses are aiming to court that market’s middle class as well, Victoria says.

Middle Class Spotlight: India

China’s middle class is often cited as a shining example of this phenomenon, and with good reason. However, more recently, analysts have identified India as a market that has historically benefitted less from this global economic trend—but is now reaping its rewards. India is the world’s fastest-growing economy. It outpaced China’s growth back in 2015. Its population is nipping on the heels of China’s, too—it will overtake China in five years, according to one United Nations report. These days, about half of India’s population is now middle class. The largest growth has occurred in the lower middle class, where tens of millions have emerged from poverty. India’s middle class is poised to overtake those of China, the U.S. and other countries by 2027, the World Economic Forum reported last November.

Some analysts call India’s rising middle class the “neo middle class.” Consumption here has increased more than threefold in the past decade, and is poised for similar growth over the next 10 years. This will likely lead to “a tenfold increase in 20 years,” suggest two Boston Consulting Group analysts, “a feat at this scale that has happened very few times in human history.”

To be clear, most of India's residents remain poor; the middle class is not yet the largest segment of this market's population. But in less than 10 years, "affluent" Indians-consumers who represent the standard of a global middle-class consumer, the analysts say-will generate 40% of the market's consumption (up from 26% in 2015).

Mobile-phone and Internet adoption, one of the key factors we described yesterday that helps forge a virtuous cycle of middle-class consumption and growth, is already thriving here. Nearly a billion Indians already have access to a cellphone, and over 300 million have Internet access. This should increase to 800 million by around 2025, with the heartiest growth among middle-class and rural consumers.

"This digital democratization will have a profound impact on how Indians see, select, study, spend, save, socialize and sell," the Boston Consulting Group analysts wrote. And thanks to the skyrocketing adoption of e-commerce in this market, companies are already seeing sales from mid-size and smaller Indian cities.

For expanding businesses willing to engage these consumers online, in their languages of choice, India is clearly a bright opportunity—particularly for first movers.

Another Perspective

Not all economists have such a rosy view of the growing global middle class. For starters, defining "middle class" often varies from study to study, or country to country. This make defining the global middle class' size a moving target. Some analysts place the threshold of a middle-class income at earning $10 or more daily. Others place it at $20 a day or higher.

Regardless, “(e)ven those newly minted as middle class enjoy a standard of living that is modest by Western norms,” the Pew Research Center wrote in 2015.

Other economists express concern that such middle-class growth may not be sustainable. China may pose an interesting example of this: the country is undergoing a pivot from a manufacturing-based economy to a consumption-based one. This has slowed its historically jaw-dropping year-over-year economic growth. Will this slump impact middle-class consumers in China-to say nothing of other markets, such as those in Latin America, which depend on commodities sales to China? Some experts fear the sky might soon fall.

(Our take on China’s slowing growth, and its impact on the Chinese middle class, is far less gloomy. You can read it here.)

Other experts wonder if robotic automation, which has replaced many U.S. jobs in the past few decades, might also be rigorously embraced in emerging markets. Such job elimination might generate challenges for middle-class growth. “Technology is poised to drastically reduce the need for low-skilled workers around the world, many of whom have only just moved into the middle class,” one Time columnist warned last year.

Nonetheless, it’s impossible to ignore the economic upside of the globalist approach.

As Adrian Monck, a member of the World Economic Forum’s executive committee told The New York Times on Tuesday: “The benefits of globalization are there to see, in jobs in China, India and many emerging markets. Billions of people owe better lives to it.”

More Growth On the Horizon

Indeed, an early 2017 report from Deloitte suggests that several factors suggest that “global growth is about to surprise on the upside, with Asia leading the way.” The global economy is finally normalizing after the stabilization of several crises including the global recession, the Eurozone debt crisis, and “geopolitical shocks” seen in the Middle East and other regions. This stability will likely lead to a lift in world trade, Deloitte analysts say, which will trigger stronger growth, which will—buoyed by a healthier U.S. economy—fuel robust gains in China, India and other markets.

And the winners of this virtuous cycle? The global middle class, the report suggests. "A new and optimistic generation is taking the lead in driving the direction of their economies," a Deloitte economist said, "one that is technologically savvy, comfortable with the borderless consumerism of the global middle class, and yet imbued with the consumption-smoothing instincts of its parents and grandparents."

Further, a Brookings Institution deputy director suggested in 2016 that the growing global middle class could in fact “save the world’s economy.” The global middle class is presently “one of the primary forces sustaining the global economy,” he wrote.

And middle-class growth is occurring in markets beyond the ones we've highlighted in this blog series (which are primarily BRIC countries). As the Brookings Institution economist wrote:

"(T)he story is not just about these giants. By 2020, Brazil, Mexico, Pakistan, Indonesia, and, a few years later, Egypt, Nigeria, and Vietnam could have middle classes larger than 100 million people. The Philippines and Thailand could have middle classes as large as in the United Kingdom, France, or Italy. These countries will still be far poorer than today's nations with advanced economies, but the rate at which their middle-class markets are growing is impressive."

Indeed, even with the widely-covered economic slowdown in China, analysts' projections of worldwide economic growth and demographics suggest the global middle class will continue to thrive, as will its spending. "Spending gains in fast-growing economies could exceed double digits for at least another decade," the Brookings Institution economist said.

Translation: The global middle class isn’t going anywhere, and remains ripe for engagement—particularly online via e-commerce, m-commerce and other digital experiences.

To ensure immediate and sustained success in these markets, companies must serve these middle-class consumers in their languages of choice, on their devices of choice, supporting locally-preferred payment and fulfillment platforms.

Wrapping Up

Does your business need help in developing strategies, tactics and translated, localized websites to serve middle-class consumers in new markets? MotionPoint has been helping hundreds of brands launch global websites for more than 15 years, and has the know-how to help them generate immediate and sustained business results. Contact us to learn more.