If you were hoping fresh white truffles would get cheaper because of a lack of demand, better think again. Purchasing power is on the rise everywhere, and money is to be made by those who see how it’s unfolding.
According to a report by Richard Dobbs, Jaana Remes and Fabian Schaer of the McKinsey Global Institute, a “massive wave of urbanization” across the developing world “will create an over-4-billion-strong global consumer class’ by 2025, up from around 1 billion in 1990.”
This has some obvious implications that ought to lead to some obvious decisions, but, note the authors, “few business leaders focus on the importance of cities when establishing growth priorities.” Therefore, those who “adopt such a strategic approach may gain early-mover benefits.”
We’ve written many times about demographics because Peter Drucker repeatedly pointed out that acting on obvious shifts in population is both relatively simple and, potentially, wildly profitable. Still, most companies fail to take advantage.
One company that Drucker singled out for doing right in this respect was Sears, Roebuck.
Early in the 20th century, as Drucker explained in The Practice of Management, Sears was among the first to recognize that “a vast urban market had come into being” and that the low-income groups “had outgrown both their subsistence standards and their distinct ‘lower-class habits’” and were “fast acquiring both the money and the desire to buy the same goods as the middle and upper classes.”
Years later, Sears repeated the feat. “The scholars on Latin America whom President Kennedy brought together to advise him on the Alliance for Progress in 1961 did not see Latin America’s urbanization,” Drucker noted in Innovation and Entrepreneurship. “But one business, the American retail chain Sears, Roebuck, had seen it several years earlier—not by poring over statistics but by going out and looking at customers in Mexico City and Lima, Sao Paulo and Bogotá.”
On this basis, Sears began to build American-style department stores in Latin American cities. The stores were, again, “designed for a new urban middle class which, while not ‘rich,’ was part of the money economy and had middle-class aspirations,” Drucker wrote, adding that “Sears became the leading retailer in Latin America within a few years.”
What do you think are the most significant business implications of an emerging 4-billion-strong consumer class?