Consumer power steadily shifts to developing markets
With Africa’s consumer spending expected to hit $1.4 trillion in the next eight years from $860 billion in 2008, analysts say consumer power is increasingly shifting to the region and other developing markets.
A survey by McKinsey and Company predicts that Africa’s collective gross domestic product, GDP, will rise to $2.6 trillion from $1.6 trillion in 2008, while the number of African household with discretionary income will hit 128 million in 2020.
According to Adage analysis, the combination of more rapid economic and population growth, and the emergence of rising middle classes in developing markets, stand in stark contrast to the stagnation of the Western economy and erosion of the middle class.
Other analysts further state that Africa’s growth acceleration was widespread, with 27 of its 30 largest economies expanding more rapidly after 2000. “All sectors contributed, including resources, finance, retail, agriculture, transportation and telecommunications. Natural resources directly accounted for just 24 percent of the continent’s GDP growth, from 2000 through 2008. Keys to Africa’s growth surge were improved political and macroeconomic stability and microeconomic reforms.”
It is said that the “rise of the African urban consumer also will fuel long-term growth. Today, 40 percent of Africans live in urban areas, a portion close to China’s and continuing to expand. The number of households with discretionary income is projected to rise by 50 percent over the next 10 years, reaching 128 million. By 2030, the continents’ top 18 cities could have a combined spending.”
The analysts who assessed the success story in the telecoms sector in spite of observed imperfections say active telephone lines have grown in Africa to about 400 million lines. Nigeria accounts for about 90.9 million of this figure in 2011.
In spite of the Africa’s progress, Harvard Business School publication states that most Western executives, unsure of the size of Africa’s consumer markets, prefer to invest in Asia’s dragon and tiger economies, rather than in Africa’s economic lions.
This thinking, according to analysts, is similar to the mistake of some foreign telecom operators who wanted to enter Nigeria about 10 years ago but declined on the advice of their consultants that the economy for telecom business was not yet feasible in Nigeria, because in their opinion, income per capita was too low to viably support telecom businesses.
They observed also that there was a gross shortage of essential infrastructure including power, good roads and telecom backbone networks. Also, it was said that crime rate was too high in Nigeria, that the judicial system was too slow and winding to grant due and timely reliefs. They likewise said that some African economies including Nigeria were too politically unstable and that an unstable polity meant unviable environment for business. But today, the return on investment in the telecom sector is mouth watering.
Also today, some multinationals in various sectors including home electronic appliances, consumables and media agencies are increasingly realising that consumer power is shifting to developing markets, especially Africa and they are taking positions to take advantage of it.
Unilever, Panasonic, Samsung, P&G, among others, are approaching the shift with constant introduction of innovations, researches and marketing initiatives to permanently integrate their brands in consumers.
For instance, Panasonic, apart from increasing its sales points in Nigeria only recently signed a $15 million product distribution deal with Kewalrams, a Chanrai group. It is gathered that Panasonic, one of the world’s largest electronic and office equipment producer, is growing Nigerian market for automation as the world is continuously driven by systems. It is also setting its eyes on expansion of its business to the BRIC nations and other emerging markets such as Nigeria, Indonesia, among others.
According to Adage, marketers are approaching the shift of consumer power to developing markets as a two-step process.” First, they are centralising management of global brands at headquarters and trimming regional organisations, particularly in developed markets, to focus more squarely on sales, local marketing initiatives and ‘activation’ or promotion.”
It is further noted by Adage that today, 55 percent of Unilever’s business comes from developing markets. It expects that number to rise to as high as 75 percent by the end of the decade. Reflecting that, of the eight new regional clusters given roughly equal weight by Unilever, six are wholly or mainly made up of developing markets.
