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New Gem: The next BIG market for growth

Last updated on: May 31, 2012 13:36 IST

Globally, businesses are looking at the "Next 4 billion" nations for growth, especially now, given the slowdown in mature economics.

Businesses who function in this group (includes India, China, Indonesia parts of Africa and Latin America where over 4 billion of the worlds 7 billion reside) have traditionally focussed on the middle and upper middle income tiers.

The next big wave of business opportunity will come from the Global Emerging Middle (GEM), which lies just below the middle income segment and above the low income segment, according to PwC's new report titled "Profitable growth strategies for the global emerging middle – learning from the 'Next 4 Billion' markets".

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Source: PriceWaterHouseCoppers

New Gem: The next BIG market for growth

Last updated on: May 31, 2012 13:36 IST

A new class of consumers in the form of 4 billion people living in countries whose per income capita is between US$1,000 and US$4,000 per year.

This market already accounts for 2.3 billion people globally and is only getting bigger. The report points out that GEM will represent a combined annual market, globally, in excess of USD 6 trillion by 2021.

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New Gem: The next BIG market for growth

Last updated on: May 31, 2012 13:36 IST

The global emerging middle is already 2.3 billion people globally. And it is going to get bigger, thanks to high birth rates, improving life expectancy and above average economic growth in many countries.

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New Gem: The next BIG market for growth

Last updated on: May 31, 2012 13:36 IST

In India alone, the segment is expected to cross the $1 trillion threshold by 2021 as its ranks swell to 570 million, from 470 million in 2010.

Large numbers of consumers are making their way up from the bottom of the economic pyramid to form an emerging middle class. Though they still earn modest sums -- $1.70 to $5 per capita per day in India, for example – these consumers collectively have large purchasing power.

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New Gem: The next BIG market for growth

Last updated on: May 31, 2012 13:36 IST

At a time, the segment, sandwiched between the lowest-income group and the middle class, will constituted about 42 per cent of India's total population.

Approximately 67 per cent of India will still live in rural areas in 2021, posing unique marketing, sales, and distribution challenges to companies.

While urbanisation will happen, from a 10-year strategic point of view, India, especially its emerging middle segment, will remain largely rural.

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New Gem: The next BIG market for growth

Last updated on: May 31, 2012 13:36 IST

These are new consumers but not unsophisticated. Technology, education and mobility have raised not only their living standards but also their expectations and aspirations. They are price-conscious but also switched on to quality, service and desirability.

Bajaj Auto, for instance, not only designed the Bajaj Boxer motorcycle to cater to the aspirations of the rural male consumer in India, but also created an innovative, localised financing mechanism to reduce the cost of financing and delivery.

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New Gem: The next BIG market for growth

Last updated on: May 31, 2012 13:36 IST

The emerging middle segment is only getting bigger owing to high birth rates and above average economic growth in many countries. Shashank Tripathi, executive director and leader – strategy and research, PwC India said, "Our research shows that once a company has established itself in the Emerging Middle, customers will carry their loyalty with them as they migrate up to the middle class.

Companies can also use the capabilities they have built in the emerging middle in one country to compete in other Next 4 Billion markets with similar segments"

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New Gem: The next BIG market for growth

Last updated on: May 31, 2012 13:36 IST

According to the report, for companies seeking to succeed in this challenging environment, their strategy should consider three important vectors: 

Value propositions: Companies have to develop a nuanced understanding of the aspirations and unique tradeoffs of this segment and develop solutions to meet these needs.

While low-cost is important, solutions must be positioned beyond low cost. Companies must also design "platform" products which can be customised to cater to the diversity of the GEM.

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New Gem: The next BIG market for growth

Last updated on: May 31, 2012 13:36 IST

Innovative business models: Companies need innovative business models and processes to address this segment profitably, to overcome institutional weaknesses and gaps in everything from credit systems to supply chains. The report argues while smart technology based reach is essential to penetrate this market, businesses must focus on offline interventions and achieving scale from the beginning.

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New Gem: The next BIG market for growth

Last updated on: May 31, 2012 13:36 IST

Shift in mindset: Companies need to adjust, both in their external approach to the market, and internally to the special requirements of the emerging middle. Often this requires a strong leadership presence, a bold approach that embraces disruptive solutions, and a willingness to adopt new values and metrics to drive growth and measure success.

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New Gem: The next BIG market for growth

Last updated on: May 31, 2012 13:36 IST

There is no one size fits all but again the framework provides some guidelines. Globally, the emerging middle is ripe for change and is open to fresh thinking. It will be interesting to see how businesses capitalise on this opportunity by changing how to fundamentally view this market -- not as the bottom of the pyramid with a social lens, but as a very diverse, different and aspiring global emerging middle class - with a profitable future.