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The advantage of a billion plus people

October 4, 2012

There is a reason why Wal-Mart wants to enter India – and remain in China, even though its turning a loss in China after more than a dozen years and far fewer restrictions and political hurdles. It’s the potential of +2.5 billion people.

Consumer spending between China and India is expected to rise to US$10 trillion a year by 2020, three times the amount spent in 2010 according to a new report by the Boston Consulting Group. The middle class, considered the cash cow would be the main driver of the consumer boom in India and China and are expected to spend US$64 billion on goods and services during 2010 to 2020, according to BCG.

The sheer number of consumers is enough to turn revenues green for retailers. In BCG’s new book – ‘The US$10 Trillion Prize: Captivating the Newly Affluent in China and India’ it says – By 2020, there will be nearly 1 billion middle-class consumers in China and India—320 million households. Consumer spending will triple—reaching US$6.2 trillion annually in China and US$3.6 trillion a year in India. That’s the US$10 trillion prize.

However it’s not only the number of people, but also other tangible and intangible assets that will make our consumers the most sought after worldwide. Incomes are rising in both China and India by an approximate 8 percent per annum, our economies are opening up further to the west, which means that in China people have a higher desire to travel, see the world, and get exposed to newer brands and a better shopping experience – thereby forcing a retail revival back home. Meanwhile in India, opening up the retail sector to 100 percent foreign direct investments means Indian’s will have higher aspirations and want to consume more with greater disposable incomes.

The shopping experience in both China and India is expected to change dramatically over the next few years as Indians and Chinese consumers buy more goods, yet remain highly frugal and discerning purchasers. Retailers in both nations find selling to both Indians and Chinese highly competitive as we are very value conscious and still retain many old qualities passed down through generations – such as reusing and repairing goods before discarding an item that doesn’t work.

“We are at a turning point in history where relative wealth will shift from the West to China and India, but absolute wealth, including in the West, should increase,” said Michael J Silverstein, a co-author of the book and a senior partner at BCG.

Its time we turn our populations into an advantage.

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