WWD.com/business-news/forecasts-analysis/global-spending-to-double-by-2025-mckinsey-7404047/
government-trade
government-trade

Global Spending to Double by 2025: McKinsey

The global economy and the consuming class will continue to grow by 2025 as worldwide spending increases twofold in the next decade.

NEW YORK — The global economy and the consuming class will continue to grow by 2025 as worldwide spending increases twofold in the next decade.

At a presentation for the Luxury Marketing Council here Thursday night, Anne Martinez, knowledge expert at McKinsey & Co., said: “Between the years 1990 and 2010, the consuming class — that is, a household that makes at least $10 a day for spending — has doubled to 2.4 billion. If we look at what will be projected in 2025, we see that this is going to double again.”

She said this would mark the first time in history that the consuming class will become a bigger economic force than those at the poverty level, producing annual disposable income of $30 trillion.

In 2010, she said, the U.S. accounted for one-third of the total world consumption. But by 2025, she predicted, that number will decrease to one-quarter.

“This does not mean that the U.S. is no longer the market to focus on,” she said. “If you’re smart, you will focus on the pockets of growth: the Hispanic consumer, the aging consumer, the consumer looking for value. You can still find a sizable market to grow here.”

This includes a market that Martinez believes is still a very large and thriving demographic: the very wealthy consumer.

Jim Brennan, partner in McKinsey, said that while the U.S. may represent a lower percentage to the total by 2025, it will remain “very strong in consumer goods and luxury goods because of the size of the U.S. market. It will continue to grow economically. You put those things together with positive demographic trends and the influx of immigrants the U.S. continues to have, and that makes it a formidable player.” 

So what about China and India, two developing countries with immense consumer industries and growing online presences? Will their digital footprint make them the highest consuming world markets by 2025?

 

“I don’t think that emerging markets like China or India will trump the U.S. in sales by 2025,” Brennan said. “There will continue to be growth in China and in India in luxury. Just based on the basic GDP growth, we will continue to see high growth in those markets that may trend over time based upon the vagaries of the day, but the U.S. will remain large.”

To appeal to the U.S. shopper of 2025, Brennan said consumer companies should turn their focus domestically to transformative technologies and how they’re shaping consumer packaged goods.

According to the McKinsey Global Institute (MGI), there are three technologies that could have an economically disruptive impact between now and 2025. These included the mobile Internet, 3-D printing, and in the longer term, the “Internet of Things.”

By 2025, MGI projects that 50 percent of retail purchases will be made exclusively on a mobile device.

“We used to think that luxury couldn’t be purchased online because the consumer would want to feel and touch products, but now we’re seeing that mobile and online is exactly where consumers — especially most millennials — are turning to,” Brennan said.

The markets that have moved to primarily digital purchases are electronics, music, and books. But other categories such as jewelry, apparel and toys, along with sporting goods, are considered markets that are in the “digital battleground” — that is, markets that are on the brink of becoming primarily digital purchases.

But wherever the consumers of tomorrow opt to shop — brick and mortar, e-commerce or m-stores — the spending will only add to the growing global economy, Brennan said.