Urban-World-Global-Consumers-Full-Report（April 2016）.pdf

Per capita spending increasingly important Nine groups of consumers to watch Urban demographics shifting 833321HIGHLIGHTSAPRIL 2016URBAN WORLD:THE GLOBAL CONSUMERS TO WATCHCopyright McKinsey&Company 2016In the 25 years since its founding,the McKinsey Global Institute(MGI)has sought to develop a deeper understanding of the evolving global economy.As the business and economics research arm of McKinsey&Company,MGI aims to provide leaders in the commercial,public,and social sectors with the facts and insights on which to base management and policy decisions.The Lauder Institute at the University of Pennsylvania ranked MGI the worlds number-one private-sector think tank in its 2015 Global Think Tank Index.MGI research combines the disciplines of economics and management,employing the analytical tools of economics with the insights of business leaders.Our“micro-to-macro”methodology examines microeconomic industry trends to better understand the broad macroeconomic forces affecting business strategy and public policy.MGIs in-depth reports have covered more than 20 countries and 30 industries.Current research focuses on six themes:productivity and growth,natural resources,labor markets,the evolution of global financial markets,the economic impact of technology and innovation,and urbanization.Recent reports have assessed the economic benefits of tackling gender inequality,a new era of global competition,Chinese innovation,and digital globalization.MGI is led by three McKinsey&Company directors:Jacques Bughin,JamesManyika,and JonathanWoetzel.MichaelChui,SusanLund,AnuMadgavkar,and JaanaRemes serve as MGI partners.Project teams are led by the MGI partners and a group of senior fellows,and include consultants from McKinsey&Companys offices around the world.These teams draw on McKinsey&Companys global network of partners and industry and management experts.In addition,leading economists,including Nobel laureates,act as research advisers.The partners of McKinsey&Company fund MGIs research;it is not commissioned by any business,government,or other institution.For further information about MGI and to download reports,please visit Dobbs|LondonJaana Remes|San FranciscoJames Manyika|San FranciscoJonathan Woetzel|ShanghaiJesko Perrey|DsseldorfGreg Kelly|AtlantaKanaka Pattabiraman|Silicon ValleyHemant Sharma|San FranciscoAPRIL 2016URBAN WORLD:THE GLOBAL CONSUMERS TO WATCHPREFACE Sweeping demographic change is transforming the world economy.In 2015,MGI explored the impact of an aging world on global GDP growth,and the imperative to boost productivity to make up for slowing growth in the labor pool.Now we turn more specifically to how slowing population growth is likely to shape global consumption over the next 15years,with a focus on large cities whose inhabitants will generate over 90percent of consumption growth between 2015 and 2030.This report is the fourth in our Urban World series.It draws on a global consumer model included in MGIs Cityscope database,which maps the evolution of global urban consumption from 2015 to 2030 using projections for population growth among different age segments and age-specific consumption patterns at a country level.This model allows us to compare large consumer groups across the world,and to understand patterns of global consumption across age groups,countries,and cities.MGIs new research is the second in the Urban World series that has a consumer focus,and adds to the growing body of research by McKinsey&Company in this area.The MGI report is published alongside,and is informed by,two new pieces of research from the McKinsey Consumer Practice focusing on consumers.One is McKinsey 2016 China Consumer Report based on 10,000 in-person interviews with people aged 18 to 65 in 44 cities,representing Chinas major regions and tiers.The other is McKinseys 2016 Global Sentiment Survey of more than 22,000 consumers in 26 countries.These two reports provide companies in the consumer markets with the broadest and most recent set of insights on consumer trends across regions.Both are available at .MGIs latest research was led by Jaana Remes,a MGI partner based in San Francisco,with guidance from three McKinsey and MGI directors:RichardDobbs,based in London,JamesManyika in San Francisco,and JonathanWoetzel in Shanghai.We are particularly grateful for the contributions of GordonOrr,director emeritus and senior external adviser to McKinsey,and SvenSmit,a McKinsey director in Amsterdam.Kanaka Pattabiraman and Hemant Sharma,both consultants based in San Francisco,led the project team,which comprised TarunAgarwal,KevinColes,EduardoDoryan,ClemensFahrbach,VivianLu,GaneshRaj,MelissaRenteria,RamanSharma,and SophieTurnbull.We are also grateful for the helpful advice of MGI senior fellows JanMischke and SreeRamaswamy,knowledge experts JonathanAblett,EzraGreenberg,XiujunLillianLi,and AnneMartinez,and TimothyBeacom,MGI knowledge operations specialist.Thanks also go to HongChen,LuciaFiorito,AmyJin,TeeraPrice,and TejaswiTharakabhushanam.We would like in particular to thank McKinseys geospatial analytics team,which works on geographic or locational aspects of doing business,including,for instance,location strategies,infrastructure diagnostics,and urban growth modeling;and McKinseys health-care analytics team,which combines health-care expertise with big data analyses to improve the global health-care community.Numerous McKinsey colleagues gave us of their expertise including VivekAgrawal,YuvalAtsmon,AlecBokman,AndresCadena,KaraCarter,VladimirCernavskis,JoyChen,YougangChen,PeterChild,ClaraChung,SusanColby,JennyCordina,DavidCourt,ElizabethDay,CarolynDewar,EwanDuncan,AlanFitzgerald,LauraFurstenthal,ChenglinGan,JonathanGordon,BryanHancock,AlexandraHicks-Hardiman,HonayounHatami,JanHenrich,LizHilton Segel,RogerioHirose,RolandJohn,AndrewJordan,AlexKazaks,GregKelly,SajalKohli,UdoKopka,JrnKpper,EricLabaye,JonathanLaw,CherylSHLim,EmmyLiss,Max Magni,Greg Malen,TimMcGuire,DougMcElhaney,PaulMcInerney,JohnMeans,FabriceMorin,RukhshanaMotiwala,JamesNaylor,JeskoPerrey,LisaRenaud,ChristianR.Riis-Hansen,ErikRong,BenSilverstein,MarcSinger,JenniferSternberg,DavidTurnbull(alumnus),RobertTurtle,TonyZhou,and ChristinaZaybekian.Many thanks goes to MGIs academic advisers RichardN.Cooper,Maurits C.Boas Professor of International Economics at Harvard University,and JedKolko,independent economist,who served as chief economist at Trulia until June 2015.We are also grateful to HomiKharas,senior fellow and deputy director for the global economy and development program at the Brookings Institution;RonaldLee,professor in the Department of Economics and Demography and the Center on the Economics and Demography of Aging at the University of California,Berkeley;AndrewMason,professor in the Department of Economics at the University of Hawaii;and MichaelStorper,Professor of Urban Planning at the University of California,Los Angeles,LSE Centennial Professor of Economic Geography at the London School of Economics,and affiliate of the Centre de Sociologie des Organisations at Sciences-Po in Paris.We would also like to thank AssafWand,CEO and co-founder at Hippo;KatyFike,partner at Generator Ventures and co-founder of Aging2.0;JohnForsyth,former McKinsey director and now partner at Forsyth Insights;and AmitMohindra,talent analytics,Apple.MGIs operations team provided crucial support for this research.We would like to thank MGI senior editor JanetBush;MattCooke in external communications and media relations;JuliePhilpot,editorial production manager;MarisaCarder,RichardJohnson,JasonLeder,MaryReddy,MargoShimasaki,and PatrickWhite,graphics and data visualization specialists;and DeadraHenderson,manager of personnel and administration.This report contributes to MGIs mission to help business and policy leaders understand the forces transforming the global economy,identify strategic locations,and prepare for the next wave of growth.As with all MGI research,this work is independent and has not been commissioned or sponsored in any way by any business,government,or other institution.We welcome your comments on the research at MGI.Jacques Bughin Director,McKinsey Global Institute BrusselsJames Manyika Director,McKinsey Global Institute San Francisco Jonathan Woetzel Director,McKinsey Global Institute Shanghai April 2016 Getty ImagesCONTENTSHIGHLIGHTSConsumer markets fragmenting Services growing in importance Company footprints matter1924101In briefExecutive summary Page 11.Major consumption shifts ahead Page 212.Nine groups of consumers towatch Page 33Developed retiring and elderly Page 39Chinas working-age consumers Page 53North Americas working-age consumers Page 65Uncertainties and risks Page 763.Cities and consumption Page 834.Implications for companies Page 101Technical appendix Page 113Bibliography Page 121IN BRIEF URBAN WORLD:THE GLOBAL CONSUMERS TO WATCH As world population growth slows,global consumption growththe demand that fuels much of the worlds economic expansionwill depend heavily on how much each individual spends.Knowing which consumers are likely to be spending robustly,where they are,and what products and services they prefer to purchase becomes even more important for companies,policy makers,and investors.Until the turn of the century,more than half of global consumption growth came from an expanding number of consumers in the world.In the period to 2030,population growth will generate only 25 percent of global consumption growth with the rest coming from rising per capita consumption.For decades,companies serving consumer markets could rely on expanding numbers in most segmentsbut no longer.Nine groups of urban consumers are projected to generate three-quarters of global urban consumption growth from 2015 to 2030and just three groups about half of that growth:Developed retiring and elderly(60-plus years in developed regions).This group will grow by more than one-third,from 164 million in 2015 to 222 million in 2030.It will generate 51 percent of urban consumption growth in developed countries,and 19 percent of global urban consumption growth.Chinas working-age consumers(15 to 59 years).Their number will expand by 20 percentan additional 100 million people.Their per capita consumption is expected to more than double.By 2030,they will spend 12 cents of every$1 of worldwide urban consumption.North Americas working-age consumers(15 to 59 years).The already large numbers and per capita consumption of this group will grow modestly by 7 percent and 24 percent,respectively,from 2015 to 2030.Many younger consumers are under income pressure and are cost conscious in their spending.Consumption is shifting toward services,reflecting two trends:heavy spending on health care among aging consumers in developed regions,and increasing spending by consumers in emerging economies as their incomes rise to thresholds where consumption of services such as communications,transport,restaurants,and catering takes off.Cities matter.By 2030,consumers in large cities will account for 81 percent of global consumption and generate 91 percent of global consumption growth from 2015 to 2030.Global urban consumption is extraordinarily concentratedjust 32 cities are likely to generate one-quarter of the$23 trillion in urban consumption growth projected from 2015 to 2030,and 100 cities will be responsible for 45 percent of that growth.Consumption and growth are now coming under pressure in many cities as population growth slows and urbanization plateaus in many countries.Six percent of large citiesmost of them in developed regionsare already experiencing declining populations.However,others,particularly in emerging economies,continue to grow,and will be home to rising numbers of consumers to watch.Roughly 700 large cities in China alone will account for$7 trillion,or 30 percent,of global urban consumption growth to 2030.Companies need to understand how shifting demographics impact their organizations footprint.If that footprint doesnt match the most promising consumer markets,they may need to adjust their strategy.Knowing which citiesand even neighborhoods within citiesare home to key consumers of the future will matter.Companies need to navigate their way through arguably the most diverse consumer markets in history,managing parallel products and channels for increasingly disparate consumer groups.And,finally,the growing importance of services needs to be factored into the thinking of all consumer-facing businesses.TAKEAWAYSFootprint matters in a shifting consumer landscape.Companies with the skills to manage increasing complexity can prosper.Look closely at services as they grow in importance.NigeriaIndiaMexicoBrazilChinaUnited StatesSouth KoreaSpainUnited KingdomGermanyJapan25Years old 3035404550Range of cities average age by country,2015City demographics are already very different and could become more so.will be generated by people living in cities from 201530.CITIES MATTERof globalconsumption growth 91%25%19%18%10%10%5%5%3%3%2%Retiring and elderly in the developed worldAll other groupsChina(1559 years)China(60+years)South Asia(1559 years)Latin America(1559 years)Southeast Asia(1559 years)Western Europe(1559 years)Northeast Asia(1559 years)North America(1559 years)Share of global urban consumption growth201530of consumers are set to generate 3/4 of global urban consumption growth from 201530.GLOBAL CONSUMER GROUPS TO WATCHNine groupsfrom per capita consumption growthfrom population growthContribution to global consumption growth1970200020001520153042%54%25%58%46%75%of globalconsumption growth will be driven by increases in per capita spending in 201530.MAJOR DEMOGRAPHIC SHIFTS75%CONSUMPTION IN AN URBAN WORLDviiiMcKinsey Global Institute Getty ImagesEXECUTIVE SUMMARY Shifting demographics are causing a major rebalancing of the engines of global consumption.In the past,an expanding population was a main driver of consumption growth,but now the pace of the worlds population growth is waning.That means that consumption growth in the period to 2030 will depend overwhelmingly on individuals spending more.It is now even more important to know which consumers will have the purchasing power and the inclination to spend,where they are,and what they want to buy.This research finds that just nine groups of“consumers to watch”are projected to generate three-quarters of global urban consumption growth from 2015 to 2030.Of these,just three groups have the scale and spending power to reshape global demand and the world economy.Together,the 60-plus age group in developed economies;those of working age in China,an age group that,by 2030,will consist of those born and raised since China reformed and opened up its economy;and the working-age population of North America,are expected to generate half of urban consumption growth to 2030.The urban world is overwhelmingly where consumption takes place.By 2030,consumers in large citiesaccounting for 50percent of the global population in 2030will generate 81percent