Their growth may be slowing right now, but China and India nonetheless boast the world’s fastest-growing consumer markets. Lifetime consumption has gone up 38-fold in China and 13-fold in India in less than 50 years, as people live longer and buy more things with every passing year.
These figures come from Michael Silverstein, cofounder of the Boston Consulting Group’s global consumer practice, in a recent podcast from the Harvard Business Review. By 2020, he says, consumers in the two countries will be spending a whopping $10 trillion a year—a huge opening for firms that are able to get in and sell. “It’s the two biggest opportunities for global companies in the world, in the history of man,” he says.
Life expectancy in 1960: 47
Life expectancy in 2009: 73
Expected lifetime consumption for someone born in 1960: $16,400
Expected lifetime consumption for someone born in 2009: $632,000
Life expectancy in 1960: 42
Life expectancy in 2009: 64
Expected lifetime consumption by someone born in 1960: $14,000
Expected lifetime consumption by someone born in 2009: $184,000
Source: Michael Silverstein, Boston Consulting Group
BCG conducted a more than two-year study in both countries, culling the data, strategies and stories that now form the basis of a new book by Silverstein and his colleagues, The $10 Trillion Prize: Captivating the Newly Affluent in China and India. Among its findings: Chinese consumers are among the world’s most optimistic, with 80% betting that their children will have better lives than they do, compared with 20% of US adults.
Here’s Silverstein, in the podcast, on the demographic drivers behind this explosion and what it means for global business:
“We can count the bodies, and then the question is, who will get the jobs? And the ones that will get the jobs are the ones that are motivated, ambitious, hungry, and educated. And that will be a colossal competition; that will be something that’s unheard of…. Expect to see anything that can be transported to a low-factor cost country to have that happen…. That doesn’t say that there aren’t going to be a lot of opportunities, because the world is going to need a lot more food. The world is going to need really good engineers. The world is going to need great computer scientists. And where do they grow up and where do they come from? They can come from everywhere. What’s very interesting is that this competition is not a zero-sum game.”
“The $10 trillion prize is an election topic. Both Romney and Obama have it flat-out wrong. They’ve attempted to demonize China, and to a lesser degree, India. They’ve tried to make it a conflict, as opposed to an opportunity. They’ve both deemed it to be a zero-sum game and what they have and what they will get is something that, as a campaign speech says, is being taken away from America. That is not a fact. It is in fact an opportunity for American businesses and American consumers to enter China, to learn about China, to learn about India, to participate in this $10 trillion prize. It is about Western companies deciding that they’re not going to have their place of origin on their sleeve.”
Tapping these mega-markets isn’t easy, but it’s worth the effort, Silverstein says, citing the example of Kraft Foods. Kraft, he argues, turned its $100 million China business into a $1 billion one by cutting costs and focusing efforts by brand and category, scaling quickly by acquiring an existing cookie company and then customizing a smaller, less-sweet Oreo to Chinese tastes.
“If you want to get into these markets, you need to get to know them. You need to understand hopes, dreams, wishes; you need to understand category usage, habits, and practices; and you really have to be inside their head…. You’re going to have to make an up-front commitment to understanding, and then a follow-up commitment of investment, and the senior management team at the multinational is going to really have to stay on top of it. Businesses in China and India are not easy to create, but once they’re created, they’re worth an enormous amount of money.”