In Search of the Middle

Christine Birkner
Marketing News
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Chinese consumption habits; American Marketing Association; Christine Birkner; Marketing News; Chinese middle class; Louis Vuitt
Key Takeaways
  • The once-mighty U.S. middle class is shrinking, while consumers’ spending power in emerging markets such as Brazil, India and China is growing.
  • Pew reports that the percentage of Americans who consider themselves middle class is declining, from 53% in 2008, a year after the start of the recession, to 44% in 2014.
  • Meanwhile, by 2020, Brazil’s market will top $1.6 trillion, and the consumer market in India and China is projected to be worth a combined $10 trillion, according to Boston Consulting Group’s 2013 Global Consumer Sentiment Survey.
While economists, political pundits and business executives fret over post-recession income inequality in the United States and the resulting bifurcation of the consumer landscape, other marketplaces across the globe offer middle classes with increasing spending power—fueling U.S. marketers’ desire to venture farther afield​

Seven years ago, the Great Recession shook up the global economy, and its reverberations are still felt. Income distribution and the consumer landscape in the United States and abroad have changed drastically, prompting another global economic phenomenon: The once-mighty U.S. middle class is shrinking, while consumers’ spending power in emerging markets such as Brazil, India and China is growing. And while economists caution that emerging markets’ growth hasn’t been immune to the post-recession forces that continue to plague the North American and European marketplaces, the fact remains that these markets’ changing consumption patterns and increasing purchase power warrant a closer look, marketing experts say.

While the Great Recession certainly widened the gulf between the “haves” and “have-nots” in the United States, the share of U.S. adults in middle-income tiers actually has fallen in each of the last five decades, from 61% in 1971 to 51% in 2011, according to the Pew Research Center. Pew reports that the percentage of Americans who consider themselves middle class is declining, from 53% in 2008, a year after the start of the recession, to 44% in 2014.

Meanwhile, the middle classes in emerging markets continue to expand as people move from rural areas to urban centers and become more active and acquisitive consumers. By 2020, Brazil’s market will top $1.6 trillion, and the consumer market in India and China is projected to be worth a combined $10 trillion, according to Boston Consulting Group’s 2013 Global Consumer Sentiment Survey. Consumers in emerging markets feel more financially secure and more confident about the future than those in developed economies, and express greater enthusiasm for brands, according to BCG’s study. Seventy percent of consumers in China and 67% of consumers in India cite “brand name and reputation” as key reasons for trading up to higher-priced goods and services, and more consumers in emerging markets than in developed nations are now trading up to higher-priced, higher-quality products, especially big-ticket items such as housing, cars and large appliances, BCG found. 

“Consumers are trading up and they’re more selective versus a few years ago. There’s growth in services, in everything that relates to experiences,” says Olavo Cunha, partner and managing director of BCG’s São Paulo office and co-author of BCG’s research on emerging markets.

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Author Bio:

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Christine Birkner
Christine Birkner is the senior staff writer for Marketing News and Marketing News Exclusives. E-mail her at cbirkner@ama.org.

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