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The 717 emerging-market cities that currently have populations of more than 500,000, and the additional 371 cities that will reach this size by 2030, will constitute the biggest commercial opportunity in the world in the coming decades, according to a new report by The Boston Consulting Group (BCG). The report is titled Winning in Emerging-Market Cities: A Guide to the World’s Largest Growth Opportunity. (28 page pdf)
China will add 142 million households with over $5000 of annual income by 2015 for a total of 314 million “middle class households”. India will add 180 million households with over $5000 of annual income by 2015 for a total of 366 million “middle class households.
“Executives tend to focus on the ‘megacities’ of emerging markets, when they need to be shifting their attention to the ‘many cities’—the large number of smaller cities that constitute the bulk of future urban-market demand across the emerging markets,” said David Michael, a BCG senior partner based in Beijing and one of the authors of the report. He noted that “companies need to track and manage the number of cities in which they have a strong presence, not simply the number of countries.”
Spending Power in Emerging-Market Cities Is Rising Rapidly
One-third of the world’s population—2.6 billion people—live in emerging-market cities, and by 2030, that number will increase by an additional 1.3 billion. In contrast, cities in developed markets will add only 100 million new residents in the next 20 years.
Beneath these headline figures lie dramatic improvements in the lives of emerging-market urban residents. Already, income levels in emerging-market cities are reaching an inflection point, with their middle-class population expected to rise 70 percent between 2010 and 2015—affecting everything from where these individuals live to how they consume.
As disposable incomes rise, many products previously unattainable by average urban residents are becoming necessities. Today, more than 37 percent of the world’s cars are purchased in emerging-market cities, and sales of luxury autos already rival sales in Germany, Japan, and the United States. This same trend in spending will cause emerging-market cities to account for 30 percent of global private consumption by 2015.
Growth in Emerging-Market Cities to Spur Massive Demand for Infrastructure
Emerging-market cities will need better housing and infrastructure—most urgently, transportation, water, sanitation, and electricity. Meeting these needs will require an estimated $30 trillion to $40 trillion by 2030—the equivalent of 60 to 70 percent of the total global investment in infrastructure. The strongest driver of infrastructure demand will be population growth, and emerging markets will require an estimated $13.8 trillion in housing investment from 2010 to 2030, with a huge portion of the demand coming from Brazil, China, India, and Mexico.
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Brian Wang is a Futurist Thought Leader and a popular Science blogger with 1 million readers per month. His blog Nextbigfuture.com is ranked #1 Science News Blog. It covers many disruptive technology and trends including Space, Robotics, Artificial Intelligence, Medicine, Anti-aging Biotechnology, and Nanotechnology.
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A frequent speaker at corporations, he has been a TEDx speaker, a Singularity University speaker and guest at numerous interviews for radio and podcasts. He is open to public speaking and advising engagements.