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The Affluent Will Be a Major Driver of Consumption Growth in China
Research by The Boston Consulting Group Shows That Affluent Consumers Will Represent $3.1 Trillion of Buying Power by 2020; Companies Need New Strategies to Appeal to This Market

BOSTON, MA -- (Marketwire) -- 11/14/12 -- The affluent will be a powerful force behind the growth of China's consumer market and account for 5 percent of global consumption by 2020, according to a new report released today by The Boston Consulting Group (BCG). The report, titled "The Age of the Affluent: The Dynamics of China's Next Consumption Engine," discusses the rapid rise and significance of this consumer class.

Much attention has been paid to China's middle-class and high-net-worth individuals. But the affluent -- richer than members of the middle class but not as wealthy as the superrich -- have spending habits and attitudes that are distinct. With annual household disposable incomes of at least $20,000, these consumers are set to become an important driver of growth, especially for premium product and service categories.

Today, the affluent are 120 million strong, and their annual buying power is $590 billion. By 2020, this group will number 280 million -- 35 percent of China's urban population or 20 percent of its total population. Additionally, the annual buying power of the affluent will reach $3.1 trillion. That will be nearly the equivalent of Japan's total consumption in 2020, 28 percent more than Germany's, and three times more than South Korea's total consumption.

Businesses that aspire to continued success in China -- and in their home markets -- need to deepen their understanding of this complex, diverse, and rapidly growing group.

The Affluent Opportunity

Vincent Lui, a BCG partner and a coauthor of the report, stated, "Reaching the affluent is important not only because of their sheer numbers but also because they have the financial resources and willingness to purchase premium goods and services." According to BCG's research, $20,000 in annual household disposable income (which equates to $38,000 in developed countries) is an inflection point -- the point at which consumers accelerate trading up in the categories that matter most to them.

The categories most poised to grow are those with products and services that are differentiated and those that have higher thresholds for affordability. These categories include cars, overseas travel, and luxury goods such as watches, jewelry, leather, apparel, accessories, skin care, and cosmetics.

"Businesses need to establish lasting relationships with these consumers," added Jeff Walters, a BCG partner and a coauthor of the report. "The time to get to know them is now."

Distinct and Evolving Consumers

According to the report, China's affluent consumers have several key attitudes and behaviors that set them apart from the middle class and the superrich. The affluent trade up for emotional gratification. They seek status and recognition. And they are relatively sophisticated, traveling abroad and adopting new brands. Although they are willing to pay more for convenience, they buy with a shrewd "investor's" eye.

The affluent are also a rapidly evolving class. Increasingly, more affluent are living in lower-tier cities, affluent women are becoming key decision makers, affluent men are trading up in new categories, and the "veterans" of affluence are pursuing experiences. An important subgroup is the "sugar generation" -- the children of current affluent consumers. This generation currently accounts for 10 percent of the affluent class, a number that is expected to grow to 30 percent in five years. Notably, these young consumers, who have led "sugarcoated" lives, seek out products and brands that set them apart -- from their peers and their parents.

Justin Fung, a BCG principal, noted, "To tap this consumer market, businesses need to continually rethink how they position their brands and how they connect with these evolving consumers -- in China and abroad."

"Strategies that companies develop for China will help them succeed in their home markets as well," according to Youchi Kuo, a BCG expert principal and coauthor of the report. "Consumers worldwide -- including the affluent -- are facing economic pressures. By mastering the affluent market in China, which appreciates luxury but is also conscious of value, companies will be better equipped to reach their local affluent consumers."

This report parallels the findings of "The $10 Trillion Prize: Captivating the Newly Affluent in China and India" (Harvard Business Review Press, October 2012), a new book by BCG consultants Michael J. Silverstein, Abheek Singhi, Carol Liao, and David Michael. This book combines data from BCG's 2011 survey of 24,000 global consumers with extensive in-the-field interviews to draw key insights about the coming consumer boom in China and India.

A copy of the report can be downloaded at www.bcgperspectives.com.

To arrange an interview with one of the authors, please contact Eric Gregoire at +1 617 850 3783 or gregoire.eric@bcg.com.

About The Boston Consulting Group

The Boston Consulting Group (BCG) is a global management consulting firm and the world's leading advisor on business strategy. We partner with clients from the private, public, and not-for-profit sectors in all regions to identify their highest-value opportunities, address their most critical challenges, and transform their enterprises. Our customized approach combines deep insight into the dynamics of companies and markets with close collaboration at all levels of the client organization. This ensures that our clients achieve sustainable competitive advantage, build more capable organizations, and secure lasting results. Founded in 1963, BCG is a private company with 77 offices in 42 countries. For more information, please visit bcg.com.

About bcgperspectives.com

Bcgperspectives.com is a new website -- available on PC, mobile phone, and iPad -- that features the latest thinking from BCG experts as well as from CEOs, academics, and other leaders. It covers issues at the top of senior management's agenda. It also provides unprecedented access to BCG's extensive archive of thought leadership stretching back almost 50 years to the days of Bruce Henderson, the firm's founder and one of the architects of modern management consulting. All of our content -- including videos, podcasts, commentaries, and reports -- can be accessed via PC, mobile, iPad, Facebook, Twitter, and LinkedIn.

About Marketwired .
Copyright © 2009 Marketwired. All rights reserved. All the news releases provided by Marketwired are copyrighted. Any forms of copying other than an individual user's personal reference without express written permission is prohibited. Further distribution of these materials is strictly forbidden, including but not limited to, posting, emailing, faxing, archiving in a public database, redistributing via a computer network or in a printed form.

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