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Beyond income: Redrawing Asia’s consumer map by McKinsey

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This report focuses on the region’s consumer markets, surveying the outlook for consumption and identifying major shifts in consumption patterns and behavior over the next decade.

While the COVID-19 pandemic continues to affect economies in Asia and around the world in fall 2021, this research aims to look beyond the economic effects of the pandemic, focusing on the factors that may influence long-term consumption growth in Asia to 2030 and beyond.


As Asia’s consumer markets are not only growing rapidly buy diversifying and segmenting, the 3 changes in perspectives are key to understanding new consumption paths in the region;

  1. Surging up the income pyramid

From people moving into the consuming class to moving within the consuming class

  • Asian consumers are expected to account for half of global consumption growth in the next decade, equivalent to a $10 trillion opportunity. Globally, one of every two upper-middle-income and above households is expected to be in Asia, and one of every two consumer transactions is likely to occur in the region.

Beyond income: Redrawing Asia’s consumer map by McKinsey

  • An increasing number of people are projected to join the consuming class, defined as spending more than $11 a day in 2011 purchasing power parity (PPP) terms. In 2000, only 15 percent of Asia’s population was part of the consuming class; the incomes of the remaining three billion people were still insufficient to support discretionary spending. However, over the next decade, a significant reversal is likely. By 2030, three billion people, or 70 percent of Asia’s total population, may be part of the consuming class.

Beyond income: Redrawing Asia’s consumer map by McKinsey

2. Ten consumer shifts that matter

From people moving to cities to diversifying segments within cities

  • Cities will continue to be the main source of the region’s consumption and consumption growth and are expected to account for more than 85 percent of it over the next decade.
  • But the urban consumption is changing, a new focus is now needed to take account not only of which city is likely to offer the most promising opportunities, but of which consumers within each city.
  • A combination of social, demographic, and technological change is making this diverse region even more varied. Source of consumption growth are diversifying and segmenting. A consumer might be young Japanese person living alone whose social life is largely online; a South Korean “Insta-granny”, or a senior citizen newly conversant in social media; a high-spending-and high-borrowing-Chinese Gen Z; or a Filipina who has succeed in securing a better-paid job and has more say over household financial decisions.
  • Across Asia, households are getting smaller, and single-person households are becoming more common which already account for 15 to 35 percent of the total in Advanced Asia and China.

Beyond income: Redrawing Asia’s consumer map by McKinsey

3. Beyond income: Value shifts to new consumption curves

From income-driven S-curves to market-specific consumption curves

  • As the relationship between income and consumption breaks down in some instances, new consumption curves are emerging in specific product categories. Income-driven S-curves may flatten or shift as business innovation and new technologies enable more people, even on lower incomes, to afford goods and services.
  • Consumer shifts could move to 15 to 65 percent of value pools to new consumption curves, depending on the sector.
  • An example is “access curves” emerging in categories such as mobility, gaming, and banking, where business model innovation and digital platforms unlock latent demand by enabling lower-income consumers to obtain services that they could not previously access or were priced out of.

Beyond income: Redrawing Asia’s consumer map by McKinsey

  • Larges demographic shifts are creating new opportunities to innovate products for example;
    • New growth angles are changing the Asian financial sector in areas like payments, wealth management, and financing.
    • Demographic and societal shifts are changing the nature of housing demand and an emerging shift to rental and other housing models instead of buying.

It is time for companies to redraw their consumer growth map of Asia

Looking at new angles and consumptions growth

    • Find new growth angles: Given that urbanization and rising incomes may no longer be sufficient to understand consumption growth, companies may look carefully at which of the ten growth angles are relevant to their business.
    • Understand the new consumption that may play out in each sector: Consider new consumption categories that may emerge and how new demand may be unlocked by innovation in business models or product development.
    • Radically reimagine the future of consumption: Consider the possible futures and include new approaches in their forecasting process. To do so, they could consider revamping their usual long0term planning processes and blend elements of design, broad based signal scanning, and analytics.

Responding to rapid change and rising diversity, companies are adopting a more agile operating model

  • Create an agile resource-reallocation process: Yearly planning cycles, sticky budgets, and status quo business reviews may need to be replaced by frequent resources reallocation discussion in which genuine trade-offs are considered
  • Increase speed to market of innovation: Consider opening up innovation cycles, for instance by seeking out external partnerships, localizing R&D, and employing more rapid test-and-learn approaches to product development.
  • Empower local decision making: local autonomy and talent are crucial to making the right decision for the right markets at the right time.
  • Ensure the board is fit for the digital age: To address the digital deficit on boards, members need better knowledge about the technology environment. They also need faster, more effective ways to engage the organization and operate as a governing body and, critically, new means of attracting digital talent.

Published : October 26, 2021