Businesses worldwide are navigating shifts in consumer behaviour driven by persistent cost-of-living pressures and heightened financial caution. The Top Five Trends in Income and Expenditure article reveals opportunities to gain and retain consumer loyalty. By catering to squeezed but value-conscious consumers, engaging overlooked segments, and expanding into underserved markets, brands can drive growth in a challenging economy.
Cautiousness at the centre
Consumers earn more, but their spending growth decelerates, signalling a notable shift towards savings. The cautious spending behaviour, driven by ongoing geopolitical, economic, and social uncertainties, has become a permanent feature of consumer decision-making. According to the Euromonitor International Voice of the Consumer: Lifestyles Survey, fielded January to February 2024, despite easing inflation, more consumers plan to adopt conservative spending strategies, such as shopping at discount stores.
Businesses face dual challenges in a cautious environment: rising operational costs and slowing demand. Yet, there are also growth opportunities. Streamlining operations and reducing inefficiencies help mitigate rising costs from within the company, while promoting value for money attracts price-sensitive consumers.
Selective spending for maximum value
Consumers grow increasingly cautious yet also deliberate, prioritising spending in areas that align with their values. The willingness to spend selectively is driven by emotional resilience and optimism following prolonged uncertainty, pent-up demand from the pandemic, and increased affluence from savings.
As consumers become more selective and cautious, businesses face more robust competition, squeezed margins and a higher demand for differentiation. The selective spending landscape offers opportunities, too. For example, senior consumers and the middle class in North America and Western Europe refuse to postpone their discretionary purchases any longer.
Growing affluence of mature consumers
In 2023, the global population of golden age consumers (aged 65+) belonging to social class A (earning more than twice the average gross income in the country) saw the largest absolute growth across all age cohorts, expanding by nearly two million to represent 9% of the total number of higher-income earners. The primary driver of growth is the rapidly ageing population.
Longer workforce participation, post-retirement careers, and rising asset values, particularly in real estate and investments, generating additional income from rentals or dividends, also add up to the increasing economic influence of silver consumers
Source: Euromonitor International
The rise of high-earning seniors presents challenges for brands. Targeting mature consumers, often overlooked in traditional product portfolios and traditional marketing, requires much investment into new products and solutions. Yet, the upward potential is substantial. While this segment are often stereotyped around health products, they need more non-health holistic offerings that empower, include, and indulge them across other industries.
Beyond the big and the obvious
As markets in developed countries reach a point of saturation, the focus is shifting towards developing and emerging nations, where strong growth in consumer spending is forecast. Within emerging and developing regions, often overlooked segments such as rural consumers are emerging as key demographics, offering promising opportunities for businesses to expand their reach. Several factors, including a substantial consumer base, improved purchasing power, increased awareness, and broader market accessibility, drive this.
According to Euromonitor International’s Industry Forecast Model, developing and emerging countries are relatively untapped and have significant unmet potential.
Egypt has the biggest expected consumer expenditure growth in absolute terms over 2024-2040 in the Middle East and Africa region
Source: Euromonitor International’s Industry Forecast Model
It also has over 60% unmet potential in key categories. This indicates an appetite for the adoption and consumption of products and services, making Egypt a lucrative market for expansion.
The year of inequality
Driven by compounding inflation pressures and a polycrisis environment, income disparity is widening. The Gini Index (a standard economic measure of income inequality based on a Lorenz curve) increased in 77 out of 103 countries over 2023, including the top five global economies: the US, China, Germany, Japan, and India, representing 42.2% of the worldwide population.
Rising inequality polarises the market and severely affects social stability and economic growth, constraining the consumer base and spending, particularly that of the middle class. Yet, rising income inequality draws more attention to the lowest-income earners, the bottom of the pyramid (BoP) and unleashes their untapped potential. Businesses can tap into this populous and overlooked market by understanding this segment's daily price/quality trade-offs and aligning with their needs, cultural tastes and behaviours.
Learn more about consumer income and expenditure in our report, Top Five Trends in Income and Expenditure.
This article was published in November 2023 and has been updated.