Riff-raff of America unite! We still matter to the world's biggest brands. The U.S. middle class isn't going to be outdone by the Chinese, any time soon.
Much has been written about the death of the American middle class and the growing importance of the rising Asian middle classes.
The U.S. middle class will continue to dominate world consumer markets for at least another 15 years. And while the middle class in Asia will be greater in number, accounting for around 60% by 2030, says the OECD, there is a difference between an Indian consumer and a Japanese one. There is less of a difference between a Texan consumer and a Californian. Not only do they speak the same language, celebrate the same holidays, listen to the same music and drink the same liquor, they also have similar life styles. The same cannot be said for a person living and Shanghai and in Xinjiang, let alone Shanghai and Mumbai.
Here's what we know: the U.S. middle class accounts for over 21% of global middle class spending. No other country comes close. China accounts for around 5%.
But while the U.S. consumer class is leveling off, the growth opportunity is clearly in Asia. Marketing to them will not be the same, therefore the U.S. consumer will still be in the forefront of most marketing campaigns by global companies. American styles and tastes matter.
Some, however, like
A recent study by the Institute on Asian Consumer Insight in Singapore found that while Asians exhibit similar emphasis on family, savings and future planning, they differ significantly in their attitudes towards religion, tradition, lifestyle and work habits. This is not a homogeneous group like Americans. In other words, Hollywood -- as global a business as it is -- will continue making American style films that speak to our head-cracking lifestyles. Our actors might crack heads in the Liwa Desert of the United Arab Emirates, but the cars, the clothes, the punches and the punchlines are still going to be American. The narrative of our demise has been greatly exaggerated.
There's another challenge for global brands in Asia. These countries are no longer willing to just make American brands. They are making their own. From jewelry to home goods, the Asian market has some stiff competition for American companies today. And they are constantly deepening their understanding of regional markets. China is getting to know India. India is getting to know southeast Asia.
Indian conglomerate Godrej has been quick to capitalize on their first-hand familiarity with Asia’s demand
for frugal innovations. Among Godrej’s products is the well-loved “ChotuKool” refrigerator, which is priced at just
$70 because it uses sophisticated cooling chips rather than the more costly conventional compressor technology.
The middle class in Asia are not as "middle" as the American middle. By World Bank standards, middle income in China is around $13,000 a year. They're buying those small refrigerators and not $2,800 French door KitchenAids. The owner of Godrej on the other hand, he is the guy buying the KitchenAid.
Then there's the demographics; though even here tastes will differ with pop culture being a mix of local and either a lean towards the regional powerhouses, like Korean and, of course, American.
In 2013, the World Economic Forum said “Urban Millennials” are now one of the fastest-growing consumer segments in the world. More than 60% of the world’s 1.7 billion millennials live in Asia, constituting a retail salivating market worth around $7 trillion come 2030.
To capture this growth, companies can no longer afford to take a short-term or opportunistic approach to operating in the region, writes Kevin Lai, executive director of the Singapore Economic Development Board. In a report released last month, Lai said companies should consider the resources they need to truly invest in Asia "holistically". That means brands, including the big American brands like Ford, will spend as much time getting to know the big Asian consumers as they have getting to know what Americans want in an imported luxury car.
"One thing is certain," Lai says. "If companies want to win over their Asian consumers, Asia can no longer be just an outpost. The region must be embraced as a second home for companies, appreciated and considered as a unique market worthy of dedicated investments."
That said, big American companies will continue investing in Asia, but given the fact that the American middle class will clearly remain the middle class juggernaut from now until 2030, they won't be doing so at the expense of the U.S. The American middle class, compared to Asians, is stagnating. For now, as a socio-economic unit, the kind marketers and businesses like to look at, Americans are still number one.
