Affordable Luxury in Emerging and Developing Markets and the Impact

July 2016

With rising incomes and greater exposure to Western cultures, the habits, tastes and needs of the new middle class emerging market consumer evolve - shoppers seeking aspirational, high quality brands at the best prices. Following The Quest For Value in Developed Markets and Market Impact, we identify opportunities in the “affordable luxury” segment in emerging and developing countries, spanning many products and services, ranging from packaged foods and foodservice to fashion and electronics.

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Expansion of middle class households

Growth in the number of middle class consumers – fuelled by factors such as economic progress, higher productivity, educational attainment, urbanisation and more working women – is driving up average income and spend.

Increased discretionary spending

Low income consumers coming out of poverty are increasing expenditure on a range of discretionary items, such as premium packaged foods, dining out, health and beauty, electronics, fashion and other products and services.

Newly affluent shoppers seek status and sophistication

With rising incomes and greater exposure to Western culture, the habits, tastes and needs of middle class consumers are evolving. Shoppers are seeking aspirational purchases and accessible luxury brands at good value.

Demand for quality above quantity

Emerging market shoppers are not prepared to compromise on quality: in general, they would rather save up their money to buy fewer prestige brands than purchase a large number of inferior products.

Modern retail formats widen availability of Western brands

The rise of modern retail formats has opened up a market for high quality packaged foods, beauty and personal care, and other Western-style consumer products that were previously unattainable.

Seeking out the best value for money

With regard to fashion and big ticket items, consumers are finding ways to obtain prestigious brands at lower prices, for example by shopping abroad, in sales events or via online marketplaces, factory outlets or resellers of pre-owned goods.

Emerging market strategies

To make products affordable and appealing to emerging market consumers, companies are employing techniques such as paring down local production costs, sachet marketing, regional customisation and establishing an online presence.

Introduction

Scope
Definitions
Drivers
Affordable luxury consumer types
Which channels are benefiting?

Key Findings

Key findings

Socio-economic Backdrop

Emerging economies continue to grow but at slower pace
Drivers of middle class expansion
Growth in middle class households
Discretionary spending on the rise
Category spend by decile 5 households

The Aspirational Consumer

Attitudes to bargains and self-treats
What do consumers look for when buying packaged foods?
Priority attributes in clothing and footwear

Retail Trends

The development of modern grocery formats
Seeking value for money
Internet shopping: Making luxury more affordable
The power of China’s online giants
The rise of e- and m-commerce
The shopping tourism boom
Chinese tourists flock to world shopping destinations

Market Impact

Packaged food and drinks
Consumer foodservice
The success of “sachet marketing”
“Accessible luxury” in fashion
Fashion label brand strategies
Demand for affordable smartphones
Smartphone brand strategies
Growing demand for white goods
Appliance brand strategies

Outlook and Recommendations

Middle class households and income will continue to expand
The emerging market shopper of the future
Recommendations

Methodology and Definitions

Methodology and sources
Data parameters
Geographical definitions

Internet vs Store-based Shopping

Further Insight
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