Affluent consumers on the rise: study
Bangladesh registers faster growth in the number of middle-income and affluent consumers compared to some of its neighbours, which presents prospects for consumer product companies, according to a report released yesterday.
Two million Bangladeshis join the rank of middle and affluent class (MAC) a year, said Boston Consulting Group (BCG), a global management consulting firm, in its report -- Bangladesh: the Surging Consumer Market Nobody Saw Coming.
By the year 2025, the number of MAC is expected to triple to about 34 million from around 12 million at present.
What is even more important for consumer product companies is that Bangladesh's MAC population is expanding rapidly -- by an average of 10.5 percent annually. That compares with 7.8 percent in Indonesia, 7.9 percent in Myanmar and 4.9 percent in Thailand, according to the report unveiled at Gardenia Hall in Dhaka.
“Bangladesh is one of the greatest untapped growth markets in Asia, yet it has been off the radar of most major consumer-product companies,” said Zarif Munir, a BCG partner and co-author of the report. SD Asia hosted and conducted the launch.
The findings are based on research by BCG's Centre for Customer Insight that included a survey of more than 2,000 Bangladeshi consumers and an analysis of their consumption patterns, said the BCG.
The report focuses on Bangladesh's MAC, which the firm defines as individuals with annual household income of around $5,000 or more. The report said this income group has attained the purchasing power to buy a broad variety of consumer goods and services and acquired middle-class traits, such as buying goods that offer convenience and luxury in addition to basic necessities.
Currently, only 7 percent of Bangladesh's population of 160 million is middle-income or affluent, compared to 21 percent in Vietnam and 38 percent in Indonesia, the report added.
But the MAC population will be 17 percent of Bangladesh's population by 2025, due to a decade of stable economic growth, a growing working-age population and strong upward mobility.
"Massive upward mobility among households at the lower rungs of the economy is likely to assure that growth in Bangladesh's consumer class will remain robust for decades," said the report.
BCG said the country has a young and growing working-age population -- the median age in the country is 24 years -- and it will provide a strong base for rising consumption in the coming decades.
Currently 84 million people -- more than half of Bangladesh's population-- have incomes that classify them as being at the bottom of the pyramid. By 2025, this group will reduce to 48 million.
Around 80 percent of Bangladesh's MAC population is now concentrated in Dhaka and Chittagong. "We see a dispersion of wealth unfolding," it said, adding that the development will have significant implications for business.
"For the next few years, consumer product companies will need to focus on scaling up their operations and service capabilities in Dhaka and Chittagong to meet surging demand."
Concentrations of buying power will emerge in other places across the country; the MAC population will be more than double in Dhaka over the next decade, more than triple in Rajshahi and Barisal, and sixfold in Khulna.
Within the next decade, 63 cities are projected to have MAC populations of at least 100,000, compared to 36 now.
The BCG analysed consumer's attitude and preference and said several traits stand out as distinctly Bangladeshis; one is, the high level of optimism and willingness to spend, but the desire to spend is tempered by wariness in taking on debt.
The BCG said 81 percent Bangladeshis believe that the future of their children will be better than theirs.
Sixty percent of consumers surveyed said they expect their incomes to rise over the next 12 months, and 69 percent said there are more things they want to buy.
"But they are restrained by concerns, due perhaps to social taboos or a lack of familiarity with debt instruments -- that they will run up debt that they won't be able to repay," it said.
On consumer buying decisions, the survey found that most Bangladeshis — more than 80 percent in the case of consumer durables — cited 'brand' as a top factor influencing their buying decisions.
"These consumers work within a budget and price is often cited as a second priority over quality."
Munir said Bangladeshi consumers switch to foreign products from local ones as people make more money.
Bangladeshis are highly family-oriented in buying, the report added. Some 75 percent of Bangladeshi consumers surveyed agreed with the statement that they never spend money for themselves until the needs of their families are met, it said.
"It is really interesting that they believe that what is good for their families is good for them," said Munir.
The percentage is higher than countries such as Indonesia, Thailand and Myanmar, it said. Companies should expect that strongest growth will occur in categories that benefit the entire family, it added.
It also said Bangladeshis are increasingly using mobile internet.
To win for the long term, Munir suggested companies ensure product quality and win brand loyalty in product and marketing strategies. Companies should start fighting now to win brand loyalty among consumers by stressing high quality for money.
"Quality matters more in Bangladesh than prices," he said.