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Middle class consumers boost economic growth and development.

BY · May 19, 2015 01:05 pm

The lives and lifestyles of the ultra-high net worth individuals (UHNWIs) cause fascination all over the world, but the changes taking place below the wealth pyramid, are just as important to anybody interested in the luxury sector.

Mass affluence, or the creation of middle-class consumers with disposable income to spend, is closely linked with economic growth & development and wealth creation.

Between 2000 and 2010, Africa’s middle-class population grew from 29% to 34% of the continent’s total population, while the Organisation for Economic Co-operation and Development (OECD) says that by 2030 Asia will account for 66% of the world’s middle-class population, that’s 10 times larger than that of the US and five times bigger than Europe’s. There is no doubt that the middle classes have been expanding rapidly in emerging economies in recent years.

In Search of the Global Middle Class, written by Uri Dadush and Shimelse Ali, shows some of the fastest rates of growth in the number of millionaires with an estimated increase of 53% in Africa and 46% in Latin America over the next decade.

Increased middle-class spending and investment power in developing economies has a direct impact on the potential for the creation of entrepreneurial UHNWIs who benefit from the rising appetite for everything, from consumer goods to financial services, technology and health care. This has been well proven by the stratospheric success of Alibaba, which provides sales services for websites and has propelled its founder, Jack Ma, to the top of China’s rich list. Alibaba’s success has been the result of increased consumer demand and access to technology across China.

In Africa, Acacia Mall, a new high-end shopping mall in Kampala, Uganda, is just an example of how the middle classes are shaping retail, with Western-style shopping centers providing good returns for their HNWI benefactors. Judy Rugasira Kyanda, Managing Director at Knight Frank Uganda, says: “The mall is surrounded by areas populated by a strong middle class, who benefit from the retail and services provided in an upmarket setting.”

Inditex, the Spanish retailer whose brands include Zara, Uterqüe and Massimo Dutti, and which is majorly owned by its founder Spanish billionaire Amancio Ortega, has been expanding rapidly in China. The company has been opening five Zara stores a month to satisfy the demand for its chic-yet-affordable fashion among the middle class.

A growing and strengthening middle class can often be accompanied by political challenges as the growth in economic independence sparks greater demand for better services, like education, political transparency and freedom of expression.

In the past two years alone there have been protests in countries including Brazil, Hong Kong, Venezuela, Bulgaria, China and Turkey, which have been associated with the increasingly uncontrollable demands of the middle classes. These demands can also be a motivation to innovation, encouraging entrepreneurs to start their own businesses to provide for this emerging class with disposable income, which in turn provides good jobs to lift more people into the middle classes, resulting in a form of virtuous circle. The eyes of the world are turning to the middle classes and more importantly their wallets and purses. Their spending power will be a crucial lever to help boost global demand.

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