Will emerging markets of the future be much smaller?

The term “emerging markets” typically triggers mental images of the vast regions of Russia, China, Brazil and India. However, the emerging markets of the future will not be regions or countries, but cities – and even neighborhoods within cities.

By 2030 about 5 billion people will live in cities and 60% of global economic growth will come from the top 600 global cities. Most of these will be in the emerging markets.

As that trend unfolds, urban centers would emerge as global economic powers in their own right. They could use their financial muscle to increasingly set their own regulations and tax frameworks, diluting the role of central governments.

The concentration of people in mega-cities will have some profound effects, not least on the environment and urban infrastructure. But how will it challenge the strategies and operating models of consumer goods and retail companies? What impact will new forms of living have on consumption?

When will your operating model become irrelevant?

At EY we’re exploring the deep implications of over 100 change drivers that could shape the future consumer, from accelerated urbanization to advances in AI and robotics and wider shifts in social structures and consumer aspirations.

Our aim is to understand how the lives of future consumers could change, and what that means for companies now. As we do this work, it is increasingly apparent that many of today’s assumptions about emerging markets will no longer apply.

Big cities, bigger questions

There would still be a distinction between emerging markets and developed ones, but the dividing lines could be very different. They could cut across cities, not vast global regions. This leads to at least three big questions for consumer companies to grapple with:

• How agile would a company need to be if future profitability depended on its ability to serve relatively small numbers of consumers in close proximity within a neighborhood? Would global scale still confer any advantage?
• How would last mile logistics and route-to-market change, so companies can serve consumers who live in homes that are highly dense and increasingly vertical?
• How would emerging market strategies (currently focused on driving reach and penetration) change as the ability to provide premium and bespoke products and services becomes a growth driver for emerging mega-cities?

The next emerging market could be at your doorstep!

Are you transforming your organization so it’s relevant to the changing consumer, both now and into the future? Learn more here.