World Consumption data reveals the incredible market opportunity at the BoP
By Priya Thachadi
There are around 4.5 billion poor living in 92 countries around the developing world who collectively spend more than USD 5 trillion a year, according to the World Consumption Data. The data reveals that the lower consumption segments spend more than the middle and higher consumption segments combined. They spend about USD 2.3 trillion a year on food and beverages alone, with USD 646 billion spent in South Asia and USD 926 billion in East Asia.
The household spending data released by the World Bank Group shows what the low-income segment is willing to pay, which may not be necessarily be based on ‘what they need’. But the customers at the Base of the economic Pyramid (BoP) – people who earn less than USD 8 per day – are value-conscious and risk averse. They seek out goods and services that can improve their lives.
So what do the numbers show?
|Food and Beverages
||Clothing, Footwear, Personal Care
*BoP consumption in USD across 92 countries
Affordability and access to financing are key to success in inclusive business. The 4.5 billion people at the BoP spend an enormous amount in total, but very small amounts individually. This means that companies need to sell products and services at low prices offset by higher volumes to succeed. Financing is an important enabler, for large and small purchases alike.
The market for food and beverages in the lower consumption segments is significantly larger than the market in the middle and higher segments combined, similar to energy. While in most other sectors — clothing and footwear, housing, education, health, water — people in the lower consumption segments collectively spend roughly as much as those in the higher segments. Only in transport, financial services, and information and communication technology (ICT) do the two higher segments combined outspend the lower segments.
BoP Market in India
India – Annual Household Consumption Data, USD PPP million
|Clothing and Footwear
|Food and Beverages
In India, the 1206 million people in the BoP market (total of low and lowest segment) spent 47% on food and beverages. While the BoP spent USD 99 million (INR 6.4 billion) on housing at 9%, 8% was spent on energy, showing the huge potential for affordable solutions in these sectors. While clothing and footwear spending was at 6%, health and transport was at 5%. Education spend at 3% could be attributed to free government education, while financial services and water spending was close to nil, highlighting that these sectors are highly underserved.
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