How to harness the spending power of millennials: Move beyond the US

Brace yourself for impact: Their time is finally upon us. In 2018, the world will achieve peak millennial, the moment when the last of the millennial generation (also known as Generation Y, those born between 1980 and 2000) will reach their 18th birthday, thereby ushering their cohort into a new era of economic primacy. Generation X is gone. Long live Generation Y.

To date, untold billions have surely been spent in the United States in an attempt to understand this “new breed” of consumer. Millennials are the biggest demographic segment (roughly 90 million people) of the largest economy on the planet, and so their preferences will drive production and marketing strategies for the next 20 years. But they are a fickle bunch. On the one hand, they scoff at traditional rites of passage such as marriage and homeownership. But, on the other hand, they are the first “digitally native” generation, and their aggregate annual income is expected to surpass 4 trillion dollars by 2030.

While this may indeed be true, the millennials’ story is actually much more interesting—and filled with many more opportunities—than the traditional U.S.-centric narrative would have us believe. For starters, we should remember that “demography is destiny.” In terms of headcount, America’s share of the millennial pie is actually quite small. More than 1 billion millennials currently live in Asia alone; and, more broadly, emerging and developing economies are home to 86 percent of the world’s millennials. Therefore, if you are a firm interested in embedding yourself into the lifestyle of the people consuming and shaping global culture over the next 20 years, you had better start looking eastward.

Until very recently, however, that was as far as the global narrative went. Due to limited data, analysts were only able to make very generic statements about millennials worldwide. Thanks to advancements in income and demographic modeling, however, it is now possible to take such a global investigation of millennials much further by forecasting their income evolution in every country of the world. By looking at a sample of 22 countries that represent 70 percent of global population and GDP, it becomes clear that the millennial story has even greater global implications.

In terms of aggregate income—and thereby spending power—it is unsurprising that at the global level, millennials will be the reigning economic powerhouse over the medium-term (and that Generation Next—those born between 2000 and 2020—will make a rapid ascent and overtake Generation X by 2035).

Figure 1: Millennials’ global annual aggregate income will reign through 2030 ($ trillions)

Global_figure 1_millennials income_2030

But at the country level, the plot thickens. By 2035, Chinese millennials’ aggregate income will surpass that of their American cousins, with India trailing close behind (Figure 2). For this reason, global companies and brands need to better understand and cater to the attitudes and preferences of Chinese and Indian youth who, in many industries, will become their future core customer base. Moreover, other countries’ millennials will also see their stars rapidly ascend, overtaking other more established economies. For example, by 2035, Pakistani millennials’ aggregate income will be higher than the combined income of their Italian and Spanish counterparts.

Figure 2: Millennials’ annual aggregate income in China, U.S., and India ($ trillions)Global_figure 2_millennial income_china_us_india

Finally, many of the markets where Millennials’ income will grow the most—markets where significant opportunities for introducing customers to newer, higher-value products, and services will materialize—are generally overlooked. By 2035, the countries that will have experienced the highest growth in aggregate millennial income from their 2020 levels—as well as commensurate increases in their respective average incomes—will include:

  • Bangladesh (104 percent aggregate annual income increase; $5,800 average income)
  • Indonesia (84 percent aggregate annual income increase; $11,600 average annual income)
  • Philippines (77 percent aggregate annual income increase; $12,400 average annual income)
  • Thailand (51 percent aggregate annual income increase; $13,200 average annual income)

These countries should brace themselves for the IKEA onslaught.

What lies in store for the millennials—and their successors – after 2035 is, at this stage, anyone’s guess. However, based on what we can already understand about the coming two decades, the ultimate narrative of millennials at the global level will be a story of market disruptions, shifts in production and marketing preferences to new regions and cultures, and the new businesses and brands who were agile enough to be able to navigate these changes. In short, the legacy of millennials is likely to expand far beyond the confines of the U.S. and live on well after their spending power is eclipsed by their children’s children.