TRADING INSIDER: Four Megatrends Changing Consumer Markets Around The World

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The rise of China’s middle class is one major trend that will shape consumer markets around the world (Photo: Getty Images)

Futurists like to say that something like 60% of the jobs that will exist in 10 years haven’t been invented yet.

While an assertion like that can only be judged in hindsight, most would agree with the broad argument that we now inhabit a world – and live in an economy – that is evolving at a blistering speed that will take us to unpredictable outcomes.

Understanding the megatrends that are going to shape consumer markets in the years to come is important for investors.

It’s about where demand will grow and fall, and consequently which industries will profit or suffer.

We gazed into our crystal ball and while we admit it is a little bit cloudy, we came up with the following themes that will shape consumer lives in the years ahead.

The growth of China’s middle class

The rapid rise of the Chinese economy is creating a burgeoning middle class of tens of millions of Chinese with cash to spend.

It’s a concentrated wave of consumers unlike any the global economy has ever seen.

Global management-consulting firm McKinsey and Company says this growth of the middle class will unleash “sophisticated and seasoned shoppers—those able and willing to pay a premium for quality and to consider discretionary goods and not just basic necessities” into the global economy.

It means more competition for quality products like Australian agricultural production, our beef, wine, dairy, sea food, fruit and vegetables.

So just like the best tuna caught in Australia now goes on a plane to Japan within hours of being caught, the best agricultural produce might soon be packed and sent to Beijing, Shanghai and beyond rather than to our local retailers.

But it also means increasing demand for agricultural product and potential sales growth for Australian farmers.

The ageing population in the developed world

The population of the Western world is ageing.

This doesn’t just mean people are getting older (of course they are). As a whole, the average age of the population is rising.

That’s a good thing it means that we are living longer. But extended life brings economic challenges.

RBA Governor Glenn Stevens recently said: “Demographic trends point in the direction of a smaller proportion of the population working, and a larger proportion needing support in their later years, even as other demands on the public finances for the provision of social goods increase.”

The maths is difficult to reconcile and increasingly it is an issue that has to be tackled before the fiscal situation becomes unmanageable.

Australia is amongst only a few nations who have planned reasonably well for this big demographic shift.

The Hawke Government’s introduction of compulsory superannuation in the late 1980’s has allowed Australia to build a significant war-chest of retirement savings in the vicinity of $1.5 trillion – more than 100% of current GDP and growing.

The ageing population does also open up opportunities for some businesses that cater to the growing ranks of the elderly, too: think healthcare provision and retirement options as areas where there will be increased demand.

Big Data and cloud computing

Increasingly as our lives become digitised and we live more and more on our smartphones and the apps that have become ubiquitous in our lives — as we embrace Facebook, Twitter, Instagram and so on — we register an increasingly robust picture of ourselves and our tastes out in cyberspace.

It’s more information than most people would have thought healthy to have in the public domain just a decade ago. But it is an unstoppable trend.

This explosion of data has coincided with a similar increase in computing and analytical power to lead to the rise of “Big Data” and cloud computing, which together have combined to allow this vast amount of data being captured to be stored and analysed at very little cost.

This offers an opportunity for a profound change to the consumer marketplace we inhabit.

Businesses will be able to customise a different offering to the different customers standing in line or browsing in a shop.

Imagine walking into a shop and it remembers that you bought jeans last year so you might need new ones – you receive a pop up message pointing you to a personal special.

Technology can revolutionise our shopping and make it even easier for retailers to target market to us.

But with the convenience of the above comes a recognition that our habits, which is really just data points on a computer, are been captured analysed and stored.

Connectedness and The Internet of Things

A trend that is already emerging but has only just scraped the surface of possibilities is the growing interconnectedness of our daily lives and the move toward an Internet of Things.

The Internet Of Things represents a major departure in the history of the Internet, as connections move beyond regular computers and smartphones, and begin to power billions of everyday devices, from parking meters to home thermostats.

Estimates for Internet of Things or IoT market value are huge, since by definition the IoT will be a diffuse layer of devices, sensors, and computing power that overlays entire consumer, business-to-business, and government industries.

The IoT will account for an increasingly vast number of connections: 1.9 billion devices today, and 9 billion by 2018. That year, it will be roughly equal to the number of smartphones, smart TVs, tablets, wearable computers, and PCs combined.

The IoT will see once-inert objects converted into intelligent devices that can communicate with other gadgets.

In the consumer space, many products and services have already crossed over into the IoT, including kitchen and home appliances, lighting and heating products, and insurance company-issued car monitoring devices that allow motorists to pay insurance only for the amount of driving they do.

We are only beginning to scratch the surface of the potential of this era of devices being connected. Companies that find inventive, creative ways to leverage this technology will benefit, either through the sales of the devices or the software they run on or – thinking back to Big Data – the insights that the aggregate information that all these millions of new connected devices collect.

This information does not take into account your investment objectives, financial situation and particular needs. Before making any investment decision based on this information, you should consider talking to a financial adviser, and assess whether the information is appropriate to your particular investment needs, objectives and financial circumstances.

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