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STATE OF THE CONSUMER 2024: WHAT’S NOW AND WHAT’S NEXT

June 10, 2024 | Article

Christina Adams Kari Alldredge  Sajal Kohli

Amid massive shifts in the consumer landscape, companies can’t afford to rely on
yesterday’s consumer insights. Here are nine trends that merit close attention.

(9 pages)

If you think you know consumer behavior, think again. Middle-income consumers
are feeling the squeeze and worrying about inflation but aren’t holding back on
splurges. Rather than sticking to tight budgets in retirement, aging consumers
are splurging too. Speaking of older shoppers, it turns out that the brand
loyalty they’ve long been known for is a thing of the past. And young consumers
in Asia and the Middle East are more likely than those in Western markets to
switch to higher-priced brands.

These are just some of the large-scale shifts taking place in the global
consumer landscape. Consumers have continued to defy expectations and behave in
atypical ways, keeping consumer goods manufacturers and retailers on their toes.
More than ever, companies that cultivate a detailed, up-to-date understanding of
today’s and tomorrow’s consumers—who they are, what they want, and where and how
they shop—will be best positioned to succeed.

In this article, we draw on our ConsumerWise research to delve into nine trends
shaping the global consumer sector and four imperatives to help consumer
businesses move from “now” to “next.”


NINE TRENDS DEFINING THE GLOBAL CONSUMER MARKET

To forecast where the global consumer landscape is heading, we surveyed more
than 15,000 consumers in 18 markets that together make up 90 percent of global
GDP. Their answers revealed surprising nuances about demographic groups,
seemingly contradictory consumer behaviors, and categories poised for growth.

WHO IS THE FUTURE CONSUMER?

Consumers no longer fit into traditional archetypes. Some of the most
influential consumers of tomorrow are currently underserved.

1. Young people in emerging markets. By 2030, 75 percent of consumers in
emerging markets will be between the ages of 15 and 34. Our data indicates these
consumers may be optimistic about the economy and willing to spend.

Among this group, young consumers aged 18 to 24 in Asian and Middle Eastern
nations, such as India and Saudi Arabia, will be particularly important to
consumer businesses, given their pent-up demand and willingness to spend. These
consumers indicate a strong desire to spend on premium products, so much so that
they are up to two times more likely to trade up—meaning opt for higher-priced
brands and retailers—than young consumers in advanced economies. They are also
up to three times more optimistic about their respective economies (Exhibit 1).
This optimism could translate into higher levels of future consumption. It’s
worth noting that young consumers in Latin America are actually less likely to
trade up than young consumers in other emerging economies.


2. Retired and ready to spend. Longer life expectancies and declining birth
rates, particularly in advanced economies, are pushing the global population of
people older than 65 to increase at a quicker rate than the population of people
younger than that age.1“Ageing,” United Nations, accessed May 29, 2024. Yet for
all the data relating to aging populations, older consumers are often
misunderstood.

Despite the financial constraints that may accompany retirement, aging consumers
across all income levels are willing to spend on discretionary items. In
experiential categories such as travel, older consumers’ intent to splurge is
even higher than that of millennials, who have historically been big travel
spenders. High-income baby boomer and Silent Generation consumers (those whose
household incomes exceed $100,000) are a sizable cohort in the United States,
making up 30 percent of the market—and they’re more likely to spend on
discretionary purchases, such as home improvement and gardening, compared with
lower-income consumers their age.

In emerging markets, it’s not just younger consumers who are ready to spend but
their parents, too. Wealthy aging consumers in emerging markets are more
optimistic, expect to spend more on discretionary items, and plan on treating
themselves more than wealthy aging consumers in advanced markets. In one of the
starkest examples, 42 percent of wealthy aging consumers in emerging
markets2Forty-two percent of consumers in Brazil, China, India, Mexico, and
Saudi Arabia. said they expect to spend more on entertainment, compared with 7
percent of comparable consumers in Europe3Throughout this article, we will refer
to “Europe” to indicate France, Germany, Italy, Spain, and the United Kingdom.
and 11 percent in the United States. We see a similar willingness to spend in
categories such as home improvement, airline flights, and hotel stays. Consumer
businesses that market exclusively to younger consumers are thus missing out;
they ignore wealthy aging consumers at their own risk.

3. The squeezed-but-splurging middle. We expect that cost-of-living increases in
advanced economies will continue to put pressure on middle-income consumers.
While conventional wisdom would suggest that these consumers will clamp down on
discretionary spending as a result, our data reveals something different:
instead, middle-income consumers in Europe and the United States say they plan
to splurge on discretionary items at a rate that is comparable with that of
high-income consumers.

This intent to splurge appears across various categories, including
experience-based categories such as travel and dining out, as well as groceries
and discretionary goods. Middle-income consumers might typically be expected to
delay purchases during economically challenging times, but our research shows
that they’re only slightly more inclined to delay purchases than wealthier
consumers. They’re also not much more likely to trade down than higher-income
consumers.

WHAT WILL CONSUMERS WANT?

What consumers want is changing too. Weakened brand loyalty, affordability over
sustainability, and heightened interest in wellness products and services
reflect the preferences and priorities of consumers across ages and geographies.

4. Brand exploration. When they couldn’t find exactly what they needed because
of pandemic-era supply chain disruptions, roughly half of consumers switched
products or brands. That behavioral change has proved quite sticky: consumers
continue to be open to exploring alternatives, and brand loyalty is fading
across demographic groups.

In advanced markets, over a third of consumers have tried different brands, and
approximately 40 percent have switched retailers in search of better prices and
discounts (Exhibit 2). Inflation and economic uncertainty are almost certainly
inducing this behavior.



This weakening of brand loyalty is not limited to a specific age group. In the
past, older consumers remained consistently loyal to their preferred brands, but
today, they’re just as likely to embrace new brands and retailers. In Europe and
the United States, Gen Zers and millennials are only slightly more likely than
older consumers to trade down to lower-priced brands and retailers.

One beneficiary of this rampant downtrading is private labels. Thirty-six
percent of consumers plan to purchase private-label products more frequently,
and 60 percent believe private brands offer equal or better quality.

5. Sustainability: Value upstages values. In recent years, young consumers in
our survey data said they prioritized sustainability considerations when making
purchases. It wasn’t all talk: in the United States, sales of products with
sustainability-related claims outpaced sales of products without such claims.

While young consumers still say they care about sustainability, they are now
making clear trade-offs in the face of economic uncertainty and inflation. In
Europe and the United States, fewer Gen Zers and millennials ranked
sustainability claims as an important purchasing factor at the beginning of 2024
than in 2023 (Exhibit 3).



Younger consumers aren’t just deprioritizing sustainability in their purchase
decisions; they’ve also become less willing to pay a premium for sustainable
products. In Europe and the United States, the percentage of young consumers
willing to pay a premium for products with sustainability claims declined by up
to four percentage points across product categories. Among these consumers, only
a very small percentage were willing to pay a premium for personal care and
apparel products with sustainability claims.

6. The worldwide wellness wave. We estimate the global wellness market to be
worth more than $1.8 trillion, growing 5 to 10 percent annually.4“The trends
defining the $1.8 trillion global wellness market in 2024,” McKinsey, January
16, 2024. In advanced economies, health and wellness products and services have
been in high demand over the past several years. Today, these categories are
also growing quickly in emerging markets, and in some cases, growth in intent to
spend on health and wellness products in emerging markets is outpacing growth in
advanced markets.

In emerging markets such as China, India, and the Middle East, the percentage of
consumers who intend to increase their spending on wellness products and
services is two to three times higher than in advanced markets such as Canada
and the United States (Exhibit 4).



It’s not only Gen Zers and millennials who are propelling growth in this space,
but also Gen Xers and baby boomers. To be sure, regional variations appear.
According to our research, for example, 63 percent of baby boomers in China
intend to spend more on fitness in the near future, while only 4 percent of the
same cohort in India plan to do so.

Weight management products and services, in particular, could help induce growth
in the wellness sector over the next several years.

By 2035, just over half of the world’s population is projected to be overweight
or obese. At the same time, the availability of weight management drugs is
expected to grow as more health plans approve coverage, doctors are able to
prescribe them for more uses, and doses are made available in pill form.
Adoption of these drugs, compared with other weight management solutions (such
as dieting or exercise), will depend on cultural norms and beliefs, too. Less
than 30 percent of Chinese and UK consumers consider weight loss drugs to be
very effective.5“The trends defining the $1.8 trillion global wellness market in
2024,” McKinsey, January 16, 2024.

7. Wellness for women. Investments in women’s wellness are also growing.
Consumers in both advanced and emerging markets are indicating a greater
interest in spending on women’s wellness products and services, as well as on
adjacent personal-care categories. We estimate that closing the women’s health
gap could be worth $1 trillion annually by 2040.6Kweilin Ellingrud, Lucy Pérez,
Anouk Petersen, and Valentina Sartori, Closing the women’s health gap: A $1
trillion opportunity to improve lives and economies, McKinsey Health Institute,
January 17, 2024.

A higher percentage of women in emerging markets (48 percent), in fact, indicate
an intent to splurge on beauty and personal-care products and fitness, compared
with women in advanced markets (27 percent). And young women are especially
interested in wellness: Gen Z women across both emerging and advanced markets
said they expect to spend more on personal-care goods and services, compared
with Gen Xers and baby boomers. As innovation in women’s health continues to
push the sector forward, we expect spending to increase as well.


WHERE WILL CONSUMERS SHOP?

Knowing what consumers want means little if businesses do not meet consumers
where they are. Global migration patterns—both to and from major urban hubs—are
changing where consumers spend their time and money in the physical world, while
growth in social commerce accounts for new movement in the digital world.

8. The new urban hot spots. In both advanced and emerging markets, people are
moving to seek out new opportunities and a better quality of life. In advanced
markets like the United States, consumers are moving away from larger cities in
the Pacific Northwest and the Northeast to “secondary cities,” or those with
populations between 50,000 and 500,000 people. Two-thirds of the fastest-growing
US cities are in the South and West. In these cities, the cost of living is
lower than in larger cities, and remote work opportunities are plentiful.
Millennials, Gen Xers, and boomers are propelling this trend.

Just because US consumers are moving to scaled-down versions of metropolises
does not mean they are curtailing their spending: just as many consumers in
secondary cities say they plan to splurge as do consumers in the largest
American cities. Meanwhile, 1.3 times more consumers in secondary cities say
they plan to splurge, compared with US consumers in rural areas.

Emerging markets will continue to see urban-population growth in both megacities
and secondary cities as consumers move in search of better economic
opportunities and improved well-being. By 2035, for example, 43 percent of the
Indian population may reside in urban areas, up from 35 percent in 2018. In
China, the percentage of middle-class households is expected to increase in both
tier-one and tier-two cities as well as in tier-three and tier-four cities by
2030. And by 2040, there will be 537 million people in African urban centers,
making the African urban population the largest in the world.

9. Social commerce takes flight. For several years, China has led the world in
the adoption of social commerce, in which consumers browse and buy directly
through social media and content creation platforms. Today, social-commerce
markets in both China and India continue to mature, while those in other
emerging-market countries—such as Brazil, Saudi Arabia, and the United Arab
Emirates—are close behind (Exhibit 5). Consumers in these countries consistently
spend more on purchases made through social media platforms, compared with
consumers in Europe and the United States.



Attempts to grow the social-commerce market in the West have had limited
success. Companies simply may have been too early to embrace this opportunity.
We expect social commerce in the United States to expand to $145 billion by
2027, up from $67 billion today.7“Social commerce: The future of how consumers
interact with brands,” McKinsey, October 19, 2022. Gen Zers and millennials are
propelling this growth: they make purchases on social media four times more
often than older generations do. More than a third of Gen Z and millennial
survey respondents said they had made a purchase on social media in the prior
three months.


FOUR IMPERATIVES TO WIN THE CONSUMER OF THE FUTURE

In light of these nine forward-looking themes, what should consumer companies
do? The most successful ones will be those that act on four imperatives:


BUILD MICROTARGETING CAPABILITIES

ABOUT QUANTUMBLACK, AI BY MCKINSEY

QuantumBlack, McKinsey’s AI arm, helps companies transform using the power of
technology, technical expertise, and industry experts. With thousands of
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experts), we are working to solve the world’s most important AI challenges.
QuantumBlack Labs is our center of technology development and client innovation,
which has been driving cutting-edge advancements and developments in AI through
locations across the globe.

Rather than putting consumers in predefined—and often outdated—boxes, companies
should focus on microtargeting to build a richer understanding of consumer
preferences. This involves taking a “smart reach” approach, whereby consumer
businesses use their consumer data to target specific microsegments of consumers
who may demonstrate particular shopping behaviors or preferences. Generative AI
can help consumer businesses reach these microsegments at scale by increasing
creative output and automating marketing outreach. Through microtargeting,
companies can engage high-potential consumer groups—for example, younger people
in emerging markets or wealthy aging individuals—and provide personalized
experiences that build brand love and loyalty and propel future purchases.


INVEST IN WELLNESS

A rise in both consumer interest and purchasing power presents tremendous
opportunities in the $1.8 trillion global-consumer-wellness space. Consumer
goods leaders have a chance to reevaluate their product development road maps
and consider whether they have more opportunities to introduce
personalized-wellness products to priority consumer groups. Consumers across the
globe want data- and science-backed health and wellness solutions. Best-in-class
companies should evaluate opportunities to lean into these offerings and other
wellness growth areas (such as women’s health and healthy aging).


PROPEL THE SOCIAL–DIGITAL EXPERIENCE

Companies should take steps to engage with consumers on social media and other
digital platforms. This involves identifying the right channels and platforms,
creating attractive content, and tailoring strategies to meet evolving consumer
needs. This is especially important as industry lines blur (for example, as
consumer companies enter the healthcare space and vice versa) and as ecosystems
(networks or partnerships that cut across different industries) become more
important.

We see innovative, international companies testing new approaches to social
commerce to connect with consumers on a local level. Some are mobilizing local
key opinion leaders to precisely target consumers and create viral digital
campaigns that resonate with them. Social media and private chats through
platforms such as WeChat help to continually engage consumers.


OFFER PREMIUM PRODUCTS WHERE THEY MATTER

Offering premium products in relevant categories can help improve brand loyalty.
Consumer brands should identify which categories are ripe for this, such as
experiential travel—where splurge activity is common even across middle-income
and aging consumers. Conversely, some categories are more suitable for value
plays based on trade-down behavior or frequent brand exploration. Integrating
loyalty and pricing strategies, instituting pricing tiers, and tailoring product
assortments at the local and channel levels are ways that consumer businesses
can provide value to consumers, while also managing economic pressures.

--------------------------------------------------------------------------------

In this consumer landscape—one in which standards, complexity, and stakes are
all higher—leaders should understand the new nuances that define who the “next”
shoppers are, what they care about, and how they shop. These insights, which
should then inform strategic category and channel investments, can lead to
long-term, profitable growth and sustained competitive advantage.



Christina AdamsPartner, Dallas
LinkedInEmail
Kari AlldredgePartner, Minneapolis
LinkedInEmail
Sajal KohliSenior Partner, Chicago
LinkedInEmail

The authors wish to thank Cait Pearson, Heather Gouinlock, and Keir Sullivan for
their contributions to this article.

--------------------------------------------------------------------------------

This article was edited by Alexandra Mondalek, an editor in the New York office.

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