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Time to make for Bangladesh: Insights into the Growing Consumer Market

By LightCastle Analytics Wing

The universe of middle and affluent class (MAC) in Bangladesh is growing both in terms of size and purchasing capacity. This provides businesses with an expanding opportunity – Bangladesh hosting 8th largest population in the world and consumers spending around USD 130 bn+ annually with an annual 6% growth rate. Right now the MAC population is 7% of the total, compared to 38% in Indonesia. However, within 2025 another 30 to 40 million consumers are expected to join the middle or affluent class. This would mean that cities with a population of at least 100,000 MACs will grow from 36 to 63 over the next decade.

The Boston Consulting Group with LightCastle Partners as their local data and analytics partner recently released their report on Bangladesh titled, “The Surging Consumer Market Nobody Saw Coming.” The report brings insights into the consumer market with 2,000+ surveys conducted across Bangladesh.

Here are some of the key takeaways from the study about the “Bangladeshi” consumers:

  • Currently the MAC population of Bangladesh is estimated at 12 million (households with income of US$ 400+) which is growing at a rate of 10.5% annually. This means by 2025 the current MAC population will triple. In addition these consumers live in close proximity with Bangladesh being the fifth most densely populated country in the world.

  • The Bangladeshi consumers are optimistic. 60%+ expect their income to rise over the next one year, 79% agree that living conditions have become better than the previous generation and will continue to move upward, which is different from developed markets. For example in the U.S., 75% of the consumers think that the next generation will be worse off. Moreover 69% of the respondents believe that their desire to purchase increase yearly.

  • Though the consumers are optimistic they are not very keen on taking debt. This means to increase spending people will have to depend on savings rather than credit. Only 20% of the MAC respondents and 6% overall uses credit cards. If needed, people prefer to borrow from friends or family or informal networks than go to financial institutions.

  • Bangladeshis are family people. Households typically have five members and consumers are keen to attend to immediate needs of the family over individual purchases. 75% of the respondents agreed to the statement “I never spend money on myself until the needs of my family are met.” By contrast, 57 percent of Indonesians, 55 percent of Thais, and 38 percent of Burmese agreed that their family needs come first. This means products designed to suit the needs of the whole family will get preference e.g. mobile packages that shares talk time across members.

  • Interestingly, Bangladesh based consumes are brand conscious and is one of the top factor they consider while making a purchase besides price and quality. Especially for consumer durables and personal care, 80% and 60% respondents respectively cited brand as a decision making factor while impact on health, convenience, discounts and offers ranked low. Additionally, consumers are willing to pay premium for good quality.

  • Based on take-off curves for consumer durables, it can be predicted that as income rises Bangladeshi consumers will trade up to higher standard of livings. This also points toward higher adoption of technology like smartphones and latest devices at a faster pace. For example, market penetration of smartphones in Bangladesh leaps from 25% of households among aspirant consumers to around 60% among emerging-middle consumers.

Consumers’ purchases of appliances that offer more convenience, such as refrigerators and smartphones, accelerate as their incomes rise. Consumption of goods offering more comfort and enjoyment tends to take off as households enter the established middle class. This is particularly true for durables such as air conditioners, flat-panel TVs, automobiles, and microwaves.

As the consumers enter the middle and affluent domain at a rapid pace – Bangladesh presents an expanding opportunity to businesses. The market leadership is still to be sealed and opportunities remain open across FMCG, consumer durables, e-commerce space and consumer financial services.

The key elements that would help businesses succeed would be quality (as income rises people would be more induced to pay higher), credit access and penetration (consumers should be able to avail personal loans especially for big ticket items), strong brand equity (given reliance factor exhibited by consumers), supply chain infrastructure (since people are used to go to some retail shops as opposed to super stores) and mobile centric digital channels deployment (95% of the internet user of the 50 million subscribers are on mobile devices).

Author: Bijon Islam, CEO, LCP