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 / Spring 2004 / Issue 34(originally published by Booz & Company)


6 Truths about Emerging-Market Consumers

Because of their limited and unstable cash flow, low-income consumers tend to shop daily and make small purchases. Such daily shopping trips don’t justify going long distances to a store. Our research showed that low-income consumers want to be able to walk no more than a few blocks from their homes to do their shopping, and they don’t want to take public transportation. To them, round-trip bus fare or a short taxi ride is a significant expense. A retailer located more than a five-minute walk or three to four bus stops away from a customer’s immediate neighborhood would have to discount its products 25 to 55 percent in order for this customer to justify paying for transportation to shop in the store.

Most low-income consumers living in urban areas can find a number of traditional over-the-counter shops, small independent supermarkets, and open-air markets close to their homes — what are sometimes referred to as “up and down the street” retail formats. For this consumer, shopping in a store up or down the street significantly lowers total purchasing cost.

The “lowest cost” myth is also refuted when it comes to choosing the size of an item. Budget-conscious consumers in developed markets like to buy oversized packages, because they have a lower per-unit cost. But in developing markets, emerging consumers tend to buy products in smaller sizes, even though the per-unit cost is higher, because they are constrained by smaller incomes and living spaces. According to our research, shelf prices in traditional and self-service stores are 5 to 20 percent higher than those in large supermarkets.

  • Myth #4: If they did not face budgetary constraints, emerging consumers would prefer modern supermarkets.
  • Truth: Emerging consumers are satisfied with traditional retailers, and don’t necessarily aspire to shop in modern supermarkets.

It’s easy to think of emerging consumers as “junior” versions of middle- and high-income consumers. The assumption is they will automatically want to shop in a modern supermarket once their incomes rise, especially if they can afford to buy a car to drive there.

In reality, emerging consumer segments we observed, especially in Colombia, Mexico, and Argentina, do not buy in supermarkets. In Brazil, a moderate number of consumers shop in stores larger than traditional markets, but they still prefer independent stores, or small neighborhood chains with no more than four or five stores, over larger retail companies. In the city of São Paulo, Brazil, ferias, which are street markets licensed by city government, sell 70 percent of the overall supply of fresh food (mostly produce, beef, fish, and poultry). In Chile and Costa Rica, more emerging consumers told us they shop in supermarkets, but they also noted that large supermarkets are located close by their homes.

Product variety could attract emerging consumers to supermarkets, but it won’t necessarily make them buyers. Sometimes shopping is simply a form of entertainment. Customers to whom we spoke described how they like to browse among personal care and general merchandise items found in larger stores, but they don’t buy the products.

Sometimes too much variety can evoke negative feelings among emerging consumers; they worry they may feel tempted to buy more than they need. Too many choices may make shopping feel time consuming, or raise feelings of inferiority if a consumer sees too many items she can’t afford. Emerging consumers value product assortments that respond to their desire for better-performing products, certain brands, economical alternatives, and emotional validation. These are decidedly more abstract retailing concepts than that of simply filling a store with thousands of stock keeping units (SKUs) and running price promotions.

Emerging consumers don’t see as “high quality” the uniformly shaped, brightly colored, and unblemished fruits and vegetables one finds in large supermarkets. In fact, these consumers prefer produce sold by street retailers to the so-called high-grade produce found in supermarkets. In our study, people said they view the stocking and ripening process employed at large supermarkets as unnatural and complained that perfectly waxed apples and bright red, unblemished tomatoes not only are artificial, but taste bad. In contrast, they described products sold by vendors on the street or in open-air markets as “wholesome” and “farm fresh.” Also, the prices for fresh produce sold in open-air market formats can be substantially lower than those in chain stores, because vendors often reduce prices throughout the day.

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  1. James A. Gingrich, “Five Rules for Winning Emerging-Market Consumers,” s+b, Second Quarter 1999; Click here.
  2. Alonso Martinez, Ivan De Souza, and Francis Liu, “Multinationals vs. Multilatinas: Latin America’s Great Race,” s+b, Fall 2003; Click here.
  3. C.K. Prahalad and Stuart L. Hart, “The Fortune at the Bottom of the Pyramid,” s+b, First Quarter 2002; Click here.
  4. David Luhnow and Chad Terhune, “A Low-Budget Cola Shakes Up Markets South of the Border,” Wall Street Journal, October 27, 2003
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