Firms ’ignore’ $5 trillion market
Tuesday, March 20, 2007
Businesses are failing to tap into a global market among low-income earners worth a potential $5 trillion (?2.6 trillion), according to a report.
More than 4 billion consumers across the world are being ignored by firms, the World Bank-affiliated study said.
The report focuses on people in what it describes as the “base of the pyramid” segment of the world’s population.
Although poor, they are better off than the 1.2bn people who live in abject poverty on less than $1 a day.
According to the report, so-called base of the pyramid markets are often rural, underserved and dominated by the informal economy.
Many of the people assessed by the report live in Asia, Latin America, Africa and Eastern Europe.
The study was produced by the International Finance Corporation – the private sector arm of the World Bank, together with researchers at the World Resources Institute.
For the first time, the study measured the size of markets at the base of the economic pyramid using income and expenditure data from household surveys.
Asia, including the Middle East, has the largest base of the pyramid market, with 2.86 billion people possessing a combined potential purchasing power of $3.5 trillion.
It is followed by Latin America, with a low-income market worth $509bn.
The market in Eastern Europe is worth $458bn, while the base of pyramid market in Africa is worth $429bn.
“This report shows how critical it is to focus on the ’base of the pyramid’ in all its dimensions,” said Jonathan Lash, president of the World Resources Institute.
“The base of the pyramid wins when brought into the formal economy. Business wins when it pays attention to the base of the pyramid.”