Consumer spending: Which megacities' residents have increasing cash to splash?

Where will Moscow feature in the rankings? Image: Getty.

There are many ways you can measure the growth of a city. You can measure the change in its population. You can measure the increase in the amount of space it occupies. You can measure the size of its economy.

Or, if you're the kind of person who likes to sell things to other people – or the kind who likes to sell information to those persons who are - then you can just look at who's spending.

So, that’s the topic of this week's sermon infographic. Last month, Euromonitor International, the world's "leading independent provider of strategic market research" (yes) published data showing how consumer spending in the world's megacities (that is, those with 10m+ people) seemed to be changing. Our old mates at Statista turned it into a chart, and this is the result:

Image: CityMetric/Statista. Click to expand.

So, what does it tell us? Some observations...

1) Most of the world's biggest cities are in the developing world

This isn’t about the economics, but it’s worth noting nonetheless. There are currently reckoned to be 30 megacities in the world. Only seven of these are in the developed world, and three of those in Asia.

So, in our western dominated world, only four of the world's megacities are in the west: two in Europe (London and Paris) and two in the US (New York, Los Angeles).

2) Some BRICs sink...

Remember the “BRICs” – economist Jim O'Neill's acronym for the world's next set of economic superpowers (Brazil, Russia, India, China) Well, some of them aren’t looking so healthy.

There are only three megacities where consumer spending is thought to have fallen in 2015-16: two in Brazil (Sao Paulo, Rio de Janeiro) and one in Russia (Moscow). There are no other megacities in those two countries.

The reasons for the two crises are different – Russia is struggling thanks to the collapse in oil prices and Western sanctions; in Brazil it’s a recession brought on by fiscal crisis – but nonetheless. Two of the BRICs aren’t looking so healthy right now.

3) It helps if you're rich

The figures shown here are absolute, not percentage ones – and this explains why developed world cities top the charts.

The $23bn increase in consumer spending in New York looks huge – but it's an increase of less than 2.6 per cent of the $900bn it saw the previous year. In per percentage terms, the increases in Los Angeles (2.8 per cent) and London (2.6 per cent) are similarly middling.

So where are the biggest increases?

4) ...and some BRICs soar

A lot of them are in China, unsurprisingly. Guangzhou's extra $7bn is a 7.7 per cent increase; in Wuhan it's 8.3, in Beigjing it's 8.9, and in the northern port city of Tianjin consumer spending is thought to have increased by 9.4 per cent this year.

But they're not the biggest increases of all. Those are in the Pakistani city of Karachi (9.5 per cent) and the Indian capital Delhi (10.5 per cent). Other Indian cities are doing pretty well, too: in Mumbai, spending is up by 6.6 per cent; in Kolkata it's 7.1.

5) BRICs aren’t everything

A number of cities outside the big emerging markets are also on their way up. To quote the blogpost in which Euromonitor first published the data...

While spending per capita in Jakarta is relatively low ($3,000 in 2015), Bangkok ($6,000) and Istanbul ($10,000) are roughly in line with Chinese megacities. By 2019, each of these three megacities is estimated to have 4-5m households with disposable income over $10,000, which will be about the amount that Tianjin, Guangzhou or Shenzhen has today.

So – those people with shiny stuff to sell are likely to focus their attention on the big, rich cities of the west for some time to come. But the options open to them are widening.


 

 
 
 
 

Here’s how Henry Ford and IKEA could provide the key to solving the housing crisis

A flatpack house designed by architectural firm Rogers Stirk Harbour and Partners, on display at the Royal Academy, London, in 2013. Image: Getty.

For many people, the housing market is not a welcoming place. The rungs of the property ladder seem to get further and further out of reach. There are loud calls to build hundreds of thousands of new homes (and equally loud demands that they’re not built in anyone’s back yard).

If there was ever a time to introduce mass-produced affordable housing, surely that time is now.

The benefits of mass production have been well known since Henry Ford’s car factories made the Model T back in 1908. It was only made in one colour, black, for economic reasons. Not because it was the cheapest colour of paint, but because it was the colour that dried the quickest.

This allowed the production line to operate at faster, more cost effective, speeds. And ultimately, it meant the product could be sold at a more attractive cost to the customer.

This approach, where processes are tested to achieve increasingly efficient production costs, is yet to filter properly into the construction of houses. This makes sense in a way, as not everybody wants exactly the same type of house.

Historically, affordable mass-produced housing removed a large amount of customisations, to ensure final costs were controlled. But there is another way. Builders and architects have the ability to create housing that allows a level of flexibility and customisation, yet also achieves the goal of affordability.


Back in 2006, the “BoKlok” approach to affordable housing was launched to great acclaim in the UK. Literally translated from Swedish, the term means “live smart”. Originally created from a collaboration between flat-pack favourite IKEA and Swedish construction giant Skanska, the BoKlok housing approach was to allow for selected customisation to maximise individuality and choice for the customers. But at the same time, it ensured that larger house building components were duplicated or mass-produced, to bring down the overall costs.

Standard elements – wall panels, doors, windows – were made in large numbers to bring the elemental costs down. This approach ensured the costs were controlled from the initial sketch ideas through to the final design choices offered to the customers. The kitchens and bathrooms were designed to be flexible in terms of adding additional units. Draw and cupboard fronts interchangeable. Small options that provided flexibility, but did not impact on overall affordability.

It’s a simple approach that has worked very well. More than 10,000 BoKlok houses have now been built, mainly in Norway, Sweden and Denmark, with a small number in the UK.

But it is only part of the architectural equation. The affordable housing market is vital, but the cost of making these homes more adaptable is rarely considered.

Flexibility is key. The needs of a house’s inhabitants change. Families can grow (and shrink) and require more room, so the costs of moving house reappear. One clever response to this, in BoKlok homes, has been to allow “built in” flexibility.

Loft living

This flexibility could include a loft space that already has flooring and a built in cupboard on a lower floor which can be simply dismantled and replaced with a “flat-pack style” staircase that can be purchased and installed with minimal disruption to the existing fabric.

Weeks of builders removing walls, plastering and upheaval are replaced by a trip to the IKEA store to purchase the staircase and the booking of a subcontractor to fit it. The original design accounted for this “future option” and is built into the core of the house.

The best approach to new affordable housing should consider combinations of factors that look at design, materials and processes that have yet to be widely used in the affordable housing market.

And the construction sector needs to look over its shoulder at other market places – especially the one that Henry Ford dominated over a century ago. Today’s car manufacturers offer customised options in everything from colour to wheel size, interior gadgets to different kinds of headlamp. These options have all been accounted for in the construction and costing of each model.

The ConversationThey share a similar design “platform”, and by doing so, considerably reduce the overall cost of the base model. The benefit is quicker production with the added benefit of a cost model that allows for customisation to be included. It is a method the construction sector should adopt to produce housing where quality and affordability live happily together.

David Morton, Associate Professor in Architecture and Built Environment, Northumbria University, Newcastle.

This article was originally published on The Conversation. Read the original article.