URBAN HOUSEHOLDS: CHALLENGES AND

OPPORTUNITIES
September 2017
INTRODUCTION
URBAN OPPORTUNITIES
URBAN CHALLENGES
URBAN CASE STUDIES
CONCLUSION
INTRODUCTION

Scope

Urbanisation is the increase in the proportion of people living in towns and Disclaimer
cities. The urbanisation of existing households either occurs because families Much of the information in this
briefing is of a statistical nature and,
move from rural areas to urban ones, or because an existing urban space while every attempt has been made
expands and envelops suburban areas, or when an urban area is artificially to ensure accuracy and reliability,
Euromonitor International cannot be
created due to an inflow of development and investment. held responsible for omissions or
errors.
Figures in tables and analyses are
calculated from unrounded data and
may not sum. Analyses found in the
briefings may not totally reflect the
companies opinions, reader
discretion is advised.

Urbanisation is a constant
theme among households, as it
shifts the demographics and
economics of consumption and
development. The continued
expansion in urban households
worldwide brings massive
challenges in ensuring sufficient
urban jobs and infrastructure,
but it also brings about
investment opportunities and
creates vibrant new markets.
This Strategy Briefing will
analyse both the prospects and
the obstacles, while providing
an array of case studies focused
on urban markets.

Euromonitor International STRATEGY BRIEFING : URBAN HOUSEHOLDS CHALLENGES AND OPPORTUNITIES PASSPORT 3
INTRODUCTION

Key findings

Urban households are Almost every single country is seeing a gradual rise in urban households, with
surging the trend especially pronounced in emerging markets with strong economic
expansion. Countries such as Nigeria and China are witnessing
unprecedented speed of city development, while in developed nations existing
mega cities are stretching out to cover more households with suburban areas.
Urbanisation is creating new The city-driven phenomenon of single-person households, bigger uptake of
clusters of consumption household appliances and digital products, and more appealing property
markets are just some impacts of more urbanised households. Companies
able to take early-mover advantage can benefit from new audiences.
Overcrowding creates A growing number of households in limited urban spaces creates major
structural challenges overcrowding challenges for states. Overcrowding leads to chronic housing
shortages and places tremendous pressure on urban infrastructures, such as
transport, electricity, water supply, sewage and sanitation, which in turn affect
the business environment of a country as a whole.
Soaring property prices As urban areas expand and envelop more households, property prices
create societal inequalities typically rise in the area. This process, sometimes under the guise of
gentrification, is pricing out low- and middle-income consumers from local
home ownership.
Savvy brands taking Dairy and meat producers in China, Amazons internet retail operations in
advantage of urban India, urban developers in London, and a gin brand targeting urban hipsters
demands are just some examples of companies leveraging urbanised audiences.

Euromonitor International STRATEGY BRIEFING : URBAN HOUSEHOLDS CHALLENGES AND OPPORTUNITIES PASSPORT 4
INTRODUCTION

A much more urbanised world, centred on homes in mega cities

Urbanisation will continue apace through to 2030, with the year posting a record total in terms of
households and people present in urban areas. Rural households are not contracting, but urban hubs are
expanding at a much faster pace. Factors, such as immigration from poverty-stricken areas, cities
expanding to incorporate more suburban and rural zones, and the creation of entirely new towns and cities,
will drive urbanisation further. By 2030, some 5.0 billion people will be living in 1.7 billion urban households.
States encourage urbanisation, as its higher population density offers an opportunity to deliver basic
services, such as water and sanitation, more cost-effectively to greater numbers of people. Cities also play
a pivotal role in creating national wealth, improving economic development, attracting foreign direct
investment, and helping to maximise resources to achieve gains in productivity and competitiveness.

Global Households by Location: 2000-2030

2,500

2,000
Households (million)

1,500

1,000

500

0
2000 2030
Urban Rural
Sources: Euromonitor from national statistics
Note: 2017-2030 figures are forecast

Euromonitor International STRATEGY BRIEFING : URBAN HOUSEHOLDS CHALLENGES AND OPPORTUNITIES PASSPORT 5
INTRODUCTION

Surging urbanisation is creating new clusters of consumption

Top Five Markets Globally by Growth in Markets are being reshaped, as newly-urbanised
Urban Households: 2011-2016 households gain access for the first time to a
80 variety of retail and commercial services available
in cities. Developed markets are more stagnant in
urban growth, making the trend less pronounced.
For example, China is witnessing unprecedented
speed of city development, with an average of 7.0
60
million annual housing completions over 2011-
2016, most of these focused in urban areas.
Household goods store Ikea has taken advantage
of Chinas apartment-heavy landscape to provide
% growth

40 flatpack furniture for the middle classes, with China

its biggest market by far in the Asia Pacific region.
In terms of segments being driven globally by
urbanisation, these include digital brands that
20 benefit from greater user numbers with access to
good urban infrastructure and real estate sectors
driven by swelling demand for housing. Urban
homes are much more likely to be in-trend with the
latest gadgets, dcor and appliances than rural
0
Qatar Jordan Kuwait Nigeria Vietnam
households in general.

Source: Euromonitor International from national statistics

Euromonitor International STRATEGY BRIEFING : URBAN HOUSEHOLDS CHALLENGES AND OPPORTUNITIES PASSPORT 6
INTRODUCTION

Households drive demand for recreational activities in cities

Cinemas are a new form of
entertainment for many former
rural households and demand
is surging. Almost 25,000 new
cinema screens were
added in China over 2011-2016.
Emerging market consumers
want the urban shopping
experience. A flood of new
investment has fuelled a mall
construction boom in markets
such as India and Mexico.
Urban areas are becoming hubs of
dining options, as consumers want
more diverse food experiences.
Global home expenditure on catering
expanded by 8.2% in real terms over
2011-2016.

A premium of the urban lifestyle is Growing digital homes and urban

cheaper and better access to
digital services. The number of
internet users in emerging countries
almost doubled over 2011-2016,
unlocking uptake of services.
crowds are driving the surging adspend
markets, particularly in mobile, online
and cinema advertising. For example, in
Indonesia online adspend increased by
over 1,000% in real terms over 2011-2016.

Euromonitor International STRATEGY BRIEFING : URBAN HOUSEHOLDS CHALLENGES AND OPPORTUNITIES PASSPORT 7
INTRODUCTION
URBAN OPPORTUNITIES
URBAN CHALLENGES
URBAN CASE STUDIES
CONCLUSION
URBAN OPPORTUNITIES

City-centred, single-person households drive wave of consumption

Top 10 Countries Globally with the Top 10 Markets by Single-Person

Fastest-Growing Single-Person Households: 2016
Households: 2011-2016
Iran China
Qatar USA
Kuwait Japan
Jordan Germany
Algeria Russia
Vietnam India
Chile France
Philippines Italy
Ecuador Brazil
Kenya United Kingdom
0 50 100 0 20 40 60 80 100
% Growth Households (millions)
Source: Euromonitor International from national statistics Source: Euromonitor International from national statistics

Rapid urban development and the appropriation
of urban values is driving the growth of single-
person households globally. Urban consumers
are much more likely to focus on their career or
education and delay family life. Access to better
urban health services extends life longevity,
meaning elderly people are more likely to live as
a divorced or widowed single person.
Singleton homes are the polar opposites of family
abodes, with the focus set on smaller, convenient
products. Younger singletons tend to be in-trend and
pay attention to fashion, technology and lifestyle
choices. However, singletons do not have the
combined spending power of a couple and often
seek out budget everyday items, in order to fulfill
their lifestyles when it comes to high-end goods.

Euromonitor International STRATEGY BRIEFING : URBAN HOUSEHOLDS CHALLENGES AND OPPORTUNITIES PASSPORT 9
URBAN OPPORTUNITIES

Highly urbanised developed economies attractive for appliances

As the Passport Connector diagram here Correlation Between Urban Households and Retail Market
demonstrates, markets can be split up for Large Cooking Appliances in Emerging and Developed
into specific quadrants for appliances Countries: 2016
uptake based on urbanisation.
The bottom-left quadrant represents low
urban penetration/low appliances uptake,
and includes almost exclusively emerging
economies with large rural segments such
as Vietnam.
The top-left quadrant is high urban/low
appliances, representing emerging
markets such as Mexico that have large
and widespread cities but low household
incomes, which limit appliances uptake.
The top-right quadrant is the sweet spot
for appliance markets, as it is high
urban/high appliances, and is made up
largely from developed, wealthy
economies like Scandinavian countries.
Very few markets fall into the bottom-right
quadrant of low urbanisation/high
appliances.

Euromonitor International STRATEGY BRIEFING : URBAN HOUSEHOLDS CHALLENGES AND OPPORTUNITIES PASSPORT 10
URBAN OPPORTUNITIES

Urban households drive stronger rental and mortgage markets

One of the primary facets of urbanisation is rising property prices, as incoming consumers drive demand for
housing in a more densely populated area. This in turn stimulates the entire real estate market, as home-
seekers look to mortgages and rentals for affordable solutions.
Countries experiencing some of the fastest rates of urbanisation (such as India, Nigeria and Pakistan) are
also among the most dynamic growth markets for mortgages and rentals.

Growth in Mortgaged Homes and Urban Homes: 2000-2016 Rented Households Globally
2000-2016
Mortgaged homes, Urban homes, 520
Rank Country
% growth % growth
1 Qatar 16,396 412 500

2 Hungary 3,614 19.3

480
3 Bahrain 2,468 55.5

Million
4 Bulgaria 2,070 12.9 460

United Arab
5 1,957 253
Emirates 440

6 Vietnam 1,695 130

420
7 Slovakia 1,388 12.3
8 Malaysia 1,167 91.6 400
20- 20- 20- 20- 20- 20- 20- 20- 20- 20- 20- 20- 20- 20- 20- 20- 20-
9 Russia 930 12.6 00 01 02 03 04 05 06 07 08 09 10 11 12 13 14 15 16
Source: Euromonitor International from ITU/OECD/
10 Thailand 773 141 national statistics

Euromonitor International STRATEGY BRIEFING : URBAN HOUSEHOLDS CHALLENGES AND OPPORTUNITIES PASSPORT 11
URBAN OPPORTUNITIES

Digital opportunities more abound among urban homes

There remains a major gap in the access to Penetration of Digital Goods Among
digital services between rural and urban US Adults by Location: 2016
households worldwide. Even in developed Desktop/Laptop
markets like the USA, rural homes are behind
Smartphone
their urban counterparts in access to broadband,
Home broadband
tablets and smartphones.
Tablet
The surge in urban households worldwide has All of the above
been accompanied by a correlated rise in
0 50 100
household broadband penetration.
% of Adults
Urban homes have been the primary driving Suburban Urban Rural
Source: Pew Research Center survey
forces behind digital trends that have reshaped
retailing and consumption in cities.
One such trend is cocooning living a fully Global Urban Households and Broadband
Penetration: 2000-2016
domesticated lifestyle by receiving goods and 1,400 50

Households (million)

% of Households
services at home without needing to leave the 1,200
40
house. E-commerce, takeaway foods, and home 1,000
800 30
entertainment are the big winners. 600 20
Another trend is sofa shopping, when 400
10
200
consumers ignore their PCs to shop on mobile
0 0
devices at home for comfort. This also leads to
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
2012
2013
2014
2015
2016
multi-screening, the use of multiple screens (TV,
mobile, tablet) to consume information. Urban Households Possession of Broadband Internet
Source: Euromonitor International from ITU/OECD/national statistics

Euromonitor International STRATEGY BRIEFING : URBAN HOUSEHOLDS CHALLENGES AND OPPORTUNITIES PASSPORT 12
INTRODUCTION
URBAN OPPORTUNITIES
URBAN CHALLENGES
URBAN CASE STUDIES
CONCLUSION
URBAN CHALLENGES

Household surges create economic and demographic bottlenecks

As the number of urban households continues Top 10 Cities by Growth in Households: 2017-2030
to surge across many economies, residents
and state structures are facing rising Absolute in
% growth,
challenges. Rank Country 000, 2017-
2017-2030
2030
Poverty, the decline in the concept of the
family, higher unemployment, lower fertility 1 Manama (Bahrain) 64.1 72.3
rates, and the increased need for social, Douala
2 43.8 328
environmental and economic development are (Cameroon)
the unfortunate consequences of urbanisation. 3 Doha (Qatar) 41.8 206
Asia alone is already home to some 17 mega 4 Cairo (Egypt) 40.4 2,739
cities (cities with over 10.0 million people), 5 Nairobi (Kenya) 39.4 525
which is expected to grow to 22 by 2030.
6 Lagos (Nigeria) 38.9 1,059
Of the worlds top 10 fastest-growing cities in
terms of households over 2017-2030, seven Kuala Lumpur
7 33.2 693
(Malaysia)
are in extremely low-income markets (Bahrain,
Qatar and China have been able to 8 Tianjin (China) 32.5 2,010
demonstrate sustainable population Manila
9 31.3 1,961
expansion). Countries like Cameroon, Pakistan (Philippines)
and Nigeria are already facing many urban 10 Karachi (Pakistan) 31.0 1,042
obstacles, such as congestion management, Source: Euromonitor International from national statistics
overpopulation, widespread urban poverty, Note: Figures are forecast

pollution, and housing shortages.

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URBAN CHALLENGES

Low and middle-income consumers priced out of urban hubs

Property prices in major cities are expanding, alongside the

general cost of living (utilities, services, foodstuff). Living in
a capital city or urban hub, such as London, New York,
Tokyo or Shanghai, is already becoming unaffordable to
most local inhabitants. This is creating a housing crisis
across many countries, which is only set to worsen by 2030,
as central cities become accessible only to the wealthy.
In the UK, for example, house prices increased by 23.0%
over 2011-2016 and are expected to continue rising going
forward. Prestige cities like London are not only attracting
more people, they are also attracting foreign finance. Many
housing projects are aimed at wealthy foreign buyers, either
private or equity firms. In Londons stylish Thameside
housing development, foreign purchasers have bought
some 80.0% of homes.
In China, the refusal of developers to make new homes
more affordable, as prices continue to rise, is creating huge
empty districts. According to China's Southwestern
University of Finance and Economics, more than one in five
homes in the countrys urban areas is vacant. Willing buyers
are priced out of the market. These conditions are turning
urban landscapes into speculative financial instruments,
rather than generating communities and prosperity.

Euromonitor International STRATEGY BRIEFING : URBAN HOUSEHOLDS CHALLENGES AND OPPORTUNITIES PASSPORT 15
URBAN CHALLENGES

Urban gentrification encourages household segmentation

Impact of Population Density and Income in Selected Developed Rising urban property prices have
Cities: 2015 and 2016 created a process of social
segmentation, whereupon specific
groups are alienated. According to
the largest analysis on the issue
as of late 2016, performed by
Nathaniel Baum-Snow of the
University of Toronto and Daniel
Hartley of the Federal Reserve of
Chicago, stronger inward
population streams in the USAs
urban cores since 2000 have been
made up of affluent and highly
educated whites. A higher cost of
living (particularly as it concerns
housing), which this demographic
has brought along, has priced out
lower-income, less-educated racial
minorities to economically
disadvantaged locations of the
Source: Euromonitor International from national statistics metropolitan areas a process
Note: The size of the bubble represents average disposable household income in a city in 2016.
called gentrification or to less
expensive metropolises altogether.

Euromonitor International STRATEGY BRIEFING : URBAN HOUSEHOLDS CHALLENGES AND OPPORTUNITIES PASSPORT 16
INTRODUCTION
URBAN OPPORTUNITIES
URBAN CHALLENGES
URBAN CASE STUDIES
CONCLUSION
URBAN CASE STUDIES

Changing China: Urban households reshape local food traditions

Chinese household expenditure on milk, cheese and eggs rose by over 20.0% in real terms over
2011-2016, as some 40.0 million new urban homes were added to the market over the same
period.

As Chinas households have urbanised rapidly and
incomes risen in tandem, local consumers are
shifting their tastes. Demand for expensive
European staples like cheese and wine has
exploded, while beef and dairy products are
stretching local reserves to their limits.
The proximity of Australia and New Zealand to
China, as well as an existing free trade agreement,
has placed brands from these markets into a good
position to profit. Bega Cheese Company and
Fonterra are just two Australasian firms that have
moved quickly into China with significant success
in major cities.

Euromonitor International STRATEGY BRIEFING : URBAN HOUSEHOLDS CHALLENGES AND OPPORTUNITIES PASSPORT 18
URBAN CASE STUDIES

Pocket Living: Targeting singletons with small urban apartments

Although the UK is dominated by houses as the primary dwelling type, urbanisation has meant
that demand for apartments has grown much faster, with apartments expanding by 7.7% over
2011-2016.

Pocket Living is a UK residential property In mid-2017, the company received an investment

developer that builds one-bedroom starter
apartments in London at a discounted price. The
company touts itself as a solution to the citys
shortage of affordable housing, through its
sustainable, modular housing units.
of 25.0 million from the London mayors office
with an agreement to build more than 1,000 homes
for first-time buyers in the capital. However, the
small homes have been criticised as actually being
fairly expensive on a price-per-square-foot basis.

Euromonitor International STRATEGY BRIEFING : URBAN HOUSEHOLDS CHALLENGES AND OPPORTUNITIES PASSPORT 19
URBAN CASE STUDIES

Amazon: Appeal of Indias urban surge lures e-commerce giant

Indias highly populated households are particularly attractive for internet retailers, as they
guarantee strong consumption per household. In 2016, 4.5 persons on average resided in an
Indian urban household.

One of the greatest modern migrations from rural
to urban areas attracted US giant Amazon in 2013.
The internet retailer has invested over US$5.0
billion into India, as it targeted urban consumers
driving demand for quick deliveries and competitive
prices in one of the largest retail markets in the
world.
The gamble (Amazon has a limited presence in
emerging markets, with notable portfolio absences
such as Russia and South Africa) on urban
demand has paid off, as India is Amazons fastest-
growing market globally and local business
doubled for the company in 2016.

Euromonitor International STRATEGY BRIEFING : URBAN HOUSEHOLDS CHALLENGES AND OPPORTUNITIES PASSPORT 20
URBAN CASE STUDIES

Hendricks Gin: Marketing to urban Millennials and hipsters

US household expenditure on alcoholic spirits increased by 5.5% in real terms over 2011-2016, as
many traditional brands overhauled their marketing models to appeal to urban audiences.

The rise of urban households unleashes a lucrative
consumer segment urban Millennials and
hipsters are their byproduct. If this hard-to-reach
audience can provide validation to a product, its in-
trend value can surge. However, few have been
able to market successfully to this group.
One firm to have done this well is alcohol brand
Hendricks Gin, which has used Victorian urban
chic to specifically target urban hipsters in the
USA. Through events and emporiums in trendy
downtown locales, the brand has reached well-
educated, high-income young Millennials in cities
like Boston and New York.

Euromonitor International STRATEGY BRIEFING : URBAN HOUSEHOLDS CHALLENGES AND OPPORTUNITIES PASSPORT 21
INTRODUCTION
URBAN OPPORTUNITIES
URBAN CHALLENGES
URBAN CASE STUDIES
CONCLUSION
CONCLUSION

Urban households surge reshapes markets

Euromonitor International STRATEGY BRIEFING : URBAN HOUSEHOLDS CHALLENGES AND OPPORTUNITIES PASSPORT 23
CONCLUSION

Opportunities in real estate, singletons, appliances and digital

Euromonitor International STRATEGY BRIEFING : URBAN HOUSEHOLDS CHALLENGES AND OPPORTUNITIES PASSPORT 24
CONCLUSION

Challenges include housing shortages, congestion and inequality

Euromonitor International STRATEGY BRIEFING : URBAN HOUSEHOLDS CHALLENGES AND OPPORTUNITIES PASSPORT 25
CONCLUSION

Global case studies in targeting urban households

Euromonitor International STRATEGY BRIEFING : URBAN HOUSEHOLDS CHALLENGES AND OPPORTUNITIES PASSPORT 26
FOR FURTHER INSIGHT PLEASE CONTACT
Pavel Marceux
Households Specialist
pavel.marceux@research.euromonitor.com

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