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The Middle Class Retreat

Essay by   •  October 1, 2018  •  Essay  •  757 Words (4 Pages)  •  109 Views

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Problem Statement

Based on the megatrend “The Middle Class Retreat”, three key problem areas have been identified. The accumulation of goods is becoming less important, there is a growing need to optimize their limited resources, and an overall struggle to maintain economic status. The problem trend is quickly altering the way the sharing middle class live their lives, disrupting a wide range of sectors and industries.

Trend Analysis

The Middle-Class Retreat is one of Euromonitor International’s eight focus megatrends. For the scope of our project, we have narrowed the trend down to three key sectors. The first being the fact that the accumulation of goods is becoming less important to the middle class. They are attributing less value to owning a wide variety of new goods. Rather, they are embracing used goods and sharing services, allowing them to free up resources to make their actual (less frequent) purchases stress free. According to Euromonitor’s Global Consumer Trends Survey, consumers are continually looking for ways to simplify their lives (Euromonitor, 2017). This, paired with the increasing need for convenience and an increased value of free time, is making the accumulation of goods a mere thought in the back of the consumers mind.

The second key section identified in the megatrend is the growing need within the middle class to optimize their limited resources. They are constantly looking to get the most value out of every dollar they spend. This has caused a large segment of consumers to partially reinvent themselves in terms of their values and priorities when it comes to purchasing decisions. While the need to optimize limited resources is primarily driven by a “squeezed middle class” (Euromonitor, 2017), environmental concerns are also a key decision-making factor. Environmentally conscious consumers are purchasing fewer, higher quality goods and supplementing the higher price tag that comes with it, with the consumption of second hand items (Euromonitor, 2017).

Lastly, the daily struggle to maintain economic status has made a noticeable impact on the consumption patterns of the middle class. According to Euromonitor International, the middle class “have not experienced any significant improvements in their standards of living since the 2008-2009 global financial crisis, as a result of weak or stagnant income growth and continued economic uncertainty” (Euromonitor, 2017). The Canadian Policy Uncertainty Index, an index that uses three main components to measure policy-related economic uncertainty (newspaper coverage, federal tax code provisions and disagreement between among economic forecasters), has hit a quarterly all-time high since its origin in 1985. This uncertainty paired with the continuous struggle to maintain economic status has consumers seeking new options when it comes to their consumption decisions. Conspicuous consumerism is on its way out when it comes to the new “sharing middle class” segment.

Company/Industry Analysis

“Trends pertaining to the Middle Class Retreat have the potential to impact, and even disrupt, a wide range of sectors and industries, as well as giving rise to new business concepts and models.” (Euromonitor, 2017). The car share industry has been selected for the scope of this project. Although there are many players in the car share industry, Car2Go is the leading service provider, and the company in which we will be analyzing. According to Euromonitor’s Country Market Insight Reports, the global urban population is set to reach 5.2 billion by 2030 (Euromonitor, 2017). The increasing urbanization in developed countries paired with the “sharing middle class” consumer calls for an alternative method of transportation. The car-sharing industry is currently at the forefront of this trend.

Car-sharing membership has been growing exponentially since 2000, and has made massive progress since 2014 (Statista via UC Berkeley, see figure 2). The number of car-sharing users in 2015 was approximately 7 million. Frost and Sullivan consulting forecasted that this number will reach 36 million by 2025 (Statista via Frost & Sullivan, see figure 3). Car ownership has been seen as a traditional method for transportation. Car2Go provides an alternative business model to this costly method, offering a pricing structure that is less than half the average price of owning a vehicle (Metro Vancouver, see figure 4). Car2Go targets consumer segments such as residential complexes, business’, and those who simply cannot afford to purchase their own vehicle for everyday use. Car2Go allows these users quick and easy access to their vehicles for short-term or long-term use for a fraction of the cost of owning a vehicle (Metro Vancouver, 2014). With the emerging “sharing middle class” and the increasing demand for car sharing services, Car2Go is in a prime position to capitalize on these consumer behaviour trends and dominate the car-sharing industry.

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