An assortment of issues such as high unemployment, household balance sheet reduction and anemic economic growth, has hindered consumerism in the developed world. While there are signs that things are getting better, continued uncertainty will cause the consumer sector growth to be muted across the United States and Europe. However, across the developing world, improving finances and strong economic growth have created the tailwinds of a major surge in shopper activity. (To learn more about emerging markets, see What Is An Emerging Market Economy?)

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The New Middle Class
The consumerism boom currently underway in the emerging markets can be compared to America's post-WWII period of the 50s and 60s. During this time, everything from cars and durables to household products and personal care goods saw an increase in sales. Strong economic growth across a variety of emerging-market nations is building the consumers of tomorrow. Increased commodity prices, a major contributor to many emerging market economies, has lifted millions out of poverty. For example, personal disposable income per capita in Latin America currently sits at about $5,739. Ten years earlier, the per capita figure stood at $3,404. An estimated 26 million people will join the ranks of the middle class every year through 2030. Over the next decade, India's middle class alone will be larger than the U.S. and Europe's combined.

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The history of poverty in many of these nations has also contributed to higher savings rates. Many people save as much as a third of their disposable income for retirement, health care and other family obligations. By contrast, the savings rate in the developed world is roughly 5%. Consumer and household debt are also extremely low. Combining these savings rates along with growing populations and it's no wonder why some analysts are predicting that emerging markets will create 445 million middle class consumers over the next five years.

While the theme is a long-term play, now may be the time to strike. An index created by Credit Suisse (NYSE:CS), which tracks emerging market consumer companies, is currently quite cheap. The CS EM Consumer index is trading at 12.5 times earnings. That compares to a P/E of 16 for the U.S. focused Consumer Discretionary Select Sector SPDR (NYSE:XLY). (To find out if you are part of the middle class, read 6 Signs That You've Made It To Middle Class.)

Playing the Trend
For investors, the newly minted emerging-market middle-class consumer could be one of the biggest trends of the decade. Adding exposure to the segment is critical. Both the iShares S&P Global Consumer Staples (NYSE:KXI) and iShares S&P Global Cons Discretionary (NYSE:RXI) track some of the largest multinational consumer companies. However, there are plenty of other ways to play the theme.


The easiest way to participate in the new wave of consumerism is through the EGShares Emerging Markets Consumer ETF (NYSE:ECON). The fund tracks 30 different emerging market consumer firms including South African media giant Naspers Ltd. (OTCBB:NPSNY) and beverage superstar AMBEV (NYSE:ABV). Since launching late last summer, ECON has returned over 18%, outperforming the broad emerging market indexes by 11%. Investors can also make a direct bet on China's consumer dominance via the Global X China Consumer ETF (Nasdaq:CHIQ).

Outside of the major cities in China, roughly 20% of homes have a refrigerator and in India, a refrigerator is the second-most aspirational want aside from a television. Both Whirlpool (NYSE:WHR) and Sweden's Electrolux AB (OTCBB:ELUXY) represent the two largest global appliance makers. Both have been making strong moves into the emerging world. Most recently, Electrolux purchased Egyptian appliance firm Olympic in order to access the Middle East.

The Bottom Line
While consumers in the developed world continued to be strained by myriad of factors, those in the emerging world are just beginning their consumer journeys. For investors, this multi-decade trend offers a great long-term play. The previous ideas along with the EGShares Consumer Services GEMS ETF (Nasdaq:VGEM) are a perfect way to play the trend. (Investing in the emerging can be risky. For more information on those risks, see The Risks Of Investing In Emerging Markets.)

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