Changing Indian Consumer

8/2/2019 Changing Indian Consumer

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Changing Indian Consumers

& Markets

Pingali Venugopal

DeanXLRI Jamshedpur



The Indian Consumer Is Rapidly

Transforming

Outlook– From Traditional to Modernized Traditional

Paradigm Shift in almost all aspects of life



Overall, competition and structural changeswithin the economy have raised the bar interms of what consumers have come to

expect. Automobiles are a case in point. Where sheer

availability was a variable before, today that'snot even a factor given the 13 companies and

40-odd models that compete in the 700,000-strong market



Expected Utility from Products/

Services

From Functional to Lifestyle



Eating habits

From traditional meals to Indianised “McDonalds”



Value From Merely Price, to Benefit /Effort (Price

+Time + Convenience)

I. For the same amount

of grocery shopping…

consumers arespending 20 % less

time

II. For the same amount

of eating out spends,

consumers are

spending about 50 %

less time

Saving time is moreimportant than saving

a few Rupees - 51%

I’d rather have more

time than money - 47%

I like to shop, butdo not have time - 47% I shop closest to

my home/office - 59 %

Source : Consumer Outlook



With the availability of low-interest financeschemes, price is increasingly becoming asmaller factor in a purchase decision in a

whole range of consumer durables also.



Consumers jump steps as they enter: today the linebetween entry-level and upgraded products isdisappearing. The newer generation is willing to pay

more if she is convinced she is getting better valuefor the higher price.

Upgrade is part of life. Today the average life of amobile is 12 months, that of a TV three years; cars

four to five years and soon even homes will bechanged more frequently. Clearly durability is nolonger the most desirable value.



"One household, multiple products“: two cars

is no longer a luxury but a practical necessityfor working couples; two TVs in the house is

recognition of the fact that different familymembers have different interests



Buying a TV set- Factors

Early nineties One, availability; two, price; and, three, picture

quality

Mid-nineties, the efficacy of an exchange scheme and the

number of channels a company offered

Today sophistication -one of the fastest growing

segments of the market is high-end flat TVs



Air-conditioners

In the early nineties, air-conditioner manufacturersfocused on institutional sales, leaving the dodgyunorganised sector, with its dirt-cheap and poorquality offerings, to service households

By the late nineties, sales to households boomed. In place of the clunky box that simply cooled the

room came sleek plastic shapes offering suchfeatures as a dust-free environment, split-room

cooling and so on and so forth.



1. Food and Grocery

2. Clothing

3. Footwear

4. Consumer durable / appliances

5. Home linen

6. Movies and theatre7. Eating out

Categories constituting 80 % of SEC AB consumer discretionary spending

1991 1. Food and Grocery

2. Clothing

3. Footwear

4. Consumer durable / appliances

5. Expenditure on DVDs and VCDs

6. Home linen7. Home accessories

8. Accessories

9. Gifts

10. Take-away/ Pre cooked / RTE meals

11. Movies and theatre

12. Eating out

13. Entertainment parks14. Mobile phones and service

15. Household help

16. Travel packages

17. Club membership

18. Computer Peripheral & Internet Usage

2003

Services are now taking away a huge chunk of the Consumers’

Wallet



The Indian economy is on the cusp of somethingbig. After a recent trip there, I am as enthusiasticabout India as I was about China in the late 1990s.

What excites me most is the potential for an

increasingly powerful internal consumption dynamic,an ingredient sorely missing in most other Asiandevelopment models.

STEPHEN ROACH, Wall Street Journal, Nov 2005

Mr. Roach is the chief economist at Morgan Stanley in NewYork



Private consumption currently accounts for64% of GDP -- higher than in Europe (58%),Japan (55%), and especially China (42%).

India's transition to a 7% growth path inrecent years is very much an outgrowth of theemerging consumerism of one of the world's

youngest populations.



Many Drivers

Demographics

Increased global exposure

Increased discretionary incomesacross wider spectrum of

population, across widergeography



Indian consumers

0 20 40 60 80 100

Very rich

Consuming class

Climbers

Aspirants

Destitutes

million households

2006-07

2001-02

1995-96



Since 1990 (after deregulation) the number ofsectors open to foreign participants hasexpanded steadily, and India’s working-class

population has increased and is likely tocontinue to grow for the next two decades atleast,



Working class

0

50

100

150

200

250

300

55+ 45-54 35-44 25-34 15-24 5'-14 0-4

P o p u l a t i o n 2001

2013

Consuming classincreasing



As Indians have grown richer, they havebegun to spend more on vehicles, phones,and restaurants, according to recent research

on consumption patters by Deutsche Bank.



Purchasing Power of Indian

Consumers Going by per capita GDP figures (US$340 per

capita), India would seem extremely poor country

However, the per capita figures do not reflect the

realistic picture of purchasing abilities of consumerhouseholds and market potential for a foreignbusiness enterprise because of significantdifferences in purchase power parities of various

currencies



In fact, the Indian rupee has a very highpurchase power parity compared to its

international exchange value The domestic purchasing power of a US

dollar in the US is closer to the purchasingpower of six rupees in India, for equivalentgoods and services

As a result, India ranks fourth richestnation in the world, on purchase power

parity terms, despite being having low percapita national income



Segments

India has various consuming classes

The young and the restless

Teen Riches, Dudes & Dudettes

Call Centre Boomers The Bold and bountiful

The Yeppies (Young Entrepreneurial Professionals)

The Yippies (Young International Professionals)

The raffles (Rural Affluent Farm-Folk): The golden Folks in High Spirits



1 The Young & Restless

India has the youngest population profile indifferent income segments and locations,who are influencing their parents’ spending.

Some of them are also beginning to earnmoney through part-time for full-time jobs,arising out of opportunities that did not existearlier.

Some of these segments include



Teen Riches, Dudes & Dudettes

This group mainly comprises young peoplewho are from relatively affluent families.Eating out, movies and occasional clubbing

are an integral part of their lifestyle. Dress isinvariably modern, and attire must bechanged frequently



Call Centre Boomers

Formerly located mainly in the IT-savvy cities,call centres and other IT-Enabled Servicecentres are spreading to other cities and

towns as well. Populated largely byyoungsters out of school or college, drawingin their first incomes, and at levels unheard ofearlier



2 The Bold and The Bountiful

The Yeppies (Young Entrepreneurial Professionals): entrepreneurs who have made it after the good

liberalization

The Yippies (Young International Professionals):

work with multi-national companies, who are based in Indiabut travel extensively

The raffles (Rural Affluent Farm-Folk):

the farmer with tax-free income spend on a wider choice of

products



The golden Folks in High Spirits

The retired folk, with kids who are marriedand living in their nuclear families, or evenout of the country

Several of them have led fairly goodlifestyles, and have the means to continue todo so



Markets

India has sometimes been called a nation of shops

Highest per capita outlets in the world - 11.5 outletsper 1000 population

As much as 96 per cent of the 12 million-plus outletsare smaller than 500 square feet in area.

The organized sector accounts for just 2 per cent. Unorganized sector includes low-cost retailing such

as the local kirana shops, owner-manned generalstores, paan/beedi shops, convenience stores,

handcart and pavement vendors



Traditional Kirana stores



Complete utilisation of space in traditional outlets



Consumer Durables outlet



Road side kiosks



Computer Accessories outlet



Changing Market scenario

Since the early 1990s the market in India has

been characterised by a major shift fromtraditional shops to modern formats thatinclude department stores, hypermarkets,supermarkets and specialty stores across a

wide range of categories Sales from the organized stores are to

expand at growth rates ranging from 24% to49% per year during 2003-2008, according to

a latest report by Euromonitor International



Retail Growth across countries

2004

0

10

2030

40

50

J a p a n

C h i n a I n d i a

T h a i l a n d

S i n g

a p o r e

Retailindustry

Largestretailer

Top 5retailers

Source: Retail Asia 2005 , KPMG in India Analysis 2005



Fastest growing retail segments in India

0 20 40 60 80 100

Food and grocery

Clothing

Furnitures and fixtures

Pharmacy

Durables

Footwear and leather

Jewelry



India No. 1 Emerging Retail Growth Market

AT Kearney Global Development Index (GDRI)

GDRI Rank 2003 GDRI Rank 2004 GDRI Rank 2005

Russia Russia India

Slovak India Ukranie

China China China

Hungary Slovenia Slovenia

India Croatia Latvia

Turkey Latvia Croatia

Morocco Vietnam Vietnam

Egypt Turkey Turkey

Vietnam Slovakia Slovakia

Tunisia Thailand



Retail growth opportunity

0

20

40

60

80

T a i w

a n

M a l a y

s i a

T h a i l a n d

B r a z i l

I n d o n

e s i a P o

l a n d C h i n a I n d

i a

% p

e n

e t r a t i o n



1. Food and grocery • Opportunity: Rs 6,00,000 crore

Big Players: RPG, Pantaloon

Likely Big Players of Tomorrow: Reliance through its malls

at fuel pumps, Tatas, Godrejs 2. Lifestyle Retailing

Opportunity: Rs 150,000 crore

Big Players: Shoppers’Stop, Pantaloon, Piramyd,Westside, Lifestyle

Likely Big Players of Tomorrow: Raymond/ Singhanias,Wadias



3. Consumer durables

Opportunity: Rs 50,000 crore

Big Players: Vivek Ltd., Vijay Sales

4. Rural Retail Opportunity: Rs 3,00,000 crore

Big Players: ITC • Likely Big Players of Tomorrow:

ITC, M&M, DCM Shriram



5. Broadband-driven retailing

Big Players: Reliance Infocomm

Likely Big Players of Tomorrow: Reliance, Bharti

6. Fuel-pump driven retailing Opportunity: Rs 10,000 crore*

Big Players: Indian Oil, BP, Hindustan Petroleum

Likely Big Players of Tomorrow: Reliance, Indian Oil,Bharat Petroleum, Hindustan Petroleum



Under-exploited categories in organized retail

Con durables, IT & Electronics,Communication 45,000 Furniture & Furnishings 30,000 Jewellery & Accessories 45,000 Footwear 6,500 Gifts and Handicrafts 6,000 Saree and Ethnic wear 12,000 Health & Nutrition 1,000 Children’s wear, Maternity wear, Accessories 4,700

Figures are estimated market size in Rs crore Source: KSA Technopak estimates for 2004-05



More to come !

From just 3 malls in 2000, India is all set tohave over 2000 malls. According toconsultancy firm Technopak, the industry will

see $20bn of fresh investments (excludinginvestments in real estate) and 2,000hypermarkets coming up within the next fiveyears

Thank You

Changing Indian Consumer

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