Changing Indian Consumers

& Markets
Pingali Venugopal
Dean
XLRI Jamshedpur

The worlds economic centre of gravity is

shifting-away from the established, wealthy
economies of Europe, Japan, and North
America and towards the Asia Pacific
India is one of the fastest-growing large
economies in the world.
Over the last 15 years India has changed
much faster than many predicted.

The Indian Consumer Is Rapidly

Transforming

Paradigm Shift in almost all aspects of life

Outlook From Traditional to Modernized Traditional

Overall, competition and structural changes

within the economy have raised the bar in
terms of what consumers have come to
expect.
Automobiles are a case in point. Where sheer
availability was a variable before, today that's
not even a factor given the 13 companies and
40-odd models that compete in the 700,000strong 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)
Saving time is more
important than saving
a few Rupees - 51%

I like to shop, but

do not have time - 47%

I. For the same amount

of grocery shopping
consumers are
spending 20 % less
time
II. For the same amount
of eating out spends,
consumers are
spending about 50 %
less time

Id rather have more

time than money - 47%

I shop closest to
my home/office - 59 %

Source : Consumer Outlook

With the availability of low-interest finance

schemes, price is increasingly becoming a
smaller factor in a purchase decision in a
whole range of consumer durables also.

Consumers jump steps as they enter: today the line

between entry-level and upgraded products is
disappearing. The newer generation is willing to pay
more if she is convinced she is getting better value
for the higher price.
Upgrade is part of life. Today the average life of a
mobile is 12 months, that of a TV three years; cars
four to five years and soon even homes will be
changed more frequently. Clearly durability is no
longer the most desirable value.

"One household, multiple products: two cars

is no longer a luxury but a practical necessity
for working couples; two TVs in the house is
recognition of the fact that different family
members have different interests

Buying a TV set- Factors

Early nineties

Mid-nineties,

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

quality
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 manufacturers

focused on institutional sales, leaving the dodgy
unorganised sector, with its dirt-cheap and poor
quality 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 such
features as a dust-free environment, split-room
cooling and so on and so forth.

Services are now taking away a huge chunk of the Consumers

Wallet

1.
2.
3.
4.
5.
6.
7.

Food and Grocery

Clothing
Footwear
Consumer durable / appliances
Home linen
Movies and theatre
Eating out

1991

1.
2.
3.
4.
5.
6.
7.
8.
9.
10.
11.
12.
13.
14.
15.
16.
17.
18.

2003

Food and Grocery

Clothing
Footwear
Consumer durable / appliances
Expenditure on DVDs and VCDs
Home linen
Home accessories
Accessories
Gifts
Take-away/ Pre cooked / RTE meals
Movies and theatre
Eating out
Entertainment parks
Mobile phones and service
Household help
Travel packages
Club membership
Computer Peripheral & Internet Usage

Categories constituting 80 % of SEC AB consumer discretionary spending

The Indian economy is on the cusp of something

big. After a recent trip there, I am as enthusiastic
about 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 Asian
development models.

STEPHEN ROACH, Wall Street Journal, Nov 2005

Mr. Roach is the chief economist at Morgan Stanley in New
York

Private consumption currently accounts for

64% of GDP -- higher than in Europe (58%),
Japan (55%), and especially China (42%).
India's transition to a 7% growth path in
recent years is very much an outgrowth of the
emerging consumerism of one of the world's
youngest populations.

Many Drivers

Demographics
Increased global exposure
Increased discretionary incomes
across wider spectrum of
population, across wider
geography

Indian consumers
Destitutes
Aspirants
Climbers

2006-07

Consuming class

2001-02

Very rich

1995-96
0

20

40
60
80
million households

100

Since 1990 (after deregulation) the number of

sectors open to foreign participants has
expanded steadily, and Indias working-class
population has increased and is likely to
continue to grow for the next two decades at
least,

Working class
300

Population

250
Consuming class
increasing

200

2001
2013

150
100
50
0
55+

45-54

35-44

25-34

15-24

5'-14

0-4

As Indians have grown richer, they have

begun 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 consumer
households and market potential for a foreign
business enterprise because of significant
differences in purchase power parities of various
currencies

In fact, the Indian rupee has a very high

purchase power parity compared to its
international exchange value
The domestic purchasing power of a US
dollar in the US is closer to the purchasing
power of six rupees in India, for equivalent
goods and services
As a result, India ranks fourth richest
nation in the world, on purchase power
parity terms, despite being having low per
capita national income

Segments
India has various consuming classes
The young and the restless

The Bold and bountiful

Teen Riches, Dudes & Dudettes

Call Centre Boomers
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 in

different income segments and locations,
who are influencing their parents spending.
Some of them are also beginning to earn
money through part-time for full-time jobs,
arising out of opportunities that did not exist
earlier.

Some of these segments include

Teen Riches, Dudes & Dudettes

This group mainly comprises young people

who are from relatively affluent families.
Eating out, movies and occasional clubbing
are an integral part of their lifestyle. Dress is
invariably modern, and attire must be
changed frequently

Call Centre Boomers

Formerly located mainly in the IT-savvy cities,

call centres and other IT-Enabled Service
centres are spreading to other cities and
towns as well. Populated largely by
youngsters out of school or college, drawing
in their first incomes, and at levels unheard of
earlier

2 The Bold and The Bountiful

The Yeppies (Young Entrepreneurial Professionals):

The Yippies (Young International Professionals):

entrepreneurs who have made it after the good

liberalization
work with multi-national companies, who are based in India
but 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 married

and living in their nuclear families, or even
out of the country
Several of them have led fairly good
lifestyles, and have the means to continue to
do so

Markets

India has sometimes been called a nation of shops

Highest per capita outlets in the world - 11.5 outlets
per 1000 population
As much as 96 per cent of the 12 million-plus outlets
are 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 general
stores, 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 from
traditional shops to modern formats that
include 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% to
49% per year during 2003-2008, according to
a latest report by Euromonitor International

Retail Growth across countries

2004
50
40
Retail
industry

30
20

Largest
retailer

10

Th
ai
la
nd
Si
ng
ap
or
e

In
di
a

na
Ch
i

Ja
pa
n

Top 5
retailers

Source: Retail Asia 2005, KPMG in India Analysis 2005

Fastest growing retail segments in India

Jewelry
Footwear and leather
Durables
Pharmacy
Furnitures and fixtures
Clothing
Food and grocery
0

20

40

60

80

100

Retail sales in India's consumer goods

market are expected to grow to $400 billion
by 2010, making it one of the world's five
biggest.

Winning the Indian consumer 2005 Special

Edition: Fulfilling India's promise. McKinsey
Quarterly

Still a lot of potential

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

In
di
a

Ch
in
a

Ta
iw
an
M
al
ay
s ia
Th
ail
an
d
Br
az
il
In
do
ne
si a
Po
la
nd

% penetration

Retail growth opportunity

80

60

40

20

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: ShoppersStop, 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

Furniture & Furnishings
Jewellery & Accessories
Footwear
Gifts and Handicrafts
Saree and Ethnic wear
Health & Nutrition
Childrens wear, Maternity wear, Accessories

45,000
30,000
45,000
6,500
6,000
12,000
1,000
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 to

have over 2000 malls. According to
consultancy firm Technopak, the industry will
see $20bn of fresh investments (excluding
investments in real estate) and 2,000
hypermarkets coming up within the next five
years
Thank You