The changing world

• The economic power centers shifting from established economies to Asia Pacific

• India one of the largest growing economies in the world

• Post liberalization (past 15 years) very rapidly changing economic environment in India beating skeptical predictions

The transforming Indian Consumer

• Paradigm shift in all aspects

Traditional Modernized Traditional

The rise of the kings and queens

• Today the consumer is truly spoilt for choices and therefore more in a position of power – The consumer is truly king

The rise of the kings and queens

• The structural changes in economy and the rise of competition have led to raising the bar of consumers expectations

• Case in point the automobile market – earlier the detrimental variable was ‘availability’ – today 13 companies and 400 plus odd models vie for the 700K strong market

Expected utility from producers/ service providers

Ambassador C-class Merc

Eating habits

• From Indian meals to Indianized McDonalds

Value

• From merely price to Benefit/ Effort (Price + time + convenience)

I like to shop but do not have much time

Saving time is more important than

saving a few Rupees

I like to shop closest to home to

save time

A case of consumer durables

• Availability of finance options is helping undermine the price factor as the most important one while making a purchase decision

• The line b/w the entry level product and upgraded products is getting fudged as the consumer is willing to buy an upper end product if s/he feels that there is greater value to be derived from it

• Upgrade is a way of life. Durability is no longer as important a factor

• One household multiple products – Cars, TVs etc.

Buying a TV set

• Nineties – Availabilty – Price – Picture Quality

• Mid Nineties – Exchange schemes and the number of channels the company offered

• Today – Sophistication and technology

Buying an AC

• Nineties – AC manufacturers focused on institutional sales, leaving the household sector to the unorganized sector

• Mid- nineties – The sale in the household sector boomed

• Today – From clunky boxes focus on stylized looks and higher end features like dust free and bacteria free environment

The wallet share1990s • Food and grocery• Clothing• Footwear• Consumer durables/ appliances• Linen• Movies/ Theater• Eating out

2000• Food and Grocery• Clothing• Footwear• Consumer Durables• Home linens/ accessories• Gifts• Takeaway/ RTE meals• Movies • Eating out• Entertainment parks• Mobile phones and services• Household help• Travel packages/ Holidays• Club membership• Computers and its peripherals

Lets look at some attractive figures

• Private consumption accounts for 64% of GDP – higher than Europe(58%), Japan(55%) and China(42%)

• India’s 7% growth path in recent times comes from growing consumerism in one of the world’s youngest population

The last three classes have seen growth in the past decade

Many drivers

• Demographics

• Increased global exposure

• Increased discretionary incomes across a wider spread of population, across a wider geography

The Socio economic classes

• Destitute

• Aspirants

• Climbers

• Consuming class

• Very rich

NCAER

• The NCAER study shows that the two largest consumer classes are the climbers and the consuming class with about 75 million households each

The working class

• In the decade after deregulation (1990) the number of sectors open to foreign participation have increased and therefore the working class has seen a growth and will show this growth till two decades at least is what experts predict

• A recent research by Deutsche bank on the consumption patterns noted that with increase in disposable incomes more Indians are spending on vehicles, phones and restaurants

Purchasing Power of Indian Consumer

• The per capita figure of USD 340 per capita will show India as a poor country

• In reality it is not truly reflective of the purchasing power of the consumer due to the significant differences in the PPP of different currencies

Purchasing Power of Indian Consumer

• Indian currency has very high PPP compared to its International Exchange rate

• The domestic PP of 1 USD in the US is closer to Rs.6 in India for similar goods/ services

• Therefore the reality is that India ranks as the 4th richest nation in the world in terms of PPP, in spite of having low national PCI

Segments

• India has various consuming segments1. The young and the restless

1. Teen riches, dudes and duddettes 2. Call center boomers

2. The bold and the bountiful1. Yeppies – Young Entrepreneurial professionals2. Yippies – Young International professionals3. Raffles – Rural Affluent Farm Folks

3. The Golden Folk

The Young and the restless

• The class will be able to identify them!

The young and the restless

The Young and the restless

• India has the youngest population profile across income segments and locations, they have a huge influence on their parents purchase decisions

• Some of them have started having own incomes through part time/ full time jobs arising out of opportunities that did not exist before

Teen riches, dudes and dudettes

• From affluent families

• Favorite spends – eating out, movies and some clubbing

• They would dress in predominantly western attire and need a wardrobe change often

BPO boomers

• Previously in areas where the IT industry was localised but now they are spreading to other towns/ cities

• Fresh out of college/ schools and are drawing their first incomes at previously unheard of packages

The bold and the bountiful

YEPPIES Young Entrepreneurial

Professionals• The post liberalisation entrepreneurs who

have made it good

YIPPIES Young International Professionals

• Work in MNCs based in India but travel frequently

RAFFLES Rural Affluent Farm-Folk

• Farmers with tax free incomes now have a wider basket of products that they spend on

The Golden Folk in high spirits

• The retired folks– Kids in their own nuclear family set up– Kids could be settled abroad– They had led good lifestyles and have the

means to continue doing so

Rama Bijapurkar

One of India's most respected thought leaders on market strategy and consumer related issues in India.

India a study of contradictions

Rama Bijapurkar in her book

Truth about India

The Bazaar

The Bazaar - Now

• India had been called the nation of shops• Highest per capita outlet ratio in the world

– 11.5 outlets per 1000 population• 96% of 12 million plus outlets are less than 500

square feet in area• Organized sector accounts for just 2%• Unorganized sector includes local Kirana stores,

owner manned general stores, paan shops, convenience stores, pavement vendors and handcarts

The changing market scenario

• Since early 1990s a major shift in the retailing scenario from traditional shops to modern formats – department stores, hypermarkets, supermarkets, specialty stores across categories

• According to a Euromonitor International report the sales from organized sector expanded in the growth range of 24% to 49% per year during 2003 - 2008

Fastest growing retail segment in India – Roti, Kapda aur Makaan

1. Food and grocery

2. Clothes

3. Furniture and fixtures

4. Pharmacy

5. Durables

6. Footwear and leather

7. Jewellery

• Retail sales in India to grow to USD 400 billion by 2010

• McKinsey quarterly 2005 – Winning Indian Consumer

• Still a lot of potential in spite of the recession

AT Kearny 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 ThailandIndia No. 1 Emerging Retail Growth Market

Retail growth opportunity

Retail growth opportunity

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Retailing potential

• Food and Grocery– Opportunity: Rs. 60,00,00 crores– Big players – Future group, Reliance– Likely players – Bharti/ Walmart

• Lifestyle– Opportunity: Rs. 150,000 crores– Big Players – Pantaloons, ShoopersStop, Tata’s/

Westside, Lifestyle– Likely big players – Wadias, Raymonds/ Singhanias

• Consumer Durables– Opportunity: Rs. 50, 000 crores– Big players – Vivel Ltd., Vijay Sales– Likely Big players – Tata/ Chroma

• Rural– Opportunity - Rs 3, 00,000 crores– Big Players – ITC– Likely big players- ITC, M&M, DCM Shriram

• Broadband driven retailing – Likely Big Players – Reliance Infocomm,

Bharti

• Fuel Pump Driven retailing – Big Players – BP, HP, IO– Likely big players of tomorrow – Reliance,

Underexploited categories in retail

• Consumer Durables• Furniture and furnishings• Jewelry and accessories• Footwear• Gifts/ Handicrafts• Ethnic wears/ Sarees• Health and nutrition• Children's wear/ Maternity wear

accessories

• 45,000• 30,000• 45,000• 6,500• 6,000• 12,000• 1,000• 4,700

Source: KSA Technopak estimates for 2004-05, figures estimated market size in crores

• From just 3 odd malls in 2000, the figure will be over 2000 malls

• The fresh investment that this sector will see will be around USD 20 billion according to a Technopak consultancy study (excluding the investment in real estate)

XLRI study