Underpinning this transformation in the making are six key consumer behaviour-altering factors.
The first and perhaps the most important of these six is the increasing time-poverty being experienced by the core-consuming class living in urban India. While the very rich are able to "outsource" many of their mundane time-intensive activities to a retinue of attendants and assistants, leaving them with more time for leisure, recreation, and shopping (and the very poor may have the time but no disposable, discretionary spending earnings), the middle classes face more pressures on their time since they juggle between job (or jobs as more women join the workforce; longer commutes; attending to the myriad needs of their children such as tutoring, pickups and drops for coaching; birthdays, anniversaries, marriages and other social obligations to attend to; the peer pressure of taking more out-of-town breaks and vacations; higher cost and reducing availability of trained domestic help; higher nuclearisation of families etc). Indeed, if time could be bought, it would command a steadily growing premium from the typical middle-class urban Indian.
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The second factor is the impact of sustained double-digit consumer price inflation across India. From a barely comfortable 5 to 6 per cent range of yesteryear, the average Indian consumer has recently seen several successive years of double-digit inflation. With the economy also slipping to a very low-growth trajectory, most Indian consumers (other than the rich) have seen nearly stagnant inflation-adjusted incomes. As a result, there is a growing number of middle and upper-middle income consumers who have started to trade down and are increasingly looking for cheaper options. With no immediate sign of inflation being tamed, this trading-down is likely to continue and with this, there will be an increasing pressure on brands that are somewhat more premium positioned, and on volume growth of product categories where the consumption can be delayed or deferred (for example consumer durables, two and four wheelers, etc).
The third important factor is the fact the 15-34 years age group now comprises the largest demographic grouping in India, at about 435 million. The next big group is the 1-14 years comprising about 345 million. The 35-59 years group now accounts for just about 27 per cent (about 325 million) of India's population. It is no surprise that the majority of Indian consumers today (and even a larger majority in 2020) have totally new needs and aspirations, and just about no legacy relating to consumption. They are generally more confident about their future, notwithstanding the current economic challenges, adopt technology much faster, and more adventurous and more heterogeneous when it comes to experimenting with new products, brands, and retail channels.
The fourth factor is that more Indian consumers are segmenting their spending priorities between "needs" and "aspirations". The former include food and grocery, most categories of fast moving consumer goods, basic textiles and footwear, select categories of consumer durables and appliances, for example refrigerators, washing machines, TVs, and small kitchen gadgets etc; while the latter includes (globally) branded clothing, home decor, bathroom and kitchen fittings, accessories such as handbags and eyewear, grooming and well-being, coaching and education etc. In the need-based product categories, there is diminishing branding power and weakened pricing power. While there will be an increased volume of consumption in most such categories, there will be a lower value-denominated increase. On the other hand, aspiration-based spending categories will offer somewhat superior pricing power to the marketers.
The fifth factor will be the exponential increase in the internet connectivity across urban and rural India. From about 125 to 150 million unique internet users in 2013, India will probably see this number grow to over 300 million by 2016, and perhaps over 650 million by 2023 with smartphones and tablets being the primary device for accessing internet, be it for information collection or for shopping or even for entertainment and socialising.
The sixth and last of the most important consumer behaviour-altering factors will be the emergence of a much more complex mix of mediums that will be used by an overwhelming majority for information collection and decision-making. Within the next five years or even earlier, the average Indian consumer will be seamlessly using a combination of print, electronic, outdoor, digital social media, internet, mobile, point-of-sale, and even workplace interactions for deciding what to buy, when to buy, where to buy from, and what price to pay. To complicate this further, there is going to be a steady increase in the subliminal impact on this decision-making from external issues relating to ethics, environment, and social responsibility.
While the Indian consumer is undergoing all of these (and some more) changes, there is one major macroeconomic reality that will have a major impact on the future of retailing in India. This reality is that even at GDP growth of 4.4 per cent in the last quarter, the Indian economy continues to be a relatively fast growing one. It certainly has the potential to settle down at a compounded annual growth rate of 6 per cent over the next decade and thereby, continue to attract the interest of many more (large) Indian business houses and international retailers. Hence, India's retail landscape will see many new entrants in the coming years.
Arvind.singhal@technopak.com