The convergence of economic, demographic, and technological forces will bring about unprecedented changes in consumer behavior, according to a new report from Deloitte Touche Tohmatsu (DTTL), Consumer 2020: Reading the signs. The report throws light on the emergence of India as the world’s fifth largest consumer market by 2025 and 50 million outbound tourists by 2020 providing significant opportunities for consumer business companies.
“With its large market of middle class consumers and growing purchasing power India is already having a significant impact on the global consumer market across a wide range of consumer goods. As India’s economy gains from strength to strength so does the growth in two- income households giving rise to increased demand for convenience of modern retailing,” said Rajan Divekar, Senior Director, DeloitteTouche Tohmatsu India. “Going forward, countries like India need to take measures that stimulate consumer spending.”
This is evident from the fact that over the coming decade we will see a rebalancing in the global economy, as countries that previously witnessed economic growth that was fueled by heavy borrowing and excessive consumer spending move to an era of export-driven growth. Conversely, countries whose growth primarily came from exporting to borrowing countries will no longer be able to rely on such markets. Countries such as China are likely to shift away from export-oriented growth toward growth driven by domestic consumer spending. For countries like India, this could include liberalising consumer finance and improving the social safety net so as to encourage consumer spending and allowing the currency to appreciate in value.
Methods of engaging consumers in adopting more sustainable behaviors in purchasing products and services will no longer be just be about marketing and communicating. Rather, customer engagement will be about connecting and socialising with a larger and enlightened group of consumers. Consumers now have the power of information at their fingertips, enabling them to comparison-shop and purchase a wide range of goods and services anytime, anywhere. Also, this trend is likely to accelerate, as mobile communication is expected to play an ever-larger transformative role in the future, as it provides independent access to information and increasing opportunities for mobile commerce.
“Trust will remain a key issue with consumers, who will continue to trust peer recommendations over company information. Additionally, the sense of customer loyalty that existed in previous generations will be more short-term and increasingly influenced by social networks,” Divekar added.
In the Indian context, another major change that is likely to be witnessed over the next decade is the changing profile of the Indian retail sector both in terms of retail formats that are customised to meet the needs of Indian consumers as well as the gradual liberalisation of FDI in the multi-brand retail sector, which in turn is likely to attract significant investments in the back end supply and create employment opportunities -- rural employment and employment by the small scale units who will supply to large retailers.
As Indian retail enters a new phase of growth in the coming decade, another important change is the gradual shift in the balance of power from consumer product companies to organised retailers. There are early signs of this already, like for example the growth of private label brands and consumer product companies establishing separate sales channels and trade practices for modern trade.
Thus in summary, while the Indian consumer market is likely to continue its growth trajectory, there are many underlying shifts taking place both at a consumer level as well as at the retail level. Consumer product companies that make themselves part of this change process are likely to remain relevant and interesting to consumers-and positively differentiated in the marketplace.