Changing Indian Consumers

1
Changing Indian Consumers Markets

• Pingali Venugopal
• Dean
• XLRI Jamshedpur

2

• 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.

3
The Indian Consumer Is Rapidly Transforming

• Paradigm Shift in almost all aspects of life

Outlook From Traditional to Modernized
Traditional
4

• 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 700,000-strong
  market

5
Expected Utility from Products/ Services

• From Functional to Lifestyle

6
Eating habits

• From traditional meals to Indianised McDonalds

7
Value

• From Merely Price, to Benefit /Effort (Price
  Time Convenience)

Id rather have more time than money - 47

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

Saving time is more important than saving a few
Rupees - 51
I like to shop, but do not have time - 47
I shop closest to my home/office - 59
Source Consumer Outlook
8

• 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.

9

• 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.
  

10

• "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

11
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

12
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.

13

• Services are now taking away a huge chunk of the
  Consumers Wallet

2003
1991

1. Food and Grocery
2. Clothing
3. Footwear
4. Consumer durable / appliances
5. Expenditure on DVDs and VCDs
6. Home linen
7. Home accessories
8. Accessories
9. Gifts
10. Take-away/ Pre cooked / RTE meals
11. Movies and theatre
12. Eating out
13. Entertainment parks
14. Mobile phones and service
15. Household help
16. Travel packages
17. Club membership
18. Computer Peripheral Internet Usage

1. Food and Grocery
2. Clothing
3. Footwear
4. Consumer durable / appliances
5. Home linen
6. Movies and theatre
7. Eating out

Categories constituting 80 of SEC AB consumer
discretionary spending
14

• 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

15

• 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.

16
Many Drivers

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

17
(No Transcript)
18

• 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,

19
Consuming class increasing
20

• 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.

21
Purchasing Power of Indian Consumers

• Going by per capita GDP figures (US340 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

22

• 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

23
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

24
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

25
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

26
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

27
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 India but travel extensively
• The raffles (Rural Affluent Farm-Folk)
• the farmer with tax-free income spend on a wider
  choice of products

28
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

29
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

30
Traditional Kirana stores
31
(No Transcript)
32
Complete utilisation of space in traditional
outlets
33
(No Transcript)
34
Consumer Durables outlet
35
Road side kiosks
36
Computer Accessories outlet
37
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

38
Source Retail Asia 2005, KPMG in India Analysis
2005
39
(No Transcript)
40

• 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

41
India No. 1 Emerging Retail Growth MarketAT
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
42
(No Transcript)
43

• 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

44

• 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, MM, DCM Shriram

45

• 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

46
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
• Childrens wear, Maternity wear, Accessories
  4,700
• Figures are estimated market size in Rs crore
  Source KSA Technopak estimates for 2004-05

47
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