Emerging opportunities in the retail sector
by Arvind Singhal and Anil Rajpal

A decade after the emergence of the modern retail formats in the country, the sector is well on its track to becoming one of the biggest consumer sectors. The current size of the organised retail is about US $8 billion, which itself is comparable to the sectors like FMCG (US $9.3b) and Consumer Durables, Appliances & IT products (US $10b). With a growing economy and positive demographic and psychographic changes, the sector is likely to explode and is expected to reach US $23 billion by the end of the decade — still touching just about 10 per cent of the total potential. No wonder leading Indian and International players have begun to give serious attention to this emerging opportunity. During this period many modern formats have been successfully introduced, which are changing the retail landscape for most of the product categories. However, while the prospects of the industry are promising; the shape of organised retail is likely to undergo major transformation in the future. This is because organised retail in India is still in nascent stages and the players are in the early stages of defining their propositions. Most of them are catering to a wide range of customers with a one-size-fits-all approach. The rapidly demanding consumers seeking customised offerings, growing competition and entry of the foreign players would drive the current formats to transform themselves or give way to the new formats.

KSA-Technopak believes that the future shall belong customer-centric formats, which shall be created and run around on well-defined customer segments and their needs. Therefore to assess the transformation and predict the future-wining formats, one would have to carefully examine the emerging customers segments. Perhaps one of the most appropriate ways of micro-segmenting the market is on the basis of the age within an income/socio-economic classification. Given the rapid changes in basic attitude towards spending and spending patterns, the generation gap happens at five-seven years now! Given this, it becomes imperative to understand the different age segments, which exhibit very different consumption attitude and needs. We have segmented the Indian rich and middle class consumers into four age segments — based on the differences in spending patterns and acquisitions basket. Each of these age groups represents a milestone in one's life — an age where a major transition happens. There is a marked difference in the consumption baskets in each of these age segments (See Table 1 and 2). Till 19 years, most Indian kids stay with their parents. India's urban middle class kids, in the age group 8-19 years, are no longer very different from their global counterparts in terms of their needs and lifestyle. In 20-25 years, college is mostly over and most embark on their careers. All of a sudden there is a transition from being dependent on your parents for spending to own earnings — specially given the BPO, retail and software boom. The age is marked with indulgent spending. From 26 years onwards, the transition to married household status takes place. Priorities change from spending on self to spending on home, kids and consolidating future. The 26-50 years is a big age segment, but if you look across, the issues largely remain the same - acquiring a house (maybe a bigger house in late forties), kids and their education, investments etc. Post 50 years, one is more or less through with basic acquisitions, for children perhaps no longer stay with them and the focus is on health, children's weddings and consolidating assets for retirement. 

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