There
is distinct evidence to suggest that the Indian Consumer,
irrespective of her socio-economic origin, is on a self-appeasement
mission. Greed is good and she wants more of the best
that life has to offer. As she traverses this path,
we find that she defines fulfillment "materialistically
and emotionally" no different from her more monied
counterpart. SEC-based classifications notwithstanding,
the Indian Consumer is out to seek pleasure and lifestyle.
177 million households in India are at various stages
of defining their "self" from the "common".
And this is the new definition of the Indian Mass Market.
First we will see how the Indians are spending and where,
and then we shall discuss some obvious implications
in terms of opportunities for "demystifying"
the Mass of the Indian middle class.
For the sake of elaborating on "mass" opportunities,
we will be restricting ourselves to the domain of the
Indian middle class, as against the Indian Affluent/Very
Rich (NCAER definition) - both Urban & Rural.
Some home truths about Consumption
1)The Indian consumer is spen-ding more on Apparel,
Entertainm-ent, Eating Out, Vacations and Lifestyle
related activities.
According to the latest KSA Consumer Outlook 2003, aspirations
of the Great Indian Consumption class is converging
across SECs A & B and also coming closer to global
trends wherein Entertainment, Movies, Clothes &
Eating Out are categories which have seen the maximum
rise in consumer spending from 2001-2002.
Globally, its been observed that as the income levels
rise, share of food and grocery in the total household
income goes down and the proportion of income spent
on lifestyle-related activities go up.
On an average, spend on personal items, eating out,
clothing and vacations has gone up in 2002-03 and per
cent spend on regular stuff like grocery has declined
to 42 per cent (from 48 per cent) in Consumer Outlook
2003 (KSA Technopak)
2)Between SEC A & B, the gap between spending on
lifestyle-related activities is declining. Clearly there
is a convergence of aspirations. (Source: KSA Consumer
Outlook 2003)
The ratio of SEC A to B spending in 2003 in categories
of clothing, grocery, movies and theatre has narrowed
from 2002. Some select category ratios are
Clothing: 1.25 (from 1.41 in 2002)
Eating out: 1.38
Grocery: 1.17
Footwear 1.37
Savings & Investments 1.2
Movies & Theatres 1.19
These are all categories that indicate heightened awareness
of the "self" and hence pose interesting marketing
opportunities.
Incidentally, according to a CSO estimate, the savings
& investment rate fell dramatically from 12 per
cent to 5.2 per cent in 2002.
3)Different SECs groups are being exposed to similar
media influences owing to rising literacy and increased
TV & Cable / Satellite penetration.
Total literacy figures have gone up to 66 per cent in
2001 from 52 per cent in 1991 and female literacy is
on the rise with the 2001 figure going up to 54 per
cent from 39 per cent in the last census.
The growth in C&S penetration is more than twice
the growth in TV owning homes. (NRS 2002)
Television now reaches 81.6 million Indian homes and
reflects a growth of 12 per cent since 1999. Access
to C&S homes jumped from 29 million in 1999 to 40
million in 2002 - a 31 per cent growth rate, more than
twice the growth of the Television market. C&S subscription
has now penetrated 50 per cent of all TV homes.
It is estimated that by 2007 there will be 67 Million
C&S homes & 112 Million TV homes in India.
The reach of dailies is also on the increase and more
urban housewives are now reading a daily (25 Million
as against 21 Million in 1999) at the cost of reading
magazines.
4)People prefer time and convenience to better bargains
and are willing to travel lesser and lesser for standard
items in their monthly shopping lists (Consumer Outlook
2003)
5)The Higher Income Group in Rural India is growing
at the phenomenal rate
According to the NCAER report 2002, there is a new potent
Rural Consumer who is not to be taken lightly. The lower
income group in both Rural and Urban India is shrinking
at the rate of 4.5 per cent in rural India. There has
been a growth of 14.3 per cent in the Higher Income
Group in Rural India and 8.6 per cent growth in the
Upper Middle Class Income group, very close to a 9.9
per cent growth of the same in Urban India during 1995-1999.
6)In Rural India, the concept of brands and quality
are very much prevalent. There is a widespread awareness
that branded goods are of better quality and agreement
that advertising affects choice of brands. (Source:
Rural Outlook, KSA Technopak 2003)
Typically Durables, Apparel and Agri inputs are purchased
from urban markets, which is a serious reflection of
the reach of the branded/high-value durables in these
markets. Urban interaction is also very high. About
40 per cent visit the nearby feeder town at least once
a week. It is observed that those who visit town less
frequently tend to spend more in a single trip.
These changes in the current consumption trends are
the compelling reasons for marketers in India to capitalise
on the rising mass market in India.
Opportunities in practically all consumption categories
arise in terms of "reach" and "medium
of consumption". It would be dangerous to take
the Indian consumer on the track of low-priced items
who is definitely not out to scrounge on life. There
is evidence all around to show that there is a mass
trend towards "upliftment" of lifestyle within
the existing income boundaries.
MacDonald's, for example has launched the Rs 10 McSwirl
cone and Rs 15 Veg Surprise burger to give the mass
Indian consumer the McDonald experience. The success
of branded FMCG producers such as Cavincare, Dabur,
Priyagold and others indicates that the Indian consumer
is indeed becoming more and more aspirational towards
consumption, even though income limitations exist on
his/her ability to consume many of these products at
a high frequency.
Lets look at some other obvious opportunity areas. The
Monthly Households Income of a typical urban consumer
is about 10,000 (Consumer Outlook 2003)
Out of this she spends 42 per cent on grocery, which
is a princely amount of Rs 4200 per month. It is estimated
that there are about 176.5 Million households in India
of which 52 Million are urban. This translates to a
total grocery market of about Rs 240,000 Crores (only
in Urban India!)
Of all the categories that the consumer spends on, there
can be none more mass than grocery. Grocery in a typical
Indian Households consists of the cereals, pulses, masalas,
soaps, cleaning detergents, daals, biscuits, ketchup
and values adds like noodles, cheese, insect repellents
etc.
It has also been observed that as the F&G retail
formats become more and more sophisticated (supermarkets,
hypermarkets etc.), the Indian kirana store is still
not losing its relevance. In fact it is evolving as
a supplier of customised requirements giving value adds
like doorstep delivery, any time of the day, 24 X 7
etc. With the result, that a typical Indian urban Households
would buy in bulk, once a month - 70 per cent of its
requirements from a big store and for replenishment
depend on the neighbourhood guy.
Our Consumer Outlook further indicates that Consumers
are seeking convenience for 'regular' purchases. However
for special purchases (jewellery, for instance), the
consumer is willing to travel extra. To save on time
they are increasingly outsourcing household work - as
evident by 51 per cent rise in payment to household
help. In this scenario, Convenience is a clear need
for standard categories.
Let's take the example of a player which has harnessed
the opportunities presented by this convergence of aspirations
of the great Indian middle class, the felt need for
"convenience" and not mentioned before the
latent workforce in the form of the educated Indian
housewife who earns herself some dignity by stealing
some hours of the day from her family commitments, participating
in the great Retail revolution in India. The example
is of Amway. It is now a Rs 626-Crore company, growing
at more than more than 10 per cent year-on-year, selling
premium products through the network of the Indian housewife.
A smart innovation that they have done in the recent
years is to introduce affordable "price points"
instead of "discounted products".
Let's turn to our Superwoman Indian Housewife. After
she has firmly established herself as a consummate seller
of premium wash detergents, her network is still available
for leveraging for various other values added items
(please - not cheap). Something like - "Mrs. Mehra,
why don't you try this new flavour of dahi (curds) -
the kids will love it." Or "This new aromatherapy
soap will relax you after a long tired day. Should I
send some small packs for trial? Let me know if you
want more?"
She calls her nearest stock point, could be her neighbourhood
grocer with whom the company has tied her up for business.
The grocer will not resist as he is continuously looking
for innovative formats to survive. And gets it sent
to Mrs Mehra for tasting. Chances are that Mrs Mehra
will get hooked to the new aromatherapy range for herself.
(Remember her "self appeasement and lifestyle"
needs) and the kids may like the flavoured "dahi"
in their daily menu. Mrs Mehra loves the "convenience"
and the neighbourhood grocer benefits by slipping in
the monthly requirement of rice, atta, maida, daals,
besan etc. Mrs Mehra is thrilled to have some more extra
time for she gets to shop for the latest designer kurtis,
which are only available at the new store open some
distance away. The logistics are managed by the third
PL system whose only job is to study the stock movement
of the kirana on a daily basis and provide replenishment.
Another example of a company, which has successfully
differentiated in a "mass" way is LG. It was
early to recognise the potential and consumerist appetite
of the Rural Indian. Way back in the late 90s, it launched
Sampoorna - a CTV for the rural market. Today 20 per
cent of its CTV sales come from here. It is interesting
to note that according to the 2002 NCAER survey, well-off
households (by definition - those who own any/all of
these CDs - AC, motorcycle, scooter, washing machine,
fridge, CTV but not car/jeep) in urban India were 57
per cent as against 21.8 per cent in Rural - which translates
to 29 Million households in Urban India vis-à-vis
27 Million Households in Rural - almost equal.
To recognise this trend in Indian consumerism and to
index potential demand for various other categories
of goods to the ownership of consumer durables as described
above and to tap the potential is the job some very
smart marketers.
With further electrification of the Indian villages
(still a major concern), LG will be the first company
to be able to leverage its "Sampoorna" supply
chain to deliver a host of other electrical gadgets
to its rural customer. But there is an ocean out there
and plenty of room for other players.
There is definitely a lacuna in terms of goods and services
availability in rural India that is demonstrated by
a study that shows that retail formats in rural India
are very weak and there is high dependence on feeder
town markets for categories like Durables, Apparel &
Agri inputs. As against popular belief, dependence on
haats/fairs is very low. This has serious implications
on the distribution set up for most companies.
It is seen (NCAER and Rural Outlook) that from 1995-96
to 1998-99, the average annual growth rate for Group
III Consumer Durables has grown by 22.5 per cent in
rural as opposed to 13.6 per cent in Urban India. Group
III durables consist of higher end durables like CTV
- Small and Regular, VCR, VCP, Scooter, Moped, Motorcycle,
Refrigerator, Washing machine, Music system, Car and
Jeep. Except for the vehicles, all others are electrical
items. Since electricity is the single largest determinant
of demand for these items, it’s availability of
electricity that will determine how the demand moves
in the future in rural areas.
We need to ask here that given that the rise in come
levels in Rural India continues unabated, will there
be no effort on the part of the Consumer durables lobby
to push for a "more electrified" India? Are
they not watching this market & the way its set
to go?
What about the automobile manufacturers? Have the Carmakers
for the masses really looked at this market? Has the
PC market surveyed its Rural potential yet?
Do they have a coherent, realisable strategy for the
Rural Well - Offs?
Or will they use the rural disposable income as a parking
slot for the City seconds? That may not be such a great
move because of heightened awareness. A Shah Rukh Khan
zipping around in his Sunshine companion beams into
as many rural homes and has an equally powerful impact,
if not more. So will our brother in the village be satisfied
with a 1995 Maruti 800, third hand model - especially
if he has had a good year with the crops and sold his
sunflower harvest at better margins directly to the
big company that makes sunflower oil in millions of
gallons in a nearby factory?
Then there's the question of rural finance options -
how are the finance companies differentiating this mass?
A typical rural household spends 3 per cent annually
on Savings and Investments from their average annual
income estimated to be Rs 37000 (Rural Outlook, 2003).
Not only that, rural consumers are big borrowers with
about one-third population having taken loans. 75 per
cent of the loan taken goes into financing agriculture-needs
and the rest in Households purchases or other non-productive
requirements.
The rural moneylender is still a very significant figure
especially in AP, UP & TN.
If the rural Indian saves 3 per cent of his total income
per annum, taking an estimate of 123 Million Rural Households,
the Savings and Investment market in Rural India alone
works out to be greater than Rs. 13.5 Thousand Crores
and his interest repayment figures indicate a similarly
big size market available for fund mobilisation.
If one looks at the potential for development available
within the Rural economy itself, its immense - only
probably lacking for a visionary financial organisation
to unleash it for further growth.
Is the Indian farmer doomed to continue his centuries
old dependence on the rural moneylender and get cheated
of his due payback year after year?
Can the rural moneylender be tapped for term deposits
to have a more stable, secured rural credit structure?
This factor alone can spur rural demand and make it
more consistent instead of it still being indexed to
the unpredictable weather.
Undoubtedly it is a tough battle with the socio-economic
structure and the fragmented nature of Rural India but
with increasing literacy and connectivity, these are
impediments that can definitely be overcome.
An exemplary step with harnessing the power of rural
India has been taken by ITC through their e-chaupal
programme.
The opportunities in the Mass of Indian consumers are
multiple - whether it be the Indian Urban Households
or the Rural one. If we are to believe the Goldman Sachs
Economic report on BRIC economies (Brazil, Russia, India
and China) of 1999 which states that India is slated
to beat all records of growth in the next 30 years,
there is really no reason for any of the existing players
not to
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