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Land of 800 million confident consumers by 2020

Rising power of private labels will lead to a striking shift of the balance of power first to the consumer, and then to the retail channel away from brands and marketers.

Arvind Singhal | Print Edition: December 27, 2009

At the beginning of the decade, consumers were still hesitant about the outlook for their future. Reasons: the dotcom crash and the slow start of the Indian economy. Ever since, the economy has grown by a CAGR of about 7 per cent. In this decade, the three big challenges for the Indian consumer probably were:

To buy or not to buy: On one side, there was optimism about the future and an abundance of choice. On the other, the traditional Indian conservatism relating to unnecessary consumption came to the fore.

What not to buy: For many years now, a relatively young, highly aspirational, and increasingly a "first-time" consuming population is seeing the categories of goods and services that they would like to spend money on increasing faster than their incomes. So, everyday, the consumers have choices galore.

Redefinition of "value": With newer, aggressive players in most categories of consumer products and services, "value" is getting redefined, putting pressure on the consumer to reorient to these new definitions.

In the next decade, the behaviour of Indian consumer is going to be strikingly different than what has been seen in the current decade. There are many factors which will contribute to this change, but perhaps the greatest impact will be on account of a rapid increase of women in the workforce leading to an unprecedented economic and social empowerment for them and thereby a dramatic redefinition of their roles and their influence. The impact will be seen on categories of consumption, on channels where consumption will take place, and a complete redefinition of convenience and service expectations.

In general, the three defining consumer trends for the next decade would be:

More confident consumer: With Indian economy firmly back on track to grow at a CAGR of around 8 per cent in the coming decade, there will be a more confident Indian consumer, and consumption growth across all categories will be very robust.

More demanding consumer: With even more options to choose from, and newer retail channels to buy from, the average Indian consumer will become more demanding in terms of value and in terms of service expectations (shopping convenience and ambience, in-store service).

More individualistic consumer: With increased incomes and increased confidence, the Indian consumer will continue the trend towards becoming more and more individualistic. While world over this is nothing really new, the challenge can be better appreciated in the backdrop of the fact that in 2010 itself, the Indian consuming class (and in the age 15+) will be over 500 million in numbers. This number is expected to swell to over 800 million by end of 2020 out of a total population of about 1.3 billion.

The fastest growing categories where these consumers would be willing to pay some premium would largely be more "aspiration"- and "emotion"-driven. e.g., leisure and entertainment, health and well-being, grooming and personal care, education/learning/coaching, home and home décor, personal adornment and accessories, etc.

The categories where consumers will consume more out of a basic need for that product or service but with little emotional connect such as food and grocery, work and home clothing, home appliances, etc., will see rapid erosion of pricing power of brands. Also, a rising power of private labels owned by the retail channels offering such commoditised, need-based consumption product categories will lead to a striking shift of the balance of power first to the consumer, and then to the retail channel away from brands and marketers.

 — The writer is the Chairman of Technopak

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