India is a consumer driven market, with consumer spending in the country projected to more than double by 2025. These days, the Indian consumer segment, broadly categorised into urban and rural markets, is attracting marketers from across the globe.
Global corporations see India as a key market for the future. The growth in the country's consumer market is largely driven by a young demographic and rising disposable income. If India sustains its current pace of growth for the foreseeable future, average household incomes will likely triple over the next twenty years and the country will become the world's fifth largest consumer economy by 2025, as per a study by the McKinsey Global Institute (MGI).
The Government of India has also played a significant role in the growth of the Indian consumer segment. It has brought about policies which have attracted foreign direct investment (FDI) and consequently boosted economic growth.
India has the potential to become the world's largest middle class consumer market with an aggregated consumer spend of nearly US$ 13 trillion by 2030, as per a report by Deloitte titled 'India matters: Winning in growth markets'.
Driven by growing incomes and increasing affordability, the consumer durables market is projected to expand at a compound annual growth rate (CAGR) of 14.8 per cent, from US$ 7.3 billion in FY12 to US$ 12.5 billion in FY15.
Online retailing, both direct and via marketplaces, will grow threefold to become a Rs 50,000 crore (US$ 8.26 billion) industry by 2016, driven by a 50-55 per cent per year growth over the next three years, as per rating agency Crisil. The growth of internet retail is also expected to boost offline retail stores.
The following are some of the major investments and developments in the Indian consumer market sector:
The high penetration of internet and the growing use of smartphones have helped top e-commerce firms leading to a rapid rise in their valuations, as per experts. This rapid growth of internet-based companies comes at a time when Flipkart is valued at an around US$ 4-5 billion and Justdial has market capitalisation of Rs 11,000 crore (US$ 1.81 billion).
Finland-based smartphone company, Jolla, has signed an agreement with Snapdeal.com to launch its handsets in India. "India is the rising smartphone market of the world and we look forward to welcoming many new Jolla fans across the country. Since late 2011 when we established the company Jolla, we have received a tremendous amount of interest from India to enter this great market," as per Mr Sami Pienimäki, Co-founder and CMO, Jolla.
Ethnic apparel brand Soch will soon launch its own online retail store via which it will offer specialised services to bring in customers. "We want to bridge the gap between online and offline. I believe it is only a matter of time before these channels merge," as per Mr Vinay Chatlani, SEO, Soch.
Bharti Enterprises has agreed to sell a majority stake in its group company, Beetel Teletech to a unit of US-based Brightstar Corp. The deal could allow Brightstar to test India's fast growing mobile phones industry. "The new mobile business and related technologies that Brightstar is bringing to Beetel will help drive significant growth by leveraging our deep distribution strength," as per Mr Rakesh Bharti Mittal, Vice-Chairman, Bharti Enterprises.
Finnish packaging major Huhtamaki has entered into an agreement to buy Positive Packaging which is known for producing packaging materials, for a transaction worth US$ 336 million. "The transaction enhances our position in India and provides us with much improved access to the fast growing markets of Africa and Middle East," as per Mr Jukka Moisio, CEO, Huhtamaki Oyj.
Google has tied up with Indian handset-makers Karbonn, Micromax, and Spice to develop sub-US$ 100 smartphones, some of which be in the market as early as September 2014. The initiative could help propel the Indian brands' image globally and as well as bring in greater competition in India's entry-level smartphone market, as per experts.
Haier India plans to set up a second plant in India to boost its local manufacturing capacity. "We could look at locations in the North and South, as we need additional manufacturing support. Currently, our plant at Pune is serving consumers across the country and we also have some original equipment manufacturer (OEM) partners in the North," as per Mr Eric Braganza, CEO, Haier India.
The Government of India has allowed 100 per cent FDI in the electronics hardware-manufacturing sector via the automatic route. The government has also allowed 51 per cent FDI in multi-brand retail trading and 100 per cent in single-brand retail trading in an effort to bring more foreign investment into India.
Hyderabad will soon have a Rs 100 crore (US$ 16.52 million) National Institute for Footwear Design and Development. The Government of Andhra Pradesh has allocated the required land at Gachibowli in Cyberabad. Funds for the centre have already been sanctioned by the Ministry of Commerce.
With the growing demand for skilled labour among Indian industries, the Indian government aims to train 500 million people by 2022, and is seeking participation of private players and entrepreneurs for the purpose. Several corporate, government, and educational organisations are putting in the effort to train, educate and generate skilled workers.
India is set to become a key market for wearable technology such as smart watches and fitness monitors, on the back of consumer interests in these latest gadgets and growing spending on consumer durables. Respondents from India were most interested in purchasing fitness monitors (80 per cent), smart watches (76 per cent) and internet-enabled eyeglasses (74 per cent), as per Accenture's Digital Consumer Tech Survey 2014.
American measurement company Nielsen projects that rural India's FMCG market will top the US$ 100 billion mark by 2025. Online portals are anticipated to play a significant role for companies trying to break into these markets. The Internet is also allowing for a cheaper and more convenient means to increase a company's reach by overcoming geographical barriers.
Exchange Rate Used: INR 1 = US$ 0.0165 as on August 26, 2014
References: Media Reports, Press releases