Indian Consumer Markets: Brief Overview
Indians have been the most confident consumers globally in the fourth quarter of 2012, revealed a recent study by Nielsen. Consumer confidence in the country increased two points to 121 in Q4, 2012 from Q3, 2012.
Indian consumer markets – broadly categorised into rural and urban markets – are majorly being driven by factors like favourable demographics, higher disposable incomes, rising middle class, government support, internet revolution and digitisation.
McKinsey Global Institute (MGI) states that cities in India could generate 70 per cent of net new jobs created to 2030, produce around 70 per cent of the national gross domestic product (GDP), and bring about a near four-fold increase in per capita incomes across the nation.
Meanwhile, the Indian rural market has gone far-ahead of consumer products and agri-input marketing. “A large part of the rural Indian market is under-penetrated and presents good opportunities,” said Siddhartha Roy, Economic Advisor, Department of Economics & Statistics, Tata Group. Total rural income, which is now at around US$ 572 billion, is projected to reach US$ 1.8 trillion by 2020-21, according to him.
The Internet Bug
A survey by Google India has recently shown that 7 out of 10 Indian buyers make a comprehensive online research before entering a store and know the exact brand and model they want to buy. Easy access to internet has given birth to the concept of ‘research online and shop offline’ which is substantially influencing the consumer behaviour in the country. The pan-India survey also showed that internet affects behaviour of buyers across all type of cities and hence, companies are looking at options wherein they could engage buyers online about their products and offerings. While internet is impacting buyers’ decisions in tier-II cities, mobiles are emerging as a strong medium.
Another study conducted by global security technology company McAfee has noticed that many Indians are planning to shop online this holiday season, using internet and mobile phones. About 70 per cent of the respondents said they would shop online.
Consumers drive Luxury Segment
The Indian consumer, especially the urban clan, is a big force behind the growth of luxury brands in the country. India's luxury market is pegged to touch US$ 14.73 billion by 2015, according to industry projections, from an estimated US$ 8.21 billion in 2013. India is already playing host to several foreign fashion brands, including Italy's Gucci, Salvatore Ferragamo, Versace, Armani, Ermenegildo Zegna, Tod's and Boggi Milano, which sell their products through local partnerships. Premium fashion houses like Moschino and Alberta Ferretti, Pollini, Gattinoni, Byblos and Scorpion Bay have initiated their entry strategy and partner search operations according to Luxury Connect, a Delhi-based marketing firm that works exclusively with luxury brands. Italian luxury fashion brand Prada SpA is also in talks with various prospective partners for an India entry and has even studied the market in advance.
Expanding class of high net-worth individuals (HNIs) in the country is the major attraction for these brands to enter India.
Recent Developments/ Investments
- To acknowledge the fast growing online consumer base, Multi Screen Media (MSM) has recently launched its video-on-demand service ‘Sony LIV’. The new offering aims at providing ‘entertainment on the go’ for young India. Apart from enhancing the way entertainment is consumed in India, this user-friendly and interactive application is also a great platform for brands to strengthen their engagement and interaction with young consumers. The Sony LIV application is available globally for free, online on sonyLIV.com and for download on major App stores – iTunes and Google Play
- French food company Danone’s Indian subsidiary Nutricia International (specialising in baby and medical nutrition), has revealed its growth plan for India wherein it intends to double its sales over 2013-16 first, by consolidating the local brands (which it acquired from Wockhardt nutrition) and then, introducing select brands from Danone's international nutrition portfolio (based on its understanding of the Indian market). Nutricia’s baby nutrition portfolio comprises of brands such as Farex, Dexolac and Nusobee
The baby food market in India is growing at an annual rate of 15-20 per cent and the company is vying for a major share in the same
- US coffee chain Starbucks, which opened its seventh store in the country (in New Delhi) considers India among the top five global markets for its growth in the long term. Starbucks entered India in October 2012 and plans to grow its business aggressively, expand stores, make investments and offer locally relevant innovations. Currently, its stores operate under an equal joint venture (JV) partnership with Tata Global Beverages called Tata Starbucks Ltd
Government Initiatives
The Indian Government is majorly concerned about the development of rural markets and hence, keeps introducing policies and initiatives to encourage their growth.
In a bid to make economic development inclusive, the Indian Government has initiated many schemes and programs that aim at improving the standard of living in India villages or rural areas. For instance, the Government launched a time-bound business plan for action called Bharat Nirman for enhancing the infrastructure in hinterlands. Under this program, action is proposed in the areas of Water Supply, Housing, Telecommunication and Information Technology, Roads, Electrification and Irrigation.
Apart from that, the Government is considering enhancing the authorised capital of National Bank for Agriculture and Rural Development (NABARD) to Rs. 20,000 crore (US$ 3.71 billion) from Rs. 5,000 crore (US$ 928.49 million). The increase in authorised capital is aimed at enhancing the operations and broadening the scope of activities of NABARD.
Road Ahead
India is emerging as the third largest internet market and its e-commerce business is likely to touch Rs 4,000 crore (US$ 742.76 million) in 2015 against Rs 1,200 crore (US$ 222.83 million) at present.
Also, with mobiles becoming a major medium for advertising and content delivery, every three out of four users in the country are expected to access the net through a mobile phone by 2015. During 2012-22, cumulatively around US$ 500 billion of ad spend is expected to happen on mobile phones, according to industry estimates.
Moreover, companies in the last decade have positioned tea and coffee as recreational products, which have majorly attracted younger population. Growing at a compounded annual growth rate (CAGR) of 20 per cent, it is expected to touch Rs 33,000 crore (US$ 6.13 billion) by 2015 from the current level of Rs 19,500 crore (US$ 3.62 billion) (in 2011), according to recent study by Assocham. Domestic coffee outlets, which have a lot of appeal for the new generation, are set to double over 2012-15, majorly driven by the foray of global players such Starbucks and Dunkin’ Donuts in India.
Exchange Rate Used: INR 1 = US$ 0.01857 as on February 11, 2013
References: Media Reports, Press releases.
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