India's consumer market is characterised by diverse languages, regions, religions, economic and social status, and an interesting urban-rural mix.
Multinationals and Global corporations view India as one of the key markets from where future growth will emerge. The growth in India's consumer market will be primarily driven by a favourable population composition and rising disposable incomes.
India's consumer market till recently was broadly defined as a pyramid; a very small affluent class having an appetite for luxury and high-end goods and services at the top, a middles-class at the center and a large relatively economically disadvantaged class at the bottom.
This pyramid structure is gradually collapsing and is being replaced by a diamond – a relatively large affluent class at the top, a huge middle class at the center and a small economically disadvantaged class at the lower end. The diamond represents increasing volume and value across all classes of the Indian consumer market.
India has once again emerged as the most optimistic market in terms of consumer confidence. This is the ninth consecutive quarter wherein India has retained the tag of the world's most optimistic market with an increase of one point in consumer confidence to 123.
The Indian consumption market will grow two-and-a-half times by 2025, to Rs 110 trillion (US$ 1.96 trillion) from Rs 43 trillion (US$ 764.58 billion) in FY 2010, according to a Kotak Institutional Equities report, which classifies Indian households into Real-rich, Upper class, Prospering, Evolving, Emerging and Surviving.
Increasing urbanisation, rising incomes and rising aspiration for a better life, especially, among the lower economic strata are some of the factors reshaping the Indian consumer market. The result of this is a new Indian consumer who is more discerning than ever, ready to place his money on brand, quality and convenience and eager to explore the organised retail market.
US-based Expedia has carved out an ambitious plan to capture a large share of the country's US$ 22 billion travel market. India is expected to be home to the fastest growing online travel market in the Asia-Pacific region in 2012 with gross bookings expected to touch US$ 24 billion and US$ 7.1 billion, respectively. Significantly, online travel is the driving force in the e-commerce segment, with a global contribution of 70 per cent of all e-commerce activities
- The Indian mobile handset market opposed the global trend of a slowdown and instead grew by 6 per cent in the first quarter of 2012, even as worldwide sales dropped by 2 per cent, according to market research firm Gartner. According to Gartner, the Indian smartphone market grew by 17 per cent, though feature phones still dominated the 226 million Indian handset industry
- The e-commerce industry in India is expected to witness increase in hiring, with online retailers being bullish about their employment plans during 2012-13, according to various industry players. The online retail segment is expected to report strong growth in the coming years, on the back of growing Internet consumer base, increasing use of smartphones, laptops/PCs and availability of Internet in the remotest part of the country. The segment is expected to grow from Rs 2,000 crore (US$ 355.62 million) during 2012 to Rs 7,000 crore (US$ 1.24 billion) by 2015
- Consumer goods major Reckitt Benckiser has said that it expects the Indian operations to become its biggest market globally in terms of revenue in the next 3-5 years. The company has globally identified and named 16 'power markets' for future growth and India is at present fourth in the list of top five markets
- Japanese consumer Electronics Company Sony India is planning to increase its marketing spend by 25 per cent to Rs 4.5 billion (US$ 80.01 million) as it aims at 30 per cent growth in sales. The consumer electronics company is also planning to enhance the existing distribution network from 10,400 to 12,200. It will also boost after-sales service with 285 service touch points across India. As per company estimates, India will join the league of top five markets for the Japanese major by 2015, sharing space with US, Japan and China. As per company estimates, India will join the league of top five markets for the Japanese company by 2015. At present, Sony India figures amongst the top ten markets and contributes 5 per cent to global revenues
- GlaxoSmithKline Consumer Healthcare (GSKCH), which re-entered the Indian toothpaste market in 2011 with the launch of Sensodyne, expects to increase its share to double-digits from the current 2 per cent. The Fast Moving Consumer Goods (FMCG) company, with a strong health and nutrition product portfolio in the country, is also planning to increase its presence in the breakfast segment
- US-based consumer durable firm Westinghouse Electric Corporation forayed into the Indian home appliances market sometime in November 2011. The management has set itself an ambitious target of Rs 200 crore (US$ 35.56 million) in sales by 2014-15. The plan is to invest around Rs 70 crore (US$ 12.45 million) on marketing and product development in the next three years. The company is targeting at least 5-10 per cent market share of the organised brand segment in India
- Samsung Electronics is aiming to capture 35 per cent of the market share in the fast growing panel TV market which comprises LED, LCD and Plasma Technology Television sets. The company had a 30 per cent market share of flat TVs during 2011-12 in India and is now targeting 35 per cent by the end of 2012-13
- Godrej Consumer Products Ltd (GCPL) has set an ambitious target of growing 10 times over the next 10 years from its current turnover of over Rs 4,850 crore (US$ 862.38 million) through acquisitions as well as normal expansion in both domestic and international markets
The Government of India is making all the efforts to open up Indian markets to the world that would give consumers wider options in terms of products and services.
The Government support to the on-going growth in the market includes:
- Implementation of Goods and Services Tax (GST) by April 1, 2011 for a simplified taxation structure
- Recognition of some industries as priority sectors
India's robust economic growth and rising household incomes would take consumer spending to a level of US$ 3.6 trillion by 2020, according to a report released by Boston Consulting Group (BCG) and Confederation of Indian Industry (CII). Food, housing, consumer durables, transport and communication are expected to garner the most of consumer spending. The report further stated that India's share of global consumption would expand more than two times to 5.8 per cent by 2020.
"The Indian consumer has shifted from forced denial to affordable indulgence," said Thomas Varghese, Chairman of CII's national committee on retail and Chief Executive Officer of Aditya Birla Retail. This "sensible consumption" has the potential to drive the economic growth of the country for years to come, he said.
Exchange Rate Used: INR 1 = US$ 0.0178 as on May 28, 2012
References: Media Reports, Press Releases