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Indian Consumer Market

February, 2013

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.