Understanding the Indian consumer

Understanding the Indian consumer
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First Published: Mon, Dec 21 2009. 01 15 AM IST

Updated: Wed, Dec 30 2009. 05 15 PM IST
Much has been made of the great heterogeneity that characterizes the Indian consumers. Many, in fact, claim that there are so many cuts along which one can classify the Indian consumer that a really complete characterization is next to impossible. But still others keep on attempting to ascertain the proclivities of Indian consumers—and they use a range of criteria.
In our grandparents’ days, questions about caste or jaati were asked directly. In our parents’ times, the questions were more muted and only the last name of a person was sought. Whatever be the mode, biradiri, or community, is an important part of Indian social interaction. Since independence, a new set of social markers have come up. Though a few of the older generation will still “let slip” how their parents came from Lahore, or how their forefathers owned large mango orchards in East Bengal, the new generations use a different set of markers. The educational institutions we went to, the neighbourhood that we live in, the professional class we belong to, the school our children go to, are only some of the non-wealth markers used to communicate a certain lifestyle, and/or a certain class.
Over a period of time, many notions evolved—the conservative Tamil, the spendthrift Punjabi, the economical Bengali, the loud Marwari, and so on. Jaati and biradiri became less important than the region that one’s family hailed from. It took the reforms and the consequent consumption boom to finally break those markers as well. As southern India grabbed the new opportunities that came with economic reforms, and incomes rose, Chennai and Bangalore suddenly became consumption hotspots. But in these cities as well not everyone benefited from the reforms—the politician-contractor nexus gave rise to a new class of nouveau riche.
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The great information technology (IT) boom created another set of highly educated, rich professionals. In northern India, on the contrary, the garment export boom of the 1980s and 1990s levelled out, but the services sector boom put high incomes in the hands of the professional class. These are ongoing changes. The rapid increases in agri-commodity prices in the last few years and quarters is putting great amounts of purchasing power in the hands of the agri-trader. This will create yet another set of high-value consumers in the next few years.
While India’s economic structure changed, so did its family structure. Families are rapidly becoming smaller, and even in larger joint families, the nuclear component is becoming stronger. Rarely does a family patriarch take consumption decisions for all family members; individuals are becoming more important and the nuclear unit of a husband and wife is taking decisions related to consumption, savings and investment—be it in Jalandhar or Coimbatore.
Those with older children are worried about the cost of higher education in an increasingly expensive private education space—and whether located in Bhilai or Bhilwara, the same forces are at work in the minds of affluent and middle-class parents. Similarly, the high cost of health care is affecting retired persons. (Though for those fortunate enough to have worked in the government, lifetime access to decent health care facilities makes it less of an issue.)
At the same time, the young professionals—unencumbered and without the family or social controls that their elder siblings had to answer to, and having incomes unheard of till only a couple of years back—are celebrating. Be it Indore or Imphal, young men and women of India are partying into the nights and early mornings; no longer do they need to depend upon nightclubs and parents’ permission. Bachelor pads provide sufficient avenues and freedom from family and the government.
Sociologists and economists at Indicus have been studying these emerging changes, and our econometricians and statisticians have been finding the patterns that reflect these changes in our families and society.
The Indian consumer spectrum series will, in 33 weeks, cover 101 consumer segments. These segments are based on a categorization of stage of life and occupation, expenditure and savings propensity, family structure and psychographics.
G1: Poor nest builders
The lowermost of the bottom of the pyramid, low education, low incomes, low lifetime opportunities—this might sound like a highly despondent set of urban Indians. But, no worry: This group of people live with their families, and what is more, support them (though the household size is typically small —an average of three persons). Their limited incomes are spread over a larger set of family members, contributing to the expenditure requirements of the larger household; some of it is even saved—around 12%. There are only a few urban Indians like this—less than a percentage or about 646,000 across the country.
Urban employment conditions for the uneducated are poor. It is only once some experience has been gained that a person can expect stable incomes day on day or week on week (most of the employment for this set is in the unorganized sector). About half the poor nest builders are married; some have older parents whom they take care of (about 19%) and some have younger siblings whom they are supporting (about 32%). Life would no doubt be difficult for this set and, therefore, in almost half such households two persons are employed, the spouse being highly likely to work—with less than a quarter of spouses being pure homemakers. An inordinately high number of persons in this set tend to be self-employed. This is not surprising, since low education does not enable many income options, and family responsibility does not enable the luxury of unemployment while searching for a job.
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Incomes are slightly more than Rs9,000 per month (at Rs110,000 per annum), for a family of three. This translates to about Rs3,000 per person per month. This would make it very difficult to survive in urban settings but for the fact that this set typically resides in houses “owned” in the manner of the informal agreements that enable shanties to be owned. Yes, most reside in slums and have poor access to water and sanitation, and in most cases an electricity connection is also “stolen”or bought from the grey market. Despite the low incomes, this set has the ability to purchase low-value durables and electronics items, but what gets in their way is not necessarily the ability to pay, but the poor availability of space, electricity and water to purchase such items. And, therefore, TV ownership is barely 35%—among the lowest in all urban consumer segments.
This segment is likely to expand rapidly, and this is for two reasons. First, the rural social structure is rapidly falling apart; the near and dear ones of the young wage earner who migrates to the city will find it increasingly difficult to depend upon the rural community. Second, newly married spouses now increasingly contribute to the family incomes.
As this set expands rapidly, a range of products and services will get a fillip from the resultant demand—mobile banking (they are predominantly recent migrants), cheaper electronics (TV sets, radio, mobiles), cheap labour-saving devices (since most spouses are not pure homemakers), low-cost food and entertainment options would also enable better lifestyles for this segment.
This series is brought to you by research firm Indicus Analytics Pvt. Ltd
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First Published: Mon, Dec 21 2009. 01 15 AM IST