Home / Industry / Retail /  Consumer priorities changing thanks to growing disposable income, technology

Mumbai: Geetanjali Bharadwaj, 32, a resident of Navi Mumbai, says the way she spends and thinks about spending has changed radically in the past decade.

For instance, Bharadwaj, who has a daughter aged two-and-a-half, no longer thinks it’s important to own a car and prefers to use car-sharing services like Ola and Uber. She also spends a lot more on pampering herself with monthly visits to the salon and spa, and takes frequent weekend breaks and vacations. She also eats out 2-3 times a week.

All this takes up a lot more of her discretionary spending than the acquisition of materialistic comforts like a new car, household appliances and electronics. Even purchases of clothing and shoes as a share of her spending has dropped, she says.

“There are a lot many more avenues to spend today than a decade ago," Bharadwaj reasons. Additionally, the family income has also grown.

Bhardwaj’s spending pattern is a reflection of the change in consumer priorities over the past 10-15 years underpinned by growing household disposable income and the advent of digital technology.

As consumers spend more time on the internet, they have got to know what are the global trends and become a lot more discerning, says Chinmai Sharma, chief revenue officer at Taj Hotels Palaces Resorts Safaris, a luxury hotel brand run by Indian Hotels Co. Ltd. According to Sharma the new currency is memories, not brands or consumer durables.

Indian Hotels is a direct beneficiary of the trend; the proportion of Indian to foreign guests at its properties continues to rise. “Currently 60% of revenue at our domestic hotels comes from Indian guests and this is increasing by 10-15% every year," says Sharma. The hotel chain has a pipeline of 2,000 rooms coming up in the next few years in places like Shimla, Gangtok, Darjeeling and the Andamans which will focus on the Indian consumer.

The changing consumer behaviour is leading retail chains like Shoppers Stop Ltd to focus on building an omni-channel presence (a combination of online and offline sales) and personalization of product and services.

“Consumer spend allocations are changing. Spends are clearly moving towards experiences like eating out and travelling rather than purchasing products," says Govind Shrikhande, managing director, Shoppers Stop.

Over the past year, Shoppers Stop has hired people who assist consumers with their shopping known as personal shoppers; personal shoppers add ease and convenience to the shopping experience translating into increased sales for the retailer. Revenues from people using this service already accounts for 10% of its overall revenue. This will double in the next 24 months, said Shrikhande, who is looking at new ways to extend it.

In absolute numbers, total private final consumption expenditure, an indicator of consumer spending in the economy at constant prices, has increased over 500% since fiscal 2001 to Rs89.27 trillion in financial year 2017, according to a publication on the Reserve Bank of India’s website.

As incomes grow, people are spending proportionately less on necessities like food and shelter compared to 15 years ago. In fiscal 2016, discretionary spending accounted for 54% of total consumer outlays, higher than the 46% in fiscal 2001, according to D.K. Joshi, chief economist at Crisil Ltd.

Also, the influence of technology is hard to miss. A mobile phone is no longer a non-discretionary item, it has become a necessity. Spending on data plans has become a part of the household budget.

“Technology has created new opportunities of consumption and even influenced the way people spend," says Joshi. He is referring to the emergence of the sharing economy with companies like Airbnb Inc., Uber Technologies Inc. and ANI Technologies Pvt. Ltd’s Ola.

Given the falling prices of wireless broadband data, consumers are turning to their smartphones for everything from online shopping to entertainment.

Indians spend 28 hours a week on the mobile, compared with four hours on TV and two hours reading print publications and books, according to the Internet Trends 2017 report by Silicon Valley venture capital firm Kleiner Perkins Caufield Byers (KPCB). Of the time spent on mobiles, 45% is on entertainment, 34% on search, social media and messaging, and 4% on shopping.

And then there are the changing demographics. The median age in India is 28 years. A young population augurs well for sectors like packaged foods and food services. India’s overall snacks market has grown from Rs29,000 crore in calendar year 2010 to Rs55,000 crore in 2016, according to a December report by India Infoline Ltd.

Young consumers like Bharadwaj, a millennial, defined roughly as those born between the early 1980s and the early 2000s, are known to spend much more on experiences than the older generations. Statistics from 2015-2016 reveal that affluent urban millennials spent 13% of their total food expenses per year on eating out. In comparison, affluent Gen X consumers, who preceded the millennials, spent just 7% of their food bill on eating out in the same period, according to a December report by insights provider, Nielsen Co.

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