Affordability affecting choices, say 64% Indians: Survey

Indian consumers are feeling more positive of their financial situation over the next one year, but remain sceptical of rising cost of goods and services. Uncertainty around managing rising living costs is driving over 80% of those surveyed in India to save more money, according to India specific findings of the EY Future Consumer Index released Wednesday.

In its ninth edition of the survey, EY surveyed 1,000 Indian consumers in February 2022. The findings reveal a mixed response—one where consumers are feeling more positive as covid-19 cases pandemic and mobility improves, but high prices of daily goods shroud uncertainty over household expenses.

Of those surveyed, 77% expect positive changes in the financial situation in the next one year. This is better than their global counterparts which stands at 48%.

However, 64% of those surveyed raised concerns over the rising cost of goods and services that they said is impacting their ability to purchase goods and is affecting their purchase decisions. Emerging markets are feeling the pinch strongly, EY’s research suggests. 62% of those surveyed globally cited affordability affecting their choices—in India the number stood at 64%.

“In India, this impacts lower-income earners the most i.e. 72%, followed by the high-income group at 60%, and the middle-income group at 58%,” it said.

Meanwhile, this uncertainty is also prompting more households to save.

Rising living costs is driving over 80% in India to save more money than in the past; 50% of all respondents have made it a goal to save rather than spend, it added.

This is especially hard news for companies that are relying on consumers to spend more.

Signs of consumers going easy on consumption are already visible as the fast moving packaged goods sector reported a dip in the March quarter. Most companies cited high inflation—that they said is biting into household spends.

“Experience seeking consumers are less loyal, and with increasing price sensitivity and an inflationary environment, companies would need to toil harder to retain them. This calls for FMCG companies to look at their revenue and margin waterfalls and squeeze outspends across the value chain to drive profitability,” said Angshuman Bhattacharya, Partner & National Leader – Consumer Product and Retail sector, EY India.

Meanwhile, the survey also looked at spending priorities among those surveyed. Consumers cited affordability, experience, planet, health and society, as their top priorities when it comes to deciding where to spend. These traits have taken precedence among consumers since the onset of the pandemic.

In fact, more than half of the respondents in India have made physical health and wellness as a goal for the next 2-3 years.

While 37% consumers globally prioritize sustainability when making purchases, the number is significantly higher—at 70% in India. The trend is more visible among millennial and GenX consumers.

Bhattacharya said consumer priorities have shifted to better self and better environment, post-pandemic.

“This behavioural change will drive the buying decision in the long term. Customers are getting increasingly environmentally conscious and are asking the brands that sell to them, to demonstrate the values that align with their own,” he added.