Nielsen India’s research indicates that of the first time shoppers – growing at 15% annually – coming to modern retail, two in five spend more than they had planned. This breed now buys 35% of its fast moving consumer goods from modern trade. One in three are from SEC C.
Side by side are the SEC E consumers – recent migrants from rural India to cities – who don’t necessarily hold formal sector jobs but who have seen a relative income explosion in the past two years.
Nielsen calls them the Low Income Value Explorers who, like every other income segment, are aspirational.
Adrian Terron, executive director, retail and shopper practice, Nielsen India, said, “SEC E incomes have doubled or even tripled from their rural levels. Since their quality of life is low, these consumers spend on entertainment or infrequent indulgences. They have satellite TV at their shanties; they may also own a small car such as a Wagon R or Alto – bought on EMI’s – besides a two-wheeler.”
Since brands are offering even their premium products in smaller packaging – such as premium shampoos in sachets – these consumers are accessing better products. Terron said featurisation of the economy segment is, in fact, a big trend. “Take automobiles. What was earlier offered as premium value-added features is now loaded into economy segment cars.”
Amitabh Mall, partner and director, consumer and retail practice, The Boston Consulting Group (BCG), said that consumers have been spending more over the last five years.
“Since the number of households is not going up but consumption is, purchase baskets are obviously expanding. We track modern retail sales and have observed a growth in the number of bills as well as the average transaction values.”
BCG’s projected income pyramid over a 10-year period till 2020 indicates a narrowing at the bottom and a thickening in the middle. “Ultimately, this pyramid will look more diamond shaped,” Mall said.
He pointed to the increased consumer spending on services too, including air travel; salons, spas and fitness centres; and eating out at fancier places. “Experiences are changing as exposures increase. In 1990, two million people had travelled abroad. In 2010, this number was 12 million.”
Pinakiranjan Mishra, partner and India leader, retail and consumer practice, EY India, said that there is a noticeable trend even among premium brands creating entry price points to draw in more consumers.
“Brands such as Mango and Zara offer some products at entry price points to attract aspirational consumers who otherwise wouldn’t walk in. Once you are in, it is likely you will uptrade. However, even at the premium end, consumers are seeking a value equation.”
Ketan Desai, MD, Integer, a shopper marketing agency, pointed to a dual consumer trend: “While deals are seeing them bulk buying on many products for longer period of time, consumers are also uptrading to higher end buys that add to better image expressions.”
Santosh Desai, MD, Future Brands, added that with consumers, it’s more a squeeze of caution and restraint than spending ability currently.
“Overall, consumers are still in a ‘more mindset’ rather than a ‘less mindset’. They still want a sense of progress. A powerful device to communicate progress is consumption.”
However, Terron said, more than bargain hunting, consumers are indulging in ‘fashionable frugality’.
“Earlier, it was about pride in the most expensive buy. Now, because everybody can afford more, I will look to get the same thing at a better deal – a Vero Moda outfit, for example, through a monsoon sale or a loyalty scheme. Getting a good deal earns me the conversational and street-smart currency.”