Both the size and shape of the consumer market in India are fundamentally changing. While the dramatic growth of the market is known, it is not well understood. In a nation as large and diverse as India, there are nearly as many estimates of the growth of its consumer market as there are official languages, and questions abound on whether such growth is sustainable.
The shape of that growth—the changing patterns of and attitudes toward consumption—is even less well understood. Most notably, a new generation of consumers has grown up in an era of economic liberalization and social freedom. The members of this generation are entering their prime spending years, and they will indelibly and dramatically reorient the market. Call them “Gen I ”.
“ I ” stands for India, independence, and individuality.
In order to understand Gen I and the broader consumer trends in India, we looked at the market from both the top and bottom, combining a macroeconomic perspective with on-the-ground consumer research.
We sought to answer FOUR fundamental questions :
- How large is the prize ?
- Why is it so large ?
- Where, in the amazing diversity of India, is the prize ?
- How can companies capture it ?
India is the second-fastest-growing major consumer market in the world. These are important questions for any company with global aspirations.
The Size of the Prize :
The consumer market in India is surging forward. Buoyed by a strong economy, rising household income, and socioeconomic forces, overall consumer spending is likely to expand 3.6 times—from $991 billion in 2010 to $3.6 trillion by 2020—a 14 percent annual growth rate, or 8 percent in real terms. (See Exhibit 1.) This is much faster than the anticipated nominal growth rate in consumer spending globally of 5.5 percent and faster than the 9 percent average annual growth rate expected for emerging economies between 2010 and 2020. By 2020, India will constitute 5.8 percent of the world’s total consumer spending—significantly higher than the 2.7 percent it represents now.
Capturing the Prize :
Given the growth in household income and consumer spending, global companies with growth ambitions must make India a priority. They need to create products and services for India and develop products and services in India. They cannot conduct business by export and expect to win. Domestic companies, on the other hand, cannot sit on their past success and expect to rise with the expansionary tide. India is becoming a hotbed of competition.
Two “Mantras” will help companies win in the Indian consumer market.
Understand the underlying trends shaping the evolution of consumption – Indian consumers are on the go. In order to capture the dynamism of the consumer in India, we examined a long list of trends and identified FIVE nascent consumer themes that are not yet as well understood as other more widely discussed trends.
- Children: Driving Consumption Growth.
- Riding the Internet Wave:
- Trading Up: The desire to trade up in India is among the highest in the world.
- Brands: Strong Recognition, Weak Loyalty. Two-thirds of all consumers say that they care about brands in at least 6 of the 9.
- Healthy Living: Indians are becoming more health conscious. Around 70 percent of families say that they have adopted healthy habits.
Consumer spending in India will continue to roar, but the companies that try to capture it without adequate preparation will likely fall short. India’s is a big and growing consumer market, but not an easy one. Understanding the size and shape of the prize and where it is hidden in the crazy-quilt fabric of India are the first steps to capturing it.