Changing Consumer Behaviour Patterns Of Indian Middle Class

Prof.Sundaram Rajagopalan
Dean Executive Education SP Jain Center of Management Singapore

Outline
Evolution of Indian consumer market in growth phase Consumer markets India vs. China increasingly affluent Indian Middle class harder to ignore Indian middle class as a distinctive segment - profile, dimensions, and location Changing patterns of middle class behavior How India's rising and unique middle class will reshape Indian / Global consumer markets ? Implications to companies thru cases

Over the next two decades , Indias middle class will grow from about 5 percent to more than forty percent and create the worlds fifth - largest consumer market
- McKinsey Quarterly 2007

Indias economy has been growing rapidly

What impact has growth had on Indian incomes and how quickly will they grow in the future? How is the distribution of income changing? When will its middle class take off? How is income growth effecting urban versus rural areas? How much of rising Indian incomes will be spent versus saved? What will Indian consumers spend their newfound wealth on?
Source : MGI

What does this mean for business and investment opportunities?

How should companies compete for the new Indian consumer?

India will emerge as the worlds fifth largest consumer economy

Indian incomes will triple over the next two decades, significantly reducing poverty Rising household incomes will be the key driver of consumption growth not changes in savings

A large urban middle class will develop, but rural areas will benefit too
Urban India will account for more than two-thirds of Consumption growth over the next 20 years Middle class households will dominate urban India Large cities tend to have highest incomes, but small niche cities prospering too. Per-household consumption in rural India will reach today's urban levels by 2017

Indian Middle class defined

Source: NCAER The Great Indian Middle Class; McKinsey Global Institute

Middle Class Consumer Markets Comparison with China

Capacity to spend in middle class of China and India widely differs. India's consumer driven economy is starkly different from China's capital-investmentdominated one. The differences go beyond the two countries' rising middle classes. Urban consumers in India will likely drive more global business than their Chinese counterparts while India's rural development far outpaces China's

Where is the real Indian middle class market ?

The Indian urban growth story until now has been driven largely by metros This is now moving beyond metros into smaller towns.

Classification of Cities and Towns

Source: The Great Indian Middle Class, NCAER; McKinsey Global Institute

Changing patterns of middle class consumer behavior Trendy lifestyles

bulk buying Positive attitude towards western trends much more flexible and experimental in their approaches stylish Lifestyles exponential growth of western trend reaching the Indian consumer by way of the media and Indians working abroad

Four Key segments

Home makers

Kids / Family

SEGMENTS

Bread winners

Mass Niche

Values of Home maker middle class Some

Changing Want to feel more productive ( use my talents)
Embrace Measured modernity ( e.g. Jeans + Kuta or Salwar ) Embrace convenience ( slowly) Yearn intimate moments with Husbands

Some same Family Provider (through efforts )money still got by man

Kids my world

Value and Budget conscious

Some unknowns for middle class ( usually bread winners)

Yet most +ve and hopeful of a great future

CHANGING MIDDLE CLASS PARENTS

Kids have a new relationship with their parents

The Niche mass

I Want it Now! Time poor, cash rich Moving away from traditional values and focusing on image and branding Convenience Looking for shopping short cuts are also looking for quick fixes for their looks. Attracted by modern retail environments

The future .
Banking, electricity, telecommunications, water, white goods & beauty industry sectors would thrive and push the middle class into consumerism. Industries will see higher cost of doing business. The Urban middle class will always dwarf Urban Affluent consumers in spending power because of their sheer size. Health and Education will be key spending areas and will even take precedence over consumerism.

Trends
Product will proliferate, consumer will complain of excess

choice although would love the excess choices.

Consumers will enjoy income levels unmatched by that of previous generations. (esp in Metros and large towns) Widening income levels, migration (rural to urban) will create new opportunities.

Most consumers will continue to embrace traditional and

modern values and will be eager for modern products with Indian tastes.