Where And How Is the New Indian Spending?

By 2025, 40 per cent of Indians would be in living in the urban centres of the country accounting for 60 per cent of consumption and expenditure. These figures might not be new, but, it is interesting to see how surveys and studies look at the India of today. A study by the Boston Consulting Group (BCG) recently came up with findings on the consumption and spending habits. Here's what you need to know:

Know the different categories

First come the 'strugglers' with incomes less than $2,300, followed by the 'next billion' who are earning $2,300-$7,700; then the 'Aspirers' earning between $7,700 and $15,400, the 'Affluent' earning $15,400-$30,800; and the 'Elite' who are earning $30,800 and above. The value of one dollar is taken as Rs 65.

Who's taking a leap?

By 2025, it is expected that the 'elite' and the 'affluent' would together make up for the largest combined segment in terms of spending. This would account to almost 40 per cent of all consumption and by the same timeline, the consumption by the 'strugglers' and the 'next billion' would shrink from 49 per cent to 36 per cent as projected by BCG.

Where are they settling?

Large-scale migration from rural to urban centres may see a little change. This would continue, but, new small cities would emerge that would attract settlers from rural centres, thanks to the jobs and other opportunities for income generation. Much of the growth, says the report, will happen in small cities.

In terms of consumption expenditure, too, emerging cities with a population of less than one million will be the fastest growing. On a year-on-year basis, expenditure in these cities is rising by 14 per cent while big cities have registered only 12 per cent rise.

This also indicates that for real estate developers, there is an opportunity in small cities where income levels are now on a rise.

Who's living with them?

The shift towards nuclear families is not recent but the number of families now adopting this structure has increased to 70 per cent and by 2025 it would reach 74 per cent as single professionals or working couples move farther from home for work or settlement. BCG says this growth in the number of nuclear families is important for marketers as nuclear families tend to spend 20-30 per cent more per capita than joint families.

Statistics available for a period between 2001-2011 also suggests that the number of singles has increased with more than 40 per cent women above the age of 20 years being unmarried by that age as against the average age of women at the time of marriage which was 22.2 years. The report says, “So far, this remains largely a big-city phenomenon, but it has started percolating down to Tier-II cities.”

Not just marketers, real estate developers, too, have an opportunity here to tap looking at the evident demand for housing. The only challenge is to provide the quality and lifestyle they are looking for. It has been noted that the independent young professionals are more optimistic than those in a joint family. The consumption of these young professionals is based on their lifestyle and not just functional necessities.

Catch them where they are spending

Although the report doesn't overtly talk about housing demand, it throws at us certain pointers. Among other things such as travel, dine-outs, fashion, mobile sales, the expenditure on internet connection become disproportionately high after a family arrives at a certain income level. What does this indicate? Developers and real estate brokers must work towards their online presence because this is where other netizens and their prospective clients are.

Data available with BCG show that there are 80-90 million users who are online buyers. By 2025, this number could go up to 300-350 million online buyers. While convenience remains one of the top factors why they go online, there is a lot of potential in case businesses are looking to expand.

They will pay for quality

The report also notes, “there is a shift towards higher-quality, higher-price sub-segments within categories, as Indian consumers trade up with greater frequency and enthusiasm. About 30 per cent of consumers in India are willing to spend more on products that they perceive are “better”—a much higher percentage than is found in more developed markets such as the US, Germany, and the UK."

Convince them of the value

Even in the case of dine-outs, elites spend 35 times more on it while affluent class spend 13 times more than strugglers. Penetration of these products, spend per purchase and frequency of such occasions are all to be counted in.

On a different level, if developers present the proof of quality of their construction and can match the aspiration of the rising elite and affluent classes, there is an opportunity to tap this class not just in big cities but emerging ones as well.

Rural is keeping pace

With internet penetration estimated to touch the lives of 850 million people by 2025, BCG says, “We expect that more than half of all new internet users will be in rural communities and those rural users will constitute about half of all Indian internet users in 2020.” Not just this, this would be an older, more mature group of users – 65 per cent would be above 25 years, unlike today where half the users are under 24.

Availability at every price-point

With the kind of competition around not just in the general consumer market but in real estate, too, it has become important for suppliers to come up with a product for the various income segments. No longer can the focus be on just luxury or affordable but this as well as the various price points in between.