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Buying and Selling Trends in India

According to Boston Consulting Group (BCG) India’s consumption has been growing at 13% annually ($110 trillion) to 2018. It was 59% of GDP of 2018, higher than the emerging market average. It is likely to grow at 12% over the next 10 years - Rs. 31 trillion (2008) to Rs 330 trillion (2028). The consumers consist of strugglers, next billion, aspirers, affluents and elites.

Table – 1 Domestic Consumer Market in India

Types of Household

(1)

IncomeBracket ( Rs. Lakhs)

(2)

Present No. of Household

10 yr CAGR (%) 2018/2008

2008 (%)

 (3)

2018 (%)

(4)

Growth in No. of Households (5)

Growth in Average spend per Household

(6)

Elites

20 and above

6

13

13

8.6

Affluent

10-20

13

20

9

8.6

Aspirer

5-10

20

23

6

8.5

Next Billion

1.5-5

44

34

2

8.5

Strugglers

Less than 1.5

17

10

-2

8.5

 

Thus in the past decade, the market has grown 3.5 times to touch Rs. 110 trillion. Aspiring and affluent households earning between 5-20 lakhs per annumincomehelped spur it rising affluence, continuing urbanization, shifting family structure, emergence of millennial, etc. are the contributory factors.

Table – 2 Break-up of consumption

 

2008 (Trillion)

2018 (Trillion)

Growth 2018/2008 (No. of times)

Food

10.6

35.6

3.3

Housing and consumer durables

6.6

21.5

3.3

Transport and consumption

5.6

18.0

3.2

Clothes and Footwear

1.7

7.8

4.6

Education and Leisure

2.3

7.4

3.2

Health

1.3

5.0

3.8

Others

2.9

15.0

5.2

 

31

110

3.5

 

Figures (Table-1) above show that 28% of all households contribute to 43% of 2018 consumption. The growth in consumption is driven by two factors (see Table-1, columns 5 and 6 above) – average spend per household and the total number of households.

Affluent households have more than doubled since 2008 (10 to 24 million), aspirers have grown from 31 million to 57 million, while elites have jumped from 3 million to9 million.

And as Table -2 shows relatively richer households are driving the demand for clothing, footwear, and health – the fastst growing consumption categories spend on clothing and footwear increased 4.6 times to touch 7.8 billion while spends on healthcare hit Rs. 5 trillion.

Table- 3 Growth in Consumption

 

2008

2018

2028

Value of consumer Market (Rs. Trillion)

31

110

335

10 year CAGR (%)

N.A.

13

12

India’s GDP (Rs. Trillion)

54.6

184.6

540.9

Consumption/GDP (%)

56.8

59.3

62.0

On the other hand, due to internet penetration and arrival of International retailers organized retail os growing at furious pace from 12% (2017) it is likely to hit 22-25% by 2021, partly driven by growth of e-commerce, $ 24 billion in 2017 to $84 billion in 2021.

Table – 4 Channel wise Retail Growth (%)

Segment

2008

2018

10 year CAGR

Online

0.10

2.80

78

Offline organized

4.60

12.40

25

Offline unorganized

95.30

84.80

12

The report by Retailers Association of India (RAI) estimates that the number of online shoppers would increase from 15% (2018) to 50% of online population (2026). By 2021 online marketplace is expected to grow to $1.2 trillion as per a report of Deloitte – RAI. High intensity online shopping pattern and heightened use of smart phones across the semiurban and rural segments has helped to boost the sales, especially bymillennial. Presently e-commerce is growing albeit on a small base, at 32% CAGR. This is also facilitated by availability of experimental retailing through advanced analytics, augmented and virtual reality, etc. No wonder 28% millennial buy products due to social media recommendations, while 63% remain updated through social media. The sellers have to account for this changing behavior of the Indian buyers.

 

Contributed by: K.K. Srivastava


KKS is an academic, author, writer, researcher, and corporate speaker. He writes regularly on Economics, Management, Technology, and others areas.

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