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India to Become Third-Largest Consumer Economy by 2025(March 21, 2017)
NEW DELHI, India, March 21, 2017 (GLOBE NEWSWIRE) -- Consumption in India is set to triple to $4 trillion by 2025 as rising affluence drives changes in consumer behaviors and spending patterns that have big implications for companies, according to a report released today by The Boston Consulting Groups (BCG) Center for Customer Insight (CCI), The New Indian: The Many Facets of a Changing Consumer. Nominal year-over-year expenditure growth of 12% is more than double the anticipated global rate of 5% and will make India the third-largest consumer market by 2025.
The shape of this growth will be influenced by the following factors:
- The elite and affluent income segments will constitute 40% of all spending by 2025; for the first time, the wealthy will represent the largest consumption segment
- Emerging cities (those with populations of less than 1 million) will be the fastest growing and will constitute one-third of total consumer spending by 2025
- Three-fourths of all households will be nuclear families
- Digital channels will influence 30% to 35% of all retail sales by 2025 and 8% to 10% of retail spending will be online
?Indias consumer market is poised for fundamental change, said Nimisha Jain, a BCG partner and report coauthor. ?As the consumer market continues to grow and evolve, companies will need to shed conventional wisdom, try multiple business models simultaneously, and be prepared for rapid change internally to adapt to changing consumer needs and behaviors.
Among the factors that will shape consumption is Indias unique pattern of urbanization, in which emerging cities are the fastest growing. About 40% of Indias population will be living in urban areas by 2025, and city dwellers will account for more than 60% of consumption. Expenditures in these cities are already rising by nearly 14% a year, while consumer spending in Indias biggest cities is increasing at about 12% a year. Consumers in these cities behave differently from big-city consumers. They have a strong value-for-money orientation, significant local-culture affinity, and a more conservative financial outlook.
Another important trend is shifting family structures. The extended Indian joint family has given way to nuclear households, (a couple or a single person with or without children). The proportion of nuclear households, which has been on the rise during the past two decades, has reached 70% and is projected to increase to 74% by 2025. This ongoing shift is significant to marketers because nuclear families spend 20% to 30% more per capita than joint families.
?A set of emerging social trends could reshape consumption patterns significantly, said Abheek Singhi, a BCG senior partner and report coauthor. ?These include more?and better educated?women taking their rightful place in society, greater pride in being Indian, and increasing time compression, each of which will drive exponential growth in various categories differently.
BCG CCIs most recent consumer survey in India included 10,000 consumers in 30 locations nationwide and studied consumption in more than 50 categories.  The research found that the classic S-curve growth pattern does not always hold true and that different categories are exhibiting very different growth trajectories.  It also shows a steady shift in consumers aspirations and spending behaviors in certain categories. For example, immediate gratification is becoming more important than asset creation. The biggest desires of aspirer households used to be to own a house and a car; today, many more of these consumers want to take international vacations. Similarly, affluent households are becoming comfort seekers, and they are willing to pay for it.
In addition, the internet is an increasingly pervasive factor in Indias commerce, and its influence will only expand. Online spending is taking off: in the past three years, the number of online buyers has increased sevenfold to 80 million to 90 million. Digitals influence on broader consumer spending is significant and growing rapidly. Digitally influenced spending is currently about $45 billion to $50 billion a year, and that figure is projected to increase more than tenfold to $500 billion to $550 billion?and to account for 30% to 35% of all retail sales?by 2025. As a result, omnichannel interaction is more and more important, but its significance varies by category. Consumers purchase pathways also are increasingly complicated.
?Already, a rising number of consumers in all segments are using the internet as their first port of call in framing and driving their purchase decisions, said Kanika Sanghi, a BCG principal and report coauthor. ?Our research found that about 70% of those who have access to the internet go online to make informed purchase decisions. As consumers get more comfortable with digital capabilities, their usage patterns exhibit growth that belies age and other demographic variables.
A copy of the report can be downloaded here.
To arrange an interview with one of the authors, please contact Eric Gregoire at +1 617 850 3783 or firstname.lastname@example.org.
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