The Indian Retail Phenomenon


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April 2013

How India's younger demographic is influencing retail

Picture this: it's a regular weekday in 1993; the sole breadwinner of a family of four comes home with shopping bags full of everything from groceries to clothes. Now cut to 2013: a bunch of college kids spend their afternoon at a bustling mall - lounging around, eating fast food, window shopping, and sometimes even making purchases. Say hello to today's quintessential retail consumers, young Indians. They're between the ages of 13 and 35; some are completing their studies, some are working; most live in big cities; and almost all have a source of disposable income (including parent-provided monthly allowances). Let's take a closer look at this consumer group and what they mean for Indian retail.

Understanding Young India

Today's youth can be broadly classified into three demographic and psychographic archetypes: Dabblers, Aspirers, and Thrivers. A Dabbler is an Indian youth between the ages of 13 and 21 who is "with-it", tech-savvy, and a key influencer on family purchase decisions. The Aspirer is 22-28 years old with a huge appetite for new, exciting experiences. A Thriver is a settled and discerning 29-35 year old who knows what he/she wants, and doesn't mind paying a higher price for it. So what are they spending their money on? The Indian retail boom can be observed in the following market segments (from greatest impact to least):

•   Food and grocery accounts for a huge share of household expenditures. The increase in international travel among Indian youth has created a broader palette for global cuisines and greater acceptance of gourmet stores, meaning retail opportunities in this category are as bright as they are varied.
•   Fashion is an extremely fast-growing market, and a big one at that. An increasing demand for branded apparel is no doubt responsible for the 40-50% annual growth rate being experienced by luxury brands and private labels.
•   Electronics is another serious player in India's retail scene right now. With an estimated compound annual growth rate of 18%, we're seeing gizmo-crazy youngsters upgrading their gadgets more frequently than ever.
•   A recent entrant in the retail race is home furnishings. Modern consumers are realizing that furniture can be changed once in a while. As global retailers set up shop in India, hypermarkets expand their home departments, and specialty stores emerge, the trend of picking branded furnishings over handmade, customized pieces is catching on.

Now that we've gotten to know our target audience, let's dig deeper into what makes them tick.

Live Fast, Buy Young

Why young consumers are big in the India retail space:

  1. 50% of the country's 1 billion people are younger than 25, forming a huge base for an industry that is expected to grow to $1.3 billion by 2020.
  2. Favourable demographic and psychographic changes in India's youth, plus rising affluence levels and international exposure, are fuelling the demand for lifestyle and luxury products.
  3. 129 million individuals across India are entering their "first job" phase, which means more financial freedom and more spending.
  4. The average mall footprint is expected to increase 2.5 times. The average youth spends half of their time in a mall, and a quarter of their total spending occurs in modern retail stores. That's a recipe for success if we ever heard one.
  5. The Indian retail market is expected to grow to $574 billion by 2015. The retail sector generates employment for over 5.5 million people, a huge chunk of which forms young India.

To sum things up, the Indian retail industry is becoming intensely competitive, with newer segments and more customers with greater spending power. But India's retail revolution has only just begun. The window of opportunity is open. And thanks to this younger demographic, the future is most definitely bright.