1 perspective a quar terly repor t <strong>by</strong> Volume 02 / 2009 | Roti, Mobile, Gaadi Aur Necklace | Volume 02 Roti, Mobile, Gaadi Aur Necklace This article appeared in Business Standard on August 13, 2009 Notwithstanding the current concerns regarding the impact on consumer spending on account of a truant monsoon, India will see a spending of almost US$ 437 Bn in 2009 (assuming a GDP growth rate of 6%). Further, factoring in a 5% inflation and assuming that GDP will further grow at 6%, the consumer spending is likely to cross about US$ 479 Bn in 2010. However, a deeper analysis of this gross data on consumer spending throws up some very interesting insights. For as long as we remember, roti, kapda aur makaan have been the primary needs and drivers of private consumption. Indeed, it seems that the impact of the sustained economic growth of the last 18 to 20 years is that for a very large part of the population, consumption has moved beyond the basic survival needs. While food & grocery continue to account for the largest quantum of spending - about US$ 260 Bn in 2009, followed <strong>by</strong> healthcare - about US$ 34 Bn and textiles & clothing the third largest - about US$ 31.25 Bn, the surprise numbers 4, 5, and 6 items on the consumer spending list in 2009 are spending on mobile phones and talk-time - about US$ 25 Bn, jewellery & watches - about US$ 24.58 Bn, and personal transport comprising two/four-wheelers including spending on fuel and repairs/maintenance - about US$ 23.95 Bn. This data, of course, is at some variation with the official data since this spending includes some through the parallel economy, but is more reliable since it has been arrived at ‘bottom-up’ sector <strong>by</strong> sector. More interestingly, the growth rates in spending on non-basic needs are much faster now and therefore, it is likely that <strong>by</strong> 2012, spending on textiles and clothing could be relegated to the sixth spot and the hierarchy (excluding healthcare) will be roti, mobile, personal transport, and jewellery & watches. The shift in consumer spending priorities does not stop here. The total outlay of the government on higher education is about US$ 2 Bn. The estimated revenue of the higher education coaching market (including preparation for entrance examinations like JEE, CAT, GRE and GMAT) is about US$ 2.08 Bn. If tutoring and other self-learning is included, the guesstimated private spending in 2009 is almost US$ 10 Bn! Spending on domestic leisure (and religious) travel and tourism is expected to cross US$ 12.50 Bn in 2009, while the spending on consumer durables and consumer electronics is just about US$ 11.45 Bn. Spending on leisure and entertainment in 2009 is about US$ 11.45 Bn, nearly equaling the entire size of the personal and home care FMCG industry! Other very fast-growing categories of consumer spending include personal computing (including internet) where consumers will spend almost US$ 2.08 Bn in 2009, and personal grooming services where the spending is over US$0.83 Bn already and growing in strong double digits. There are several implications of these mega-shifts in consumer spending patterns. For the manufacturers and marketers, some of the imperatives include giving a fresh, much-deeper look into consumer and shopper behaviour using new age tools that go beyond traditional consumer/market research and then work the appropriate value proposition and delivery channels for their basket of goods and services. For entrepreneurs as well as businesses seeking to diversify, the implications are that there are incredibly large new business opportunities though, perhaps, these opportunities will require new business models (product, channel, consumer connect, delivery). Students planning their careers now would be well advised to study these new emerging sectors and plan accordingly. As is clear from the above, the sectors that are likely to create the most jobs (besides retail since most of this consumption will be facilitated through modern brick & mortar retail channels) are healthcare, telecom, travel & leisure, education & training, media & entertainment, personal grooming and fitness etc. The government itself has to get a much better understanding of these shifts since the implications are not only on its own revenue generation opportunities through direct and indirect taxation, but also in many other dimensions including vocational and higher education, and infrastructure (such as retail). Author Arvind Singhal, Chairman & Managing Director I arvind.singhal@technopak.com
A Financial Deep Dive into India’s Retail Sector Introduction 03 Modern Retail Growth across Product Categories 03 Financial Returns in Various Categories 04 Margin Concentration Across Product Categories 05 Inventory Management: The Key to Profitability 06 Focus on Same Store Sales Growth 07 Conclusion 07
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