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consumer

a q u a r t e r l y r e p o r t b y t e c h n o p a k MARCH 09 / VOLUME 2

NineTrends forIndia

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Overview2008 was an eventful year for India in several ways. Inflation reared its ugly head early on andprices of commodities, food items and fuel went soaring up. Later on, the global economic crisis

had its impact with FIIs pulling out money from the stock market. Newspapers reported various

incidents of middle class families which had lost money in the stock market and now were facing

the prospect of poverty. The global meltdown has had its impact on Indias richest: Indias 40 richest

peoples net worth has shrunk from $351 billion a year ago to $139 billion. Property prices began

to tumble. The daily news about globally iconic companies now begging for government handouts

and numerous announcements of layoffs have created an atmosphere of ambiguity. Several Indian

companies announced layoffs, salary cutbacks and freezes on hiring. India witnessed many more

acts of terrorism across its cities Delhi, Mumbai, Jaipur, Guwahati, Ahmedabad...with the siege ofBombay being the latest and in many ways the most frightening.

If we examine the larger picture, India and Indian companies are probably reacting in a sharper-

than-required manner. The expected GDP growth is still 7%, not a mean rate of growth for such a

large economy. The number of people actually laid off in India is miniscule. While it is true that the

manufacturing sector has slowed down, many sectors have shown phenomenal growth. The FMCG

sector is one such, while according to a source at a leading kitchen appliances MNC, the durables

sector too has shown fast growth. The bulk of people in India are self-employed, with the number ofpeople working in the organised sector at barely 2% of the total workforce. Similarly, the involvement

of Indian consumers with the stock market is less than 5%, with the majority of people still relying

on traditional financial instruments like fixed deposits and bonds. However, the prevailing sentiment

amongst the middle class is that of uncertainty and fear. Mindscape, Technopaks consumer - based

consulting arm, did some brainstorming and consumer interviews to come up with 9 key behavioural

trends for 2009

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Contents

TREND 1Money, money, money 01

TREND 2Fear Factor 02

TREND 3Family Ties 03

TREND 4Small Wonder 04

TREND 5Whats In a Name? 05

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In the past few years, Indians had been earning morethan ever before and spending equally well. Splurges onbranded products, eating out, multiplex tickets and foreignholidays were becoming more common. Living on EMIswas becoming the norm for young people.

However, with the economic downturn, people will revert tothe traditional type of consumption. Thinking twice beforespending every penny and tightening the purse strings willbe the norm.

Indians have already begun to spend less and save more,as evident in the BASCI, (Boston Analytics ConsumerS ti t I d ) thl ti t i d

TREND 1Money, money, money

a deserted look, restaurants and stores are facing up to75% drop in clientele. Landmark has seen sales of music,movies, toys and gifts dropping in the last three months.Desperate consumers are however not drowning theirsorrows in drink, as even liquor shops and bars are seeingfewer footfalls.

From an attitude of wanting to boast about how muchthey spent on the latest Louis Vuitton handbag, kitty partyconversations are now about how much they saved on aparticular item by being canny. People are saving up andpaying cash rather than whipping out the credit card, andwaiting for the annual sales rather than buying on impulse.While the middle class always valued promotional offers and

could be swayed by them, today even affluent consumersare carefully scrutinising on-pack information to opt forbetter value deals. Discount retailers are already talkingabout an upswing in their footfalls and sales levels. Manyretail firms including the Future Group are talking aboutexpanding the network of discount stores in their chains.Big Bazaar in fact, is seeing a huge upswing in footfalls.

Over the next year, whats likely to happen is that consumers

will continue to focus on pruning unnecessary expenses andshop with a list. Many of them may turn away from modernretail to traditional kirana shops which could offer discountsbased on knowing their clientele, or credit periods whichwould be a boon to the harried housewife trying to managea shrinking budget. Big entertainment could still tempt

t hil ll t h f

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Since September 2002 to November 2008, India haswitnessed 19 terror events, culminating in the 26/11 attackin Mumbai. More than 600 people have been killed andhundreds injured in the last six years. As a result, peopleare feeling more and more fearful for their own lives andthose of their families and taking pre-emptive measuresto protect themselves. This is illustrated by the reducedfootfalls in public areas, especially on festivals.

Many outdoor service industries have felt the pinch after26/11. The multiplexes of Mumbai saw less than 30 percent occupancy during the weeks after 26/11. Many smallb d t i hi h d t h t l h ff d

TREND 2Fear Factor

As a result of the state of fear, companies in the securitybusiness are finding a new burst of popularity. Hotels,hospitals, malls, multiplexes and offices are inquiring aboutsecurity agencies for their establishments. Consumers alsowant to buy safety devices for their homes. The manager ofDetech Devices Pvt Ltd claims they used to get around 50inquiries per day, now they are getting 500 calls daily.

Whats likely to happen over the next year is an increase insales of mobile phones, especially the base-level models,as families ensure that each and every family member isable to stay in touch whenever they are out of the house.The penetration of mobile phones is likely to see a surgeboth among the youth and the elderly, as their families

want to ensure they are able to be contactable at all times.Traditional kirana stores would again benefit, as familiesshy away from shopping at big outlets in malls. Stand-alone cinemas could see a boost in ticket sales, as peopleprefer to flock there rather than to prominent venues likemultiplexes. Parties are more likely to shift to private venueslike farmhouses and homes rather than five star hotels.Security devices for the home will see a big boost in sales.

Best of all, consumers will actually become more cooperativewhen faced with security checks!

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Difficult times have the ability to bring families closerphysically as well as emotionally. Economical slowdown,financial crisis, inflation, terror all of them have createda state of anxiety and uncertainty in which people arenaturally drawn to their families for emotional support. Thefear of going out to popular and crowded public placesfurther serves to bring the family closer together.

This will have an impact on the age at which young peoplewant to move out of the parental home and becomeindependent. As it is, its common in India for youth to staywith their parents even after they have begun working. Thelength of the stay is likely to increase further, with economicuncertainty looming. Marriages could get postponed to a

later age as people want to feel secure in their earningsbefore they get married.

TREND 3Family Ties

Given the uncertain world outside, the home more than everbecomes the place for people to congregate, to stay closeto their loved ones, to insulate themselves from the harshrealities of the outside world. People will want to cocoonthemselves within its four walls.

Homes have already undergone a change in recent times,becoming more comfortable as well as good looking. Nowpeople will be willing to go the extra mile in making their

homes all the more interesting for all family members tohang out in. Ordering food in will become more commonas families prefer to eat in the safety of their homes. DVD

t l d l f h th t t ill i

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In times of economic slowdown people are no longer ableto afford all the luxuries they have been used to. However,no one wants to become an ascetic, and therefore, weprophecy that the next couple of years will see a rise insmall indulgences. Leonard Lauder, the chairman of EsteeLauder, coined the term lipstick indicator which is whathappened when the economy gets tough - lipstick salesgo up. Consumers cut down on their spends on expensivecreams, fashion and other categories considered asfrippery but continue to spend on small items like lipstickand nail polish, as they cost much less and yet feel like anindulgence.

People will look for cheaper entertainment options andcheaper ways of pampering themselves and their loved

Child ill b i d l d ith d b t

TREND 4Small Wonder

and get a massage from the maalish waali rather thangoing to spas. People would go shopping in their friendsclosets rather than to stores. Walks will become morepopular than visits to the gym. Vacations may either bedownsized to long weekend trips to nearby destinations ortrips to visit relatives.

India has always had a thriving trade in second-handgoods. There is a tradition of passing down everything fromclothing to utensils to needy members of the family. Thisis going to become much more of a need and consumerswill be more accepting of second-hand goods in morecategories white goods sales may rise in the second

hand market, as will brown goods. Music CDs and movieCDs or DVDs may find a market.

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being noticed by other retailers too. People are not shiftingaway from brands per se, but evaluating where brands arenot indispensable.

Brands will need to offer more real value than ever to ensurethat consumers stay with them. From needing the emotionalpayoff of lifestyle or lifevalue similarities consumers are

TREND 5Whats In a Name?

People were slowly turning to more and more brandedproducts, as much for their badge value as for the purportedquality that brands promised. But at a time when they aretrying to economise, consumers are more concerned aboutgetting good value for their money and will eagerly turn tounbranded products that offer similar functionality in manyproduct categories.

Says Jayshree Sundar, a former senior professional inadvertising, My daughter needed floaters for her schoolcamp. Earlier, I would have gone to a Reebok or Adidasand swiped the credit card for some 3-4000 rupees. Butthis time, I told her were only going to Bata. Then, on theway, we spotted a small street market which had unbranded

floaters for Rs. 300. I promptly went and bought them, andIm proud of myself.

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As people become more economically secure, theybecome much more confident in themselves and at thesame time have an increased awareness of their rights. Asa result, they start demanding much more accountabilityand transparency, both from government and frombusiness. India too has been seeing a slow rise in socialconsciousness over the past few years.

Moreover, people have slowly seen a rise in the power ofindividuals to make a difference. The Angry Young Manof yore has given way to the determined young man orwoman who has managed to fight the system and get hisway. Incidences like the Supreme-Court-granted-power tofly the Indian flag, due to a legal battle by one person, for

example, have had an impact on peoples perception oftheir own power. The mobile phone has suddenly givenIndians everywhere, small villages to large metros, a voiceand information at their fingertips. The RTI legislation toohas been important in giving the average citizen a sense ofmuch-needed control and the ability to ask the governmentmachinery to be transparent in its decision-making. Mediatoo has jumped on the bandwagon, espousing causes andgetting the government machinery to act, as the recent

example of the Hindustan Times series on the lack ofinfrastructure in Gurgaon demonstrated.

In recent weeks, one has seen much more of this kind ofactivism, be it the various citizens groups which sprang upafter 26/11 the demonstrations in the big cities which were

i f h i iddl d iddl l

TREND 6I Have Confidence in Me

as well as more secure in their power to be the change thatthey want to see. People want to take control of their ownlives to a much larger extent, be it in terms of security orfinances. Many brands including Idea and Tata tea havealready started capitalizing on this new spirit through theircommunication.

This is likely to increase substantially in the future. Thiswill have a rub-off on companies and brands as well, asconsumers ask for increased transparency from Indiascorporates. Particularly at a time when consumers arefinding their purses under threat, they need the brands andth i th b f t b t bl d t

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TREND 7Diamonds are Forever

In the last few years, there were few asset classes whichwere not rising, be it stocks, real estate, art or commodities.However, all of a sudden almost all asset classes seem tobe in a freefall, and the only ones holding their heads up areGold and silver. At times like this, when nothing else seemsto be stable, traditional investments like gold and jewelleryseem extra attractive, and these categories of products arelikely to see a real boost in the next few years.

Just recently, Christies sold a 36-carat diamond for thehighest ever price of $24.3 million, claiming at the same timethat the first half of 2008 ending with jewellery sales of $226

million was the best jewelry season ever seen at auction.As per the Retailers Association of India, the jewellery sectormight expect a boost of even 25-40 percent!

Ordinary consumers are rushing out to invest in gold anddiamond jewellery, silver utensils and even gold biscuits. Assets that are real and tangible and that the consumercan keep under his strict gaze. These are also seen asassets which never depreciate and which can then be

h d ld ff i f di d A l ld

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When companies face turbulent times, they turn to thegovernment. When consumers face uncertain times, theyturn to the Supreme Power, religion, to ask for a bail-out.Now that bad times seem not only certain but what seemseven more uncertain is when those bad times will be overor how bad they are likely to get, religion is poised to get ahuge boost in terms of adherents. Since people dont knowwhat rational means they can personally use to bring morestability into their lives, they are going to turn tospirituality or superstition.

New-age spiritual beliefs as well as superstitions are goingto become stronger. Be it Feng Shui or Vaastu, ways ofbringing in good luck and repelling bad luck have been

becoming popular, and this is only going to increase inthe next few years. The number of people going to future-tellers like tarot readers, palmists, horoscope readers orNaadi readers is also going to rise.

TREND 8Lucky Star

Newspapers and magazines are showing more ads forthings like healing crystals or good-luck rings all meant

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TREND 9Id do anything for you, dear

As brands and corporate see consumers becomingincreasing watchful of their spending, and more ready toswitch brands or service providers for financial reasons,they will go out of their way to bind the consumer closerthrough consumer relationship management programs. Alot more time and money will be spent below the line onstrengthening CRM programs and getting more consumersinto their net, as brands try and retain their goodwill bank.

This has already begun in various service industries,with brands from Jet Airways to Kingfisher making morestrenuous efforts than before to woo travellers. Thef f il d i ti f th b d

Many brands are trying to tie-up with like-minded andpositioned brands to provide more package benefits toconsumers. More brands will be on the lookout for such tie-

ups which help manage the cost of the outreach programs,provide access to more consumers and help build in moreloyalty.

What will be interesting is to observe whether the heightenedlevels of attention and service remain constant once theeconomic crisis subsides!

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Mindscape is the strategic consumer insights division of Technopak Advisors. Drawing from Technopaks unmatchedunderstanding of industry, retail environments, Indian and global markets, Mindscape is uniquely placed to integratepresent and future business strategy with best practices in consumer insights.Mindscape was set up to cater to the growing business need for foresight into how consumers and shoppers are likely toevolve, what they will want tomorrow and how best to translate this buyer desire into business wins. Mindscapes mission:To catalyse business growth through consumer insight.

Mindscape offers a bouquet of innovative services:

Enhancing space productivity in partnership with Envirosell

Innovation and design research and product design in partnership with Foley Designs

Industry reports through our in-house intelligence wing, The Knowledge Company Branding and communication strategy

In order to learn more about Mindscape and how we can add value to your business, please contact:

Preeti Reddy

preeti.reddy@technopak.com

Parameswaran Venkataraman

param@technopak.com

Priyadarshini Narendra

priyadarshini.narendra@technopak.com

Mindscape

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Since our inception in 1991 as a Management Consulting firm across diverse industries, we have offered services to have far reachingimpact on client businesses.

Founded on the principle of concept to commissioning, we are strategic advisors to our clients during the ideation phase, implementationguides through the start-up stage, and trusted advisor overall. Over 70% of our projects come from repeat clients.

Our team currently comprises of 200+ skilled professionals from leading International and Indian engineering and managementinstitutes. Most of our consultants have hands-on industry experience in their fields of specialization and represent a wide variety offunctional backgrounds. This enormous knowledge and talent pool enables Technopak to create, special customized teams for eachproject depending upon the clients requirements.

From offices in Gurgaon (National Capital Territory of Delhi), Thane (Mumbai) and Bangalore; we consult with clients across the world. In2007, we worked with 90 Clients across 127 projects, in 20 countries besides India, across 5 continents.

With a team of established domain experts at work, Technopak builds and enhances business capabilities for leading Indian andinternational companies; by offering end-to-end solutions that are unique due to our rich experience, strong industry relationships anda global footprint.

About Technopak

A leading Management Consulting firm offering strategic advice,start up assistance, performance enhancement

impetus, consumer insights and capital advisory, to leading Indian and International companies, operating

in Retail, Food and Agriculture, Consumer Products, Fashion (Textiles & Apparel), Healthcare, Hospitality,

Education, Entertainment and Real Estate sectors

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Assistance in developing value creating strategies basedon consumer insights, competition mapping, Internationalbenchmarking and clients capabilities

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