SIGNIFICANT GROWTH OPPORTUNITIES

1. RISE IN LEVEL OF URBANIZATION AND GROWTH IN GDP

According to IMF reports issued recently, the Indian economy is on track and has stepped
up their rate of development after the demonetisation and introduction of Goods and
Services Tax (GST). In 2017, India overtook France to become the sixth-largest economy
in the world, measured in terms of GDP. There is a high potential market for retail in
India as per the macroeconomic fundamentals due to the following reasons:
a) India has the highest consumption growth among the top 10 countries. It is the fastest-
growing major economy and the second-largest by population. India has 17% of the
world’s population and 3% consumption. In India, per capita income has quadrupled
since 2000, rising from 452.4 USD in 2000 to 1577.6 USD in 2016. As a result, there is
more disposable cash in the pockets of consumers who are not shy of spending. What
contributes to the consumption growth in India is the rise in affluence, which is not
limited to just the income group or metro cities
b) Increase in nuclear families and young urban consumers: In India, approximately 47%
of the population is under the age of 25 and India is expected to be the youngest country
by 2020. In addition to rising urbanisation, which is around 32% presently, there has also
been an increase in the female participation in the workforce leading to a time-starved
consumer group which is likely to pay a premium for convenience. With 70% of
households having a nuclear construct, a trend has been observed that they spend 20-30%
more on consumer durables than a joint family.
c) Aspirational Growth: There is a growing trend among Indian consumers to ‘upgrade’
to branded products from the unbranded goods sold; they are willing to pay for the
service and convenience. What has driven this is the shift in demographics, the quest for
better products, increased awareness about global trends and focus on healthier living.
d) Digitalisation in India: There has been a rapid growth in digital penetration in India.
The percentage of the population using a smartphone is 13%, 91% of population search
what they want to purchase via their mobile phones and almost 54% of those buy the
desired good from their mobile. There has been a 37% internet penetration, which has led
to this level of maturity. CAG (Compounded annual growth rate) has been growing at a
rate of 31%, which is higher than the U.S. and China.
2. IMPROVEMENT IN AFFORDABILITY
The emerging middle class in India is a result of growth of a young population that is
enjoying rising incomes and rapid rate of urbanisation. Urban and middle-income group
population is expected to grow by 21% by 2021, constituting about 42% of the country’s
total population.
With digital access becoming more affordable, along with shift in lifestyle patterns and
increasing product awareness, consumer spending on home appliances and electronics
could see strong growth in the next five years.
Conventionally, an increasing market penetration has been a key driver of sales growth
for many consumer electronics products. However, there exists a significant opportunity
for companies to tap the huge potential, especially in the rural markets and sub-urban
areas of India. The government is developing infrastructure through the development of
roads, rail and power supply is helping to reduce the urban-rural divide.
Apart from growing incomes and purchasing power parity, the other essential factors that
are changing consumer behaviour is the increasing affordability and spending patterns.
Indian consumers these days are looking for a better lifestyle and have homes where they
have products and experiences of global brands. Fuelled by the changing demographics
and falling prices of consumer durables, there is a scope of the transformation of
consumer durables and electronics market in India. Comparing the global average for
consumer durables and electronics products such as refrigerators, air conditioners and
washing machines with the sub-par penetration in India, there is significant scope for the
future growth of consumer durables in India.