Newly affluent shoppers key in India

30 November 2012

NEW DELHI: Rising levels of wealth among poorer shoppers in India could yield over $3bn in incremental sales for companies in the FMCG sector, according to Nielsen.

The insights group said in its report that "low-income value explorers", once known as the "deprived", and "first-time modern trade shoppers" will supply additional FMCG revenues worth $3bn by 2015.

The first of these audiences comprises 10m urban households, each earning below Rs72k per year, and allocating 20% of their expenditure to food.

Looking ahead, the annual collective returns for the FMCG industry attributable to this demographic should improve from $2.4bn today to $3.6bn in three years' time.

Research conducted by Nielsen found that more than half of the consumers in this group are open to influence when in stores, and approximately 40% actively "like to try new things".

Adrian Terron, executive director, Nielsen India, added that over 50% of low-income buyers had "migrated" to branded products as their affluence rises. "Now is the time to create and continue a relationship with this shopper segment," he said.

By 2015, individuals forming part of this cohort will spend around $175m at modern retail stores, or just under 5% of the total, meaning traditional outlets like markets will be key for brands.

Among the main traits characterising this group are tightly managing and optimising their outlay, cited by 63%, seeking lower prices on 58% and buying in bulk or picking larger pack sizes on 33%.

When looking at "first-time modern trade shoppers", Nielsen reported that their annual expenditure in organised retail outlets stands at $380m today, a figure due to surpass $1bn by 2015.

Some 35% of the FMCG purchases, in value terms, made by this "new breed" of consumer are claimed by modern retail stores at present, a share which should increase dramatically going forward.

Roughly 40% of customers fitting this profile often "supersize" and buy more than they planned in stores, driven both by promotions and an eagerness to experiment with modern trade products.

They are typically impulsive and "prone to upsizing". Nearly 50% also regularly switch brands, offering chances to boost their position. Indeed, Nielsen said retailers can add $100m in sales by choosing the right assortment and helping educate customers.

Data sourced from Nielsen; additional content by Warc staff