Uncovering the Next Billion-Dollar Shoppertunity in India
As India’s economy continues to grow, shopping habits are evolving in kind, particularly among Low-Income Value Explorers (LIVE), a group once referred to as the “deprived” class. The LIVE demographic is mobilizing to become First-Time Modern Trade Shoppers (FTMTS). By 2015, Nielsen estimates that these two segments alone will drive an additional $3B USD of Fast-Moving Consumer Goods (FMCG) sales in India.
Adrian Terron, executive director, Nielsen India, speaking at Nielsen’s India Consumer 360 Conference in Mumbai, details the unique characteristics of LIVE and FTMTS segments and outlines the strategies necessary to grow them.
LIVE: Low-Income Value Explorer
An estimated 10 million LIVE households live in urban India, earning an income of less than Rs. 72,000 annually. Spending one-fifth of their household expenditures on FMCG ($2.4B USD), this massive growth segment is expected to contribute disproportionately to FMCG growth, rising by 50 percent in the next three years to $3.6B USD.
“Confident and buoyed by a sudden rise in incomes, half of LIVE households have already migrated to branded products,” said Terron. “For manufacturer and retailers, this move is not about share gain, but rather expanding the base for branded product sales. With an increasing number of shoppers still forming their relationships with brands, more than half are predisposed to in-store influences, and 40 percent like to try new things. Now is the time to create and continue a relationship with this shopper segment.”
Strategies to win with LIVE:
Catch them early. For shoppers seized by aspiration and insecure about their well-being, modern trade is an indulgence that imparts a sense of progress. Today, five percent of their household budget is spent at modern trade, which is expected to grow to reach $175M USD by 2015.
Tackle inflation through volume gain. While 63 percent of LIVE households watch what they spend—as they reduce, or optimize, quantities for key categories of household consumption and 58 percent seek better value through lower prices– a new behavior is emerging. One-third of LIVE households buy bulk packs for certain categories, which does not only include larger pack sizes, but also banded, or combo, packs, especially for personal care categories.
FTMTS – First-Time Modern Trade Shopper
Every fourth modern trade shopper is a first-time entrant to this channel. Today, FTMTSs spend $280M USD at modern trade on FMCG products, which is expected to triple to $1B USD in just three years. This new breed of shopper, which currently spends 35 percent on FMCG at modern trade, is growing by 15 percent each year.
Impulsive and prone to upsizing quantity, two in five FTMTS also “supersize” their shopping trips by buying more than they had planned. This is not only the result of greater promotions, deals and events at modern trade, but it is also due to increased word-of-mouth marketing and the intense desire to explore and discover the new experiences that modern trade offers.
Strategies to win with FTMTS:
Simplify the navigation. Retailers can help new shoppers overcome the anxiety of being overwhelmed by too many in-store interruptions.
Make product connections. Clear associations between similar and complementary products remind shoppers to consider and buy them.
Offer the right range. With nearly one-in-two shoppers looking to switch brands, category assortment strategies help align consumers with changes in brands and packaging.
While new and premium products are the routes to drive loyalty to modern trade, the arrangement of products on the shelf will differentiate retailers. By redefining the range of assortment and winning the confidence of the FTMTS, retailers can expect to gain an additional $100M annually.