The great retail riddle

Is Goa, where I’m off to after writing this piece, the country’s most affluent market, not in terms of size, but in terms of the purchasing power of its citizens?

Certainly it would appear so if you go by the very recent “Guide to Urban Markets” brought out by advertisement firm R K Swamy BBDO, since Goa has the highest Market Intensity Index in the country, coming just before Chandigarh.

Yet, if you compare the BBDO guide with research firm Indicus Analyticus’ “The Market Skyline of India”, an older offering that is being re-launched, you’d say that Chandigarh is more affluent.

Look at the National Council of Applied Economic Research’s forthcoming “The Great Indian Middle Class” and you’d get a more nuanced result — yes, Goa has the country’s highest per capita income, but it is nowhere near the most affluent.

Indeed, while one in 5,000 Goanese have an annual household income of over a crore rupees, one in 900 Chandigarhites fall in this category. Look at those earning over Rs 50 lakh a year, and one in 1,200 Goanese fall in this category versus one in 300 for Chandigarhites.

In another case, BBDO says the Delhi market is larger than Gujarat’s. Yet, Indicus points out that while Delhi’s market size is Rs 74,000 crore, Gujarat’s is around three fourths larger.

Shimla, says BBDO, has a higher market-intensity than Pune, yet this is the exact opposite of what Indicus says given that just 3-4 per cent of Shimla’s households have two or four wheelers while 30 per cent of Pune families have a two wheeler and 7 per cent have cars. The list goes on.

Welcome to the great retail riddle, who is the Indian consumer, where does he live, what does he earn, and what does he buy?

While figuring out customer psychographics is a challenge anywhere in the world, developed markets like the US have an edge in that official data, on say jobs growth and consumer spending is available regularly and is reasonably accurate.

In India, on the other hand, consumption surveys from the National Sample Survey, regularly understate consumption and increasingly capture less and less of GDP — indeed, Indicus’ numbers are based on NSS data, but have been “blown up” to make the NSS numbers more realistic.

As for jobs, regular information is never available, and in fact two expert committees set up by the government within a year of each other had hugely different estimates of even the number of unemployed in the country!

Which is why marketers increasingly have to rely upon (sadly) very disparate pictures of what the consumer looks like. While I’m possibly biased in favour of the NCAER offering given that Business Standard is associated with it, the survey has a lot of features the others simply don’t have, more so given the fact that it is the only one that has been carried out every year (barring a couple) since 1985-86 and so has a trend line that facilitates a comparison with the past.

Most surveys, such as the Indicus one as well as others, stop at annual household income levels of around Rs 2 lakh per annum — in other words, while they depict a very useful trend, the results they provide are often of little relevance to marketers of more than very low-priced goods. The NCAER’s latest offering gives estimates of annual incomes of up to Rs 1 crore.

Getting surveys to provide information for high income levels, while always important, has become a lot more critical today.

A decade ago, even if you didn’t have meaningful information on the number of families earning over, say, Rs 10 lakh a year, you could get a fairly good idea by keeping track of the number of cars being sold, the houses being constructed, and so on.

Today, however, with interest rates collapsing and consumer financing coming of age, today’s consumers are buying cars and houses few in their income-class bought earlier.

Linked to this, with large parts of incomes tied up in loan repayments, is the issue of consumers “downtrading” (that is, buying cheaper soaps and shampoos) and “category collide” (if consumers spend Rs 10,000 crore on mobile phones this year as is estimated, they clearly won’t buy a lot of other things). In other words, it’s critical for marketers to have as much information about the consumer’s income as possible.

So, for instance, while it is obvious that metros like Delhi and Mumbai are the richest in the country, the NCAER report quantifies what marketing firm Dalmia Care’s CEO Sudarshan Banerjee calls “rurban” markets — that is, within these urban islands of prosperity, there are huge markets that are very poor and behave like rural markets.

In Mumbai, for instance, according to the NCAER survey, 23 per cent of the population is in the “deprived” category, or has an annual household income of under Rs 90,000.

In contrast, around 11 per cent of all crorepatis live in rural areas and another 17 per cent in towns with under five lakh people — rural Haryana has a higher density of crorepatis (number of crorepatis per million population) than even cities like Kolkata and Hyderabad.

Indeed, according to NCAER’s projections, the shape of India’s income distribution is slowly morphing from an inverted pyramid (very large number of poor at the top, a small middle class in the middle and negligible rich at the bottom) to a diamond (fewer poor at the top, larger middle-class in the middle, and a small number of rich at the bottom).

An interesting aside in these days of wooing the Left, the NCAER survey shows that no state, not even Bihar, has seen the kind of fall in its all-India income rankings as West Bengal has in the last 5-6 years!