Indian consumers refuse to compromise in categories such as food, health and kids. These have emerged as the key categories to register higher spending in inflationary times, claims a study titled ‘Winning Indian Consumers in 2011' by Boston Consulting Group (BCG). This is evident in the rising spending on healthcare and health insurance.
High-end hospitals and diagnostic centres in India are also seeing traffic due to people's high propensity to spend on healthcare, says the study. Brand name is the other reason behind trading up, driven by the increasing importance of social status. Several companies have captured this opportunity by introducing branded products at prices that are higher than unbranded ones, yet are affordable.
Middle, lower-income groups hurt
Addressing a press conference, Mr Abheek Singhi, Partner and Director, The Boston Consulting Group, said, “Consumers are willing to pay a premium in the health and wellness segment. Consumers are trading up in categories like personal and household care and down-trading in categories like apparel and footwear. It is the urban middle- and lower-income groups which have been impacted by food inflation.”
Categories such as dairy, fresh food, laundry detergents, vitamins and supplements, juices and kids clothing continue to be important. In these categories, consumers trade up for a number of reasons including health, brand, fun and better results. These justify paying higher prices as the customer believes that ‘I deserve it' or ‘I can afford to…'. Although most reasons for trading up emerged much stronger in India than in other developing countries, the response rate for each reason was much lower than last year, claims the study.
Trading down in India is driven not just by necessity but also by the thrill one derives on getting a great deal. Spending associated with discretionary categories, like jewellery, athletic shoes, sports equipment and eating out, has been and continues to be vulnerable. These categories see tendencies of trading down of more than 40 per cent.
The study also highlights that the tendency to trade up in developing economies — such as India (34 per cent), China (38 per cent), Brazil (26 per cent) and Russia (22 per cent) — was much higher than that in developed countries, such as the US (17 per cent), the European Union (15 per cent) and Japan (9 per cent). Mexico, with only 9 per cent consumers showing a desire to trade up, is the only exception to this trend. After experiencing a temporary but steep increase in 2010 (58 per cent consumers), Indians wanting to trade down has gone back to the 2009 level of about 35 per cent.