Meet The New Indian Consumer How consumer behaviour is changing in one of the world’s fastest-growing economies SKOLKOVO Institute for Emerging Market Studies (IEMS) 2018 Ruben VARDANYAN, Impact Investor and Venture Philanthropist «The world has never been as dynamic as it is today: technological disruptions, demographic shifts, economic turbulence, and political unrest bring challenges on an unprecedented scale. Twenty years ago nobody could have imagined that the combined GDP of the top seven emerging markets could exceed that of the G7 countries. These markets offer both a great opportunity and a major challenge for any business. By establishing IEMS we wanted to contribute our views and insights to the dialog of business with policy-makers and NGOs in all emerging markets. We believe that open multi-stakeholder dialog will eventually help businesses and politicians come up with better-informed decisions that make a positive impact and drive change for better.» Karl JOHANSSON, former Managing Partner, EY Russia & CIS, Chairman of the Analytical Credit Agency of Russia (ACRA) «Studying emerging markets from within – that is the idea behind bringing together the research teams in Moscow, Hong Kong, and Hyderabad into the international and interdisciplinary research network. These are the most effective means to deal with the dynamics and complexity of the changing nature of emerging markets. Assisting international businesses better understand emerging markets and operating businesses in emerging markets expand globally – those are the strategic aims of the research initiatives at IEMS.» FOUNDING PARTNERS RESEARCH PARTNERS Authors This report was compiled by the SKOLKOVO IEMS team. Yekaterina Molchanova Dear friends! Head Of Global Strategy Studies We are pleased to present a new report by the You are holding in your hands a report on the Kseniya Sokolova SKOLKOVO Institute for Emerging Market Studies new Indian consumer. As well as studying Analyst (IEMS) on the consumer market in India. changes in consumer behaviour, the report’s authors have looked at the context of the transformations happening in India: economic Olga Lemeshko We are currently living in a time of change when reforms, demographic, social and cultural shifts, Analyst traditional patterns are eroding. The world is economic growth itself and the development of becoming more and more undefined, complex infrastructure and individual industries. and interlinked. Traditional institutions are failing to meet these challenges and often try to ignore them. In this context, society’s expectations of I firmly believe that this work will be of interest business are growing as businesses are capable not only to entrepreneurs considering stepping of changing life for the better. It is unsurprising into the Indian market but to everyone who looks Contributors: that the role of business leaders is becoming at their business in a global context because, increasingly important. Whereas capital was once despite the fact that all markets are different, we the main measure of success, talent is taking can always find shared approaches to studying Alexey Kalinin its place, and global competition is no longer them. Research Director over money and resources but over people. Adaptability, cultural intelligence and global We are very grateful to EY for the long-standing thinking are becoming the essential features of Dr Lydia Kulik cooperation and support they have given the the modern business leader. Head of India Studies, IEMS SKOLKOVO Institute for Emerging Market Studies Research Fellow, Institute of Oriental Studies, (IEMS). As a global company, EY will always be Russian Academy of Sciences Time magazine once noted that global CEOs an important partner for us, helping us to better are India’s most important export. It is true that understand global markets. no other developing economy has been able to provide the world with so many outstanding Ruben Vardanyan heads of corporations, entrepreneurs, deans and professors. Examples include Microsoft, Social Investor and Entrepreneur, Founding Partner of the Moscow School of Management No part of this publication may be reproduced or translated into another PepsiCo, Nokia and Harvard Business School. SKOLKOVO language in any form or by any means, including by photocopying, recording Furthermore, we are witnessing the rapid rise of or using any information storage and retrieval system. Indian companies, such as Infosys and TATA, and Chairman of the Supervisory Board of the they are just the tip of the iceberg. Institute for Emerging Market Studies (IEMS) This publication contains general information and can therefore only be used as a general guide. This work is not a detailed investigation or a professional evaluation. The opinions provided are those of the authors and do not necessarily reflect the position of the Moscow School of Management SKOLKOVO. 2018 Dear colleagues! Dear Friends! Russian business needs new opportunities for For several years now, we have been a strategic We are happy to present to you this new report by The Indian School of Business and Moscow growth. We firmly believe that these opportunities partner of the SKOLKOVO Institute for Emerging the Institute for Emerging Market Studies (IEMS) of School of Management SKOLKOVO share a long- should be sought not only in Russia but on the Market Studies (IEMS), whose mission is to help the Moscow School of Management SKOLKOVO lasting historical connection, where Institutes international market too. Russian business Russian businesses to discover new opportunities on The New Indian Consumer, prepared in for Emerging Markets Studies of both schools, representatives and entrepreneurs do not always in the world’s markets. cooperation with the Indian School of Business. inspired by EY, continue to play a special have a sufficient understanding of the possibilities role. Joint research is one of the key areas of available in foreign markets. Developing cooperation where the two schools will maintain Aleksandr Ivlev India is already one of the largest consumer countries deserve particular attention: here, the their focus, besides development of educational markets in the world, with a growing trend towards situation changes so quickly that only a deep Managing Partner for CIS countries programmes for the Russian and Indian, as well urbanisation and digitisation. The new Indian understanding of the fundamental factors of EY as international, entrepreneurs. We shall look consumer is ready to spend, and this dynamic, market transformation can be used as the basis for forward to continuing our efforts in building vibrant, young and aspiring market is attracting building a long-term strategy for each individual bridges between the business and educational international companies to invest and capture its market. communities of Russia and India, and beyond. potential. This research focuses on analysing what categories of consumers there exist in today’s This report is intended as an introduction to India, their preferences, evolving attitude, lifestyle Rajendra Srivastava India, which has always been seen in Russia and habits. It would help businesses considering Dean as a mysterious, almost fairy-tale-like country. entering the Indian market, fine-tune their Indian School of Business Perhaps, this is now truer than ever, considering strategy towards this fast-changing environment. the significant changes occurring in this enormous The report also serves as an illustration to the economy. One of the key driving forces behind evolution of the world’s major growth market, and this change is the new Indian consumer, who India’s unique experience of economic and social is the focus of this study. We firmly believe that transformation. understanding the new market must begin by trying to understand how consumers live today, and how they want to live tomorrow. Furthermore, according to the EY Growth Barometer, 43% of Indian middle-market businesses are expecting double-digit growth in revenue in 2018. 6 Meet the New Indian Consumer 7 Contents 10 WHY INDIA INDEED? 12 INDIA TODAY 12 A country of contradictions: democracy and castes 14 A country of diversity: the many Indias in one country 16 A country of transformations: from the Middle Ages to the 21st century 18 A country on the rise: large, growing and young 21 FACTORS influencing THE consumer MARKET 21 Urbanisation 24 New consciousness 27 Lifestyle changes 29 CATEGORIES OF consumer IN INDIA 31 Urban middle class 31 Indian beauty 32 Investing in quality of life 34 On the path toward organised retail 35 Young specialists 36 Fast life 37 Always connected 39 The well-off rural population 39 The great wedding 40 The home 41 Kirana country 43 Those in need 44 ‘Micro-approaches’ 45 Jugaad-style innovations 46 Prospects 48 BIBLIOGRAPHY investing in India, it is its neighbour, China, that There are also diametrically opposed assessments is placing the biggest bet on India’s economic and judgments in expert circles on the most growth. In 2017 alone, more than 250 Chinese pressing issues on the Indian agenda, whether it be Why India indeed? companies expressed their readiness to invest the status of women, relations between different in the development of this market [68]. Besides nationalities and regions, the progress of reforms interest in large infrastructure projects, Chinese and international policy (which includes relations companies are actively penetrating the Indian with China), and involvement in international consumer market, especially in the smartphone, associations and alliances. Such a diversity of From a hulking elephant to a roaring lion, the case for several decades. According to data from household appliance and online commerce opinions is facilitated by true freedom of the press image of India’s transformation is still gaining the World Bank, in 2016 India became the seventh segments. as well as by the open political discourse which momentum. The country is actively promoting largest consumer market in the world: the total characterise this democratic country. itself on the international stage, with particular volume of its consumer spending was more than focus on establishing business relations.