India Trades Up!

I’m sure many of us in India have been reading articles in newspapers and magazines recently about India trading up.

From the Mint: http://www.livemint.com/2012/03/14001707/India-trades-up-finds-census.html?h=B

From India Today: http://indiatoday.intoday.in/story/upwardly-mobile-india-has-less-loos-more-phones-census-2011/1/177667.html

 

During a recent trip to Chennai for some consumer research, I could not help but notice this phenomenon; especially with this one particular respondent – a 25 year old woman belonging to a SEC C/D household – showing clear signs of trading up, both in household products as well as personal use products.

To give a little background on the Socio-Economic Classification (SEC) commonly used in India – this system classifies the Indian consumer on the basis of two parameters: Occupation and Education of the chief wage earner of the household. SEC C & D are the mid-to-low socio-economic classes in urban India – typically comprise of skilled workers, petty traders, shop owners and salaried employees and majority are educated upto middle-to-high school. A majority of this segment (almost 80%) earns less than Rs.3 lakh annually. (Source: Indicus Analytics)

 

Let’s call our respondent Rehana. Rehana’s house was located in a typical low-income neighborhood – a cluster of 6-8 buildings, 2-3 storeys each, each floor had 2 small flats on either side of a very narrow and often broken staircase. As often observed in such areas, the landing and passage space are used by residents, quite a few of their belongings were kept outside their doors  – like buckets and water drums, folded beds and mattresses, clothes lines running along the stairs, etc.

I visited her house in the afternoon and middle aged women from the building were all hanging out in a group right at the foot of the stairs on the ground floor, since there was a power cut. This is their situation everyday – from 12-3 there is no electricity, so they finish their work accordingly. So while they all hung out – they combed their own or each other’s hair, some chopped vegetables while some just fanned themselves and rested.

Rehana’s home was about 200-250 sq. ft. in area and had three rooms – 1 kitchen, one living-cum-bed room and one dedicated bedroom – with a bathroom in the house. And there came the first surprise, right outside the bathroom, there it was – a washing machine!

We were seated in the bedroom, which in terms of furniture had a proper double bed, a 3 seater sofa, a Godrej almirah and the TV unit (of course!).  She was most conscious that I should not sit on the floor, instead insisted that I sit on the sofa. There was a large Sansui television connected to a Videocon DVD player. The young lady was using the newly launched Samsung Hero mobile phone and was most excited to tell us that this is the same phone that Aamir Khan endorses. (Link to ad here) There was also a water purifier in the bedroom. The water purifier seemed to be their latest purchase (looked brand new) and a proud one, as it held a very specially cleared corner in the bedroom, right next to their Godrej almirah. It was evident in the pride with which she offered us water and looked towards the water purifier suggesting that she was offering not just any water, but water from the purifier!

 

Such a clear example of what we’ve all been reading about lately – about households having more disposable income and trading up. While not everyone has improved their living conditions as much as Rehana’s family has, a lot of families are spending more on low value consumer goods on a regular basis. It is of little wonder now why these lower SEC segments are fast gaining increasing importance with marketers.

 

Best,

Roshni Jhaveri

 

p.s. – We’d earlier written about the limitations of the SEC classification and how only income and education aren’t a good measure of consumer classification. (Click here to read the post) Asset ownership can be a good judge of aspirations, affordability and therefore purchase intent and potential of customers.

2012-04-18T08:33:04+00:00

8 Comments

  1. Rahul Jhaveri April 20, 2012 at 6:04 am - Reply

    This also sheds light upon how unrealistic real estate prices in India are. In most countries, the first thing people trade up once they start getting more disposable income is a new and bigger house. But in India even though people are making more money than they used to, real estate prices are increasing at a faster rate than the increment in their earnings. Therefore, they have to make due with spending money on consumer products etc. Plus, Indians are more conservative in piling on debt. Even if their propensity to save might have decreased, their willingness to increase debt is less.

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