Shift in con­sumer spend­ing & be­hav­ior, a chal­lenge for CEOs in con­sumer goods sec­tor: FICCI-PwC Re­port

FICCI Business Digest - - Special Feature -

The changes to In­dian con­sumer be­hav­iour are be­ing driven by in­creas­ing in­comes, the younger pro­file of con­sumers and grow­ing ac­cess to the in­ter­net. Ac­cord­ing to the FICCI-PwC re­port, 'Shap­ing Con­sumer Trends', the in­creased use of smart­phones, con­scious­ness con­cerns about health and the en­vi­ron­ment, tech­no­log­i­cal in­no­va­tions and the ris­ing com­plex­ity of de­ci­sion­mak­ing due to the pro­lif­er­a­tion of prod­ucts and points of sale are key ar­eas of change that will im­pact con­sumer and re­tail busi­nesses.

Ac­cord­ing to the re­port, these driv­ers are re­shap­ing where, what and how con­sumers' make pur­chases and how they want to be served. The key busi­ness trends that are vis­i­bly un­fold­ing and cre­at­ing a large num­ber of op­por­tu­ni­ties for con­sumer-driven com­pa­nies are: Chang­ing pur­chase pat­terns: The shift in pur­chase be­hav­iour to­wards on­line buy­ing, dom­i­nated by mo­bile phones, has been very ev­i­dent over the last few years. Pref­er­ences are now clearly ex­tend­ing be­yond the orig­i­nal prod­uct cat­e­gories of elec­tron­ics and fash­ion to in­clude food and gro­cery as well as lo­cal ori­gin prod­ucts. Evolv­ing de­sire for ser­vice: Con­sumers are now seek­ing a clut­ter and trou­ble-free ex­pe­ri­ence, en­abled by tech­nol­ogy and bet­ter qual­ity sales peo­ple. Switch to health and wellness-driven choices: There is a marked con­sumer shift to­wards prod­ucts and ser­vices that are per­ceived to be rel­a­tively healthy and less harm­ful or en­hance peo­ple's sense of phys­i­cal and men­tal wellness and the en­vi­ron­ment. Rise of con­ve­nience: Cash-rich and time-starved con­sumers are seek­ing a new di­men­sion in 'con­ve­nience by knowl­edge' to help them nav­i­gate to the right prod­ucts and ser­vices that are rel­e­vant for them. Grow­ing so­cial net­works: The con­cept of 'crowd clout' is gain­ing sig­nif­i­cance as con­sumers re­alise that their col­lec­tive net­works are en­abling them to de­mand im­proved prod­ucts and ser­vices from com­pa­nies. Dis­cussing the re­port, Kr­ish Iyer, Chair­man-FICCI Re­tail & In­ter­nal Trade Com­mit­tee and Pres­i­dent & CEO, Wal­mart In­dia Pvt. Ltd, “The con­tin­ued fo­cus on ease of do­ing busi­ness by the Govern­ment au­gurs very well for In­dia's in­dus­tries across sec­tors. We're see­ing lot of re­forms by the govern­ment, not only re­lated to FDI, but also for re­mov­ing sev­eral struc­tural & sys­temic bot­tle­necks''.

''So while In­dia re­mains one of the most at­trac­tive mar­kets for busi­nesses world­wide due to its fa­vor­able de­mo­graph­ics, size of the pop­u­la­tion, grow­ing pur­chas­ing power and the grow­ing con­sum­ing class, ef­fec­tive im­ple­men­ta­tion of the pro­gres­sive pol­icy re­forms will

fur­ther boost the econ­omy and cre­ate an ease of do­ing busi­ness en­vi­ron­ment in its true spirit'', added Iyer.

Anurag Mathur, Part­ner and Leader – Con­sumer & Re­tail, PwC In­dia, said, "In­dia is in a strong po­si­tion in the world where a grow­ing con­sump­tion ca­pac­ity, demographic shape and life­style changes will pro­pel dou­ble digit growth for con­sumer busi­ness over the next decade. How­ever, the In­dian con­sumers selec­tive par­tic­i­pa­tion in global con­sump­tion trends & con­cerns cou­pled with lo­cal in­fra­struc­ture chal­lenges will re­quire a unique re­sponse from com­pa­nies to win and leapfrog on the growth cy­cle

In­dia has come a long way in reg­u­lat­ing its poli­cies and pro­mot­ing ease of do­ing busi­ness, and has huge po­ten­tial for growth in the sec­tor. As per the re­port, the Govern­ment is ac­tion­ing pol­icy re­forms by lib­er­al­is­ing for­eign in­vest­ment norms and cre­at­ing a sin­gle win­dow clear­ance pol­icy to fa­cil­i­tate busi­ness in the coun­try. But there is a need for fur­ther in­vest­ment un­der the Make in In­dia cam­paign for In­dia to com­pete with the de­vel­oped na­tions of the world and make a mark in the sec­tor.

Com­ment­ing on the steps the Govern­ment has taken so far, Akash Gupt, Part­ner & Leader – Reg­u­la­tory Ser­vices, PwC In­dia, said, “Glob­ally, in­vestors are look­ing at In­dia not only for its mar­ket size but as a des­ti­na­tion with sig­nif­i­cant long- term po­ten­tial. The evolv­ing reg­u­la­tory frame­work and the dy­namism of the Govern­ment have opened new av­enues and have twofold ben­e­fits on ful­fill­ing ob­jec­tives of make in In­dia, and of in­creas­ing con­sump­tion de­mand in the coun­try. This is the time when most reg­u­la­tions are and should be cre­ated around con­sumers. In par­tic­u­lar, the food and bev­er­ages seg­ment has opened up the ex­ten­sive scope of man­u­fac­tur­ing and trad­ing in the coun­try. And with the im­ple­men­ta­tion of 100% FDI in re­tail trade of food prod­ucts, we can ex­pect to see an en­hanced con­sumer bas­ket and a util­ity-driven con­sump­tion trend.”

The key reg­u­la­tory rec­om­men­da­tions made in the FICCI-PwC Re­port are: Give the FMCG and Re­tail sec­tor in­dus­try sta­tus so that com­pa­nies are el­i­gi­ble for pri­or­ity sec­tor lend­ing Con­tinue to fo­cus on im­prov­ing 'ease of do­ing busi­ness' in the coun­try to im­prove the reg­u­la­tory en­vi­ron­ment and In­dia's rank on the global in­dex Im­ple­ment GST early to achieve cost ef­fi­ciency in the pro­cure­ment and sup­ply chain Pro­vide fis­cal in­cen­tives to the in­dus­try, in­clud­ing on back­end in­fra­struc­ture and sup­ply chain In­tro­duce a uni­fied agri­cul­ture mar­ket­ing ePlat­form to ac­tu­alise its ob­jec­tive of pro­vid­ing the 'best pos­si­ble price to the farmer' Im­ple­ment a uni­fied re­tail pol­icy on a pan-In­dia ba­sis and in­tro­duce a time-bound func­tional sin­gle win­dow to help busi­nesses meet com­pli­ance-re­lated re­quire­ments for all bye-laws and guide­lines (This would also en­tail one-stop clear­ance for regis­tra­tion of en­ti­ties and re­duce mul­ti­ple lay­ers of ap­provals for crit­i­cal li­censes and per­mits re­quired to set up shops and busi­nesses.) Har­monise various laws such as Le­gal Meterol­ogy, BIS and FSSA (Any con­fu­sion on these, specif­i­cally on la­belling and re­lated is­sues, should be proac­tively dealt with.) and cre­ate a mech­a­nism to ad­dress is­sues aris­ing due to the mul­ti­ple laws Un­der the ex­ist­ing FDI pol­icy on re­tail sec­tor, the sec­tor is seg­re­gated be­tween sin­gle brand re­tail trad­ing, multi brand re­tail trad­ing, whole­sale cash and carry trad­ing and eCom­merce. With a view to stream­line this with the global trends and prac­tices, the govern­ment may con­sider hav­ing a prod­uct spe­cific pol­icy for for­eign in­vest­ment in the trad­ing sec­tor – to give ex­am­ple, lib­er­al­i­sa­tion of pol­icy by re­mov­ing conditionalities ap­pli­ca­ble to sin­gle brand trad­ing in case of lux­ury prod­ucts which will al­low such com­pa­nies to set up shops in In­dia. This will cre­ate a niche brand pres­ence in the coun­try.

There is a need for fur­ther in­vest­ment un­der the Make in In­dia cam­paign for In­dia to com­pete with the de­vel­oped na­tions and make a mark in the sec­tor.

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