How India Spends,

Shops and Saves in

the New Reality?
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HOW INDIA SPENDS,
SHOPS AND SAVES IN
THE NEW REALITY?

ABHEEK SINGHI

KANIKA SANGHI

December 2020 | Boston Consulting Group

CONTENTS

3 EXECUTIVE SUMMARY

6 INTRODUCTION

9 HOW INDIA SPENDS

1 6 HOW INDIA SHOPS

2 1 HOW INDIA SAVES

2 4 HOW TO THINK ABOUT THE INDIAN CONSUMER IN THIS

DECADE

2 6 FOR FURTHER READING

2 7 NOTE TO THE READER

2 | How India Spends, Shops and Saves in the New Reality?

EXECUTIVE SUMMARY

T he Indian consumption story captured the imagination of

investors across the world, and with good reason. Over the last
decade, India’s increasingly upwardly mobile consumers have fueled
a significant consumption led growth. The entry into the new decade
was expected to demonstrate a continuation of this narrative, albeit
with some changes in the shape of consumption—driven by both
demand and supply side factors. However, the advent of COVID-19
has altered the course of this story with both access linked constraints
and income uncertainty negatively impacting household consump-
tion. The changes have been across how Indian consumers spend,
shop, and save.

How India Spends?

Over the last decade, household consumption in India grew 13 per-
cent year-on-year to reach INR 120 trillion in 2019. This saw increase
across categories with the highest growth in services like health, edu-
cation and leisure, indicating the changing lifestyle and preferences of
consumers, and the rise of many new to the world categories. In the
coming decade, this strong growth trajectory was expected to continue
on the back of four key pillars—Affluence (sustained rise in average
household incomes), Attitude (positive sentiment towards economy
and personal financial situation), Awareness (due to enhanced con-
nectivity, travel, and media), and Access (both digital and physical).

Two of these factors—namely Affluence and Attitude have been im-

pacted by COVID. This will lead to three key shifts in how India
spends. First, household consumption is going to be negatively impact-
ed over 2020 and 2021 and the overall consumption growth is likely to
get delayed by upto 2 years. Given the uncertainty around COVID, it is
difficult to have a definite estimate, however our consumer income
and expenditure model suggests that total household consumption
spending is likely to reach INR 290-300 trillion by 2030—similar to our
initial pre-COVID estimates for 2028. Second, there are likely to be

Boston Consulting Group | 3

 some short-term shifts in the shape of consumption expenditure. Rural
consumption has been relatively resilient through the pandemic, but
the trend is unlikely to sustain over the long-term. With the proportion
of high-income households getting widely distributed across approxi-
mately 100 cities in the country, the contribution of tier 2, tier 3, and
tier 4 cities (all with populations below 1 million) to the consumption
boom is likely to increase. Thirdly, in the aftermath of the pandemic,
the recovery rates across categories are likely to be volatile and varied.
These differential recovery rates are likely to be determined by 2 pa-
rameters: i) type of category, i.e., essential or discretionary and ii) ex-
posure risk during purchase / usage of the category.

How India Shops?

The current pandemic is likely to shape consumer thinking and conse-
quently impact their shopping behavior. From a shopping perspective,
we expect the emergence of five key themes.

First, we expect functional purchase drivers across categories to be-

come more important as consumers increasingly focus on core of the
product, eschewing the peripheral benefits in favor of tangible value.
Second and relatedly, price will continue to hold sway in most catego-
ries (except food related categories) with consumers trying to make
ends meet. Third brand consciousness and loyalty in food / health re-
lated categories is likely to increase. For example, our survey indicates
that the percentage of consumers who like to buy from a preferred
trusted set of brands has gone up from 38 percent to 61 percent in sta-
ples. Fourth, traditional word-of-mouth triggers are likely to reduce in
importance compared to online media. As per our survey online me-
dia as the key influencer in purchase decisions has increased by more
than 10 percent, as compared to pre-COVID. Fifth, we expect an accel-
erated shift towards digital or online channels of purchase across cate-
gories. Our survey suggests that around 20 percent new users have
been added to the universe of online shoppers. Many of the catego-
ries witnessed sharp acceleration in adoption—with staples seeing
upto 40-50 percent new users. However, the stickiness of this behavior
is likely to vary across categories.

How India Saves?

Savings have always played an important role in Indian households
with Indian consumers setting aside nearly a quarter of their monthly
incomes, on an average. This proportion, however, has been on de-
cline since 2013 when the rate was in the mid-30s. At every level of
household income, a higher proportion of people have reported a de-
crease in savings over the last five years rather than an increase. This
decline has driven consumption led growth and is an indication of
greater confidence in the future.

With the advent of the pandemic, however, there has been a spike in
savings since February 2020—most likely driven by a lack of expendi-
ture avenues due to lockdown measures and restrictions on mobility.
However, we expect this to be a short-term phenomenon rather than
a secular trend. Real estate and gold have been the preferred forms of

4 | How India Spends, Shops and Saves in the New Reality?

savings for Indian consumers. During COVID, Indians gravitated even
more towards tangible assets and showed a preference for gold. Al-
most 30 percent of the consumers surveyed further increased their in-
vestments in gold.

COVID has undoubtedly changed the plot of India’s consumption story

and has had a considerable impact on the lead character, i.e., the Indi-
an consumer. The consumption patterns in the country are currently
undergoing a deep transformation, one that is giving birth to unique
challenges and opportunities for companies. Companies looking to
gain consumer’s trust and capture their share of the consumption
spend should focus on re-designing their existing strategies. The first
step towards that would be to plan for different recovery scenarios and
adopt a probabilistic rather than a definitive view of future growth.
The second step would involve understanding changing consumer be-
havior—figuring out what will really change post COVID, identifying
the consumer’s new needs and pain points, and accordingly re-design-
ing strategies to meet the new imperative. The third step is to under-
stand what supply side business model changes are needed to address
the changed consumer behavior. Finally, companies must understand
the importance of using digital to its full potential in order to enhance
the consumers’ journey and foster enduring relationships.

In this report, BCG spotlights the changing behaviors of Indian con-

sumers in all its complexity in an attempt to pave the path for organi-
zations to gear up for the coming decade.

Boston Consulting Group | 5

INTRODUCTION

T he impact of the COVID-19 pandemic

across the world has been unparalleled.
It has strongly challenged status quo and
bigger (3-bedroom) home by at least 2 years
or when things get better. Further, Gopal’s
wife, Nidhi was compelled to compromise
compelled us to rethink how we live our lives and replace her damaged smartphone with a
and earn, spend, and save our money. The significantly cheaper model.
ramifications of the pandemic on consump-
tion have been different and diverse. However, nine-months into the pandemic, the
environment has started to change. The vari-
To better understand how COVID has impact- ous small jobs have started to come back, and
ed opportunities and attitudes of the Indian Gopal is once again able to augment his in-
consumer, lets draw a picture of two Indian come by transcribing audios, doing data-en-
households. try, and digitizing legal notes. Though his to-
tal income is yet to return to pre-COVID
Gopal is a 37-year old back-office executive levels, it has certainly increased from the
who lives with his wife and two young chil- lows of April-May. This has given Gopal and
dren in Indore, a city in central India. He mi- family hope and restored some of their confi-
grated to Indore from a nearby district a de- dence. Today, Gopal believes that the worst is
cade back in search of better job behind him and is somewhat optimistic
opportunities after having acquired some ba- about the future.
sic computer skills. In order to meet his aspi-
rations for his family and self, he supplement- Kavita is a 49-year old Mumbaikar with two
ed income from his regular job by taking up children in their 20s. She owns and manages a
various small jobs on the side. kirana shop with her husband. It is not surpris-
ing to see women taking a more active role in
Everything seemed to be progressing as per economic activity—even though on paper Ka-
plan until the COVID pandemic hit this fami- vita may be categorized as a ‘homemaker’.
ly. While Gopal managed to retain his job, the
additional income from the various small COVID put significant restrictions on peoples’
jobs disappeared. The absence of this extra movements, thereby impacting the where and
income had a strong impact on the family’s when of consumption demand. This signifi-
consumption pattern. Gopal and his family cantly disrupted Kavita’s life as it led to a
had to either cut down or postpone various sharp drop in the footfall in her shop. Recog-
planned spending activities. For example, the nizing the need to put safety first and the in-
family decided to postpone its purchase of a creasing use of online channels for consump-

6 | How India Spends, Shops and Saves in the New Reality?

tion, the family started taking orders via economic turmoil, the long-term growth tra-
WhatsApp and offering a free home delivery jectory remains solid supported by the cau-
facility. By adapting themselves to the tious optimism of its citizens. If India’s
changed environment, Kavita and her family growth resumes along expected lines—
were able to partially mitigate the impact of whether a few months from now or a year
the pandemic on their business. Additionally, from now—it will be because of spending by
Kavita decided to use her cooking skills and consumers like Gopal and Nidhi, Kavita and
started delivering home-cooked meals and Sharad, and hundreds of millions of other
snacks within her neighborhood to augment households across the country.
the family income in these tough times.
In this report, Boston Consulting Group
Even though the environment is slowly re- (BCG) shines a light on the changing behav-
turning to normalcy, Kavita and her husband, iors of Indian consumers, contrasting the pre
Sharad continue to be anxious about the fu- and post-COVID dynamics, in all its com-
ture. Their goal is to invest in their children’s plexity. BCG’s Center for Customer Insight
education and enroll their son in a good uni- surveyed more than 10,000 consumers (See
versity. Kavita believes that a good education Sidebar 1, “Who We Surveyed and What We
can uplift their life and ensure a more secure Set Out to Learn”) and developed a 10-year
future for her children. view of income changes and consumption
growth, capturing the effects of the COVID
In order to attain this, Kavita believes that shake up. Recognizing the conflicting and
Sharad and she will need to keep innovating confusing data on Indian households, BCG
in their small store to stay afloat amidst stiff has arrived at these scenarios for future
competition, especially from grocery e-com- through a comprehensive approach. Histori-
merce firms that have benefited towards the cal data trends have been tabulated and
latter part of COVID. While she remains opti- pressure tested, triangulated and then ex-
mistic about the future, she is wary of the trapolated, to develop models that provide
several challenges that are likely to come forecasts into How India is likely to Spend,
their way due to the pandemic. Shop and Save in the next decade. (See Side-
bar 2, “The Challenges of Developing a Reli-
This is India in a new decade. Although the able Picture of Indian Household Income
decade has commenced with considerable and Expenditure.”)

SIDEBAR 1: WHO WE SURVEYED AND WHAT WE SET OUT

TO LEARN
The surveys that underlie this report were To participate in these surveys, consumers
all conducted in person over 2019 and 2020. were required to have certain attributes.
In 2019, more than 8,200 consumers partici- For instance, only those who had pur-
pated in the study, which was overseen by chased apparel in the recent past (within
BCG’s Center for Customer Insight. The three months of the survey for urban
biggest city in which the survey was held consumers, within six months of the survey
was Delhi while Sangrur, in the state of for rural) were asked questions about
Punjab, was the smallest. A fresh survey apparel. Likewise, questions about food
was conducted in September 2020 among ordering were limited to people who had
1200 consumers to understand the changes ordered food in the two months preceding
in consumer behavior post-COVID. In the survey.
addition to data-oriented answers, partici-
pants also responded to qualitative ques-
tions; some of those comments have been
included as direct quotes in this report.

Boston Consulting Group | 7

 SIDEBAR 2: THE CHALLENGES OF DEVELOPING A
RELIABLE PICTURE OF INDIAN HOUSEHOLD INCOME
AND EXPENDITURE
There is absence of a commonly agreed future scenarios. These included i) regress-
data set of India and Indians’ income and ing household income against economic
spends. The wide range of (often conflict- growth, ii) evaluating the evolution of
ing) datasets, estimates and forecasts serve different city tiers (we have seen that cities
to further accentuate the data challenge typically move up two steps over a decade
for practitioners. For instance, even the implying that tier 2 cities in 2019 will
estimates for the number of total house- reflect the same income distribution as
holds in the country range from 250 million metros in 2009), and iii) mapping against
to 300 million. On the other hand, there is actual growth achieved by comparable
nearly a 10X difference in the estimated countries, i.e., countries which were at the
number of low-income households in India. same level of economic development as
India a decade ago. Many of the findings
BCG’s Center for Customer Insight has for 2030 were similar across the different
used different data sets and triangulations approaches—but there were areas of
to develop a baseline of India’s income divergence as well. These findings are
distribution. We believe that asset owner- presented in this report in an attempt to
ship and consumption habits are more provide a holistic picture of how Indians
reliable indicators of households’ economic will spend, save, and shop in the coming
status and can accordingly sharpen our decade.
understanding of income levels in India. To
further validate our estimates, we also We believe that our income distribution
referred to macroeconomic data relating to model, which we introduced in 2012 and
Indians’ occupations and their consump- have updated and fine-tuned continually
tion / savings patterns. since then, is the best barometer of where
Indian households are today and how they
Three different methodologies were will evolve in the coming years.
parallelly adopted to develop our model for

I n this report, we provide an overview of

how Indians’ spending, shopping, and sav-
ing behaviors have changed in the post-
COVID world and how they will evolve in the
coming decade.

8 | How India Spends, Shops and Saves in the New Reality?

 HOW INDIA SPENDS

O ver the last decade, the Indian

consumption story continued to play out
as 1.3 billion people stepped out of their
in the concept of roti, kapda, aur makaan or
the essentials of basic living. India’s least well
off (the “strugglers” cohort with incomes be-
homes to work, earn, save, and spend. The low INR 1.5 lakhs annually) spend almost
average Indian household’s increasing half of their household income on food. In
proclivity to consume goods and services contrast, the elite Indian households (those
fueled a consumption led growth for the with annual incomes above INR 20 lakhs) de-
economy Household consumption in India vote only around 15 percent of their incomes
grew at a nominal 13 percent year-on-year to food expenditures but spend almost a
(yoy) over the last decade to reach INR 120 quarter of their incomes on housing and
trillion in 2019. Reflecting the diversity in household products. These include discretion-
consumer segments and variations in income ary purchases like furnishings and décor,
and education, the spends and growth apart from rentals and household mainte-
witnessed across categories was quite differ- nance. Further, another quarter of their in-
ent. Not surprisingly, food and grocery was come is allocated to expenditure on trans-
the single largest category, representing 32 port, communication, and leisure. (See
percent of all household spending followed Exhibit 1)
by housing and household products (19
percent) and transport and communication Indian consumers have not only increased
(16 percent). The fastest-growing categories, their spend on traditional categories but also
however, were health and education, which have embraced new categories contempora-
grew by 16 percent and 15 percent, respec- neously with the rest of the world. We ob-
tively. Indians are prioritizing health and served a growth in multiple new categories
education with an aim to chalk out a better like mobile wallets, ride hailing, and Over-the-
future for themselves. Top (OTT) content. Many of these categories
have been driven by the changing economic
Income is obviously a dominant driver of and infrastructural landscape, the evolving
household consumption patterns. Conse- needs of the consumers, a shift in population
quently, there are wide differences in the composition and the supply landscape. For
spending categories and consumption trends example, mobile wallets touched a total
based on household income. In particular, it transaction value of INR 1.9 trillion in 2019
has been observed that as income levels go with transaction volumes growing at a CAGR
up, the spending on discretionary items also of 114 percent over 2013-18. The demonetiza-
increases proportionately. The roots of this lie tion exercise carried out in 2016 coupled with

Boston Consulting Group | 9

 EXHIBIT 1 | Vast Difference in Spending Pattern across Income Levels: Food Reduces whereas Housing,
Transport & Communication Rise with Increase in Income

% SHARE OF HOUSEHOLD SPENDS BY CATEGORY ACROSS INCOME SEGMENTS

14 Food, beverages, tobacco

22
30
8 Clothing & Footwear
47 43
8
7 24 Housing & household products
21
7 20 5 Health
6
6
15 15 5 20 Transport & Communication
3 3 18
17 Education
14 6
12 5 4
4 3 Leisure
2 3 2 3 3
14 17 19
12 12 Other goods & services

Strugglers Next Billion Aspirers Affluent Elite

Source: CCI category consumption survey (Pre-COVID: Period–2019, N= 8,500; Post-COVID: Period–Sep'20, N= 1,200).
Note: Annual Gross Household income – Strugglers: INR <1.5 lakhs; Next Billion: INR 1.5-5 lakhs; Aspirers: INR 5-10 lakhs; Affluent: INR 10-20 lakhs;
Elite: INR >20 lakhs; Categories are Food, Beverages & tobacco (Fresh food & dairy, Staples, packaged foods & beverages, Tobacco), Clothing &
Footwear (Clothing & accessories, Footwear), Housing & Household products (Housing rental, maintenance & utilities, Household goods, equipment
& services),Health (Health goods & medical services), Transport & Communication (Local regular commute, Air/bus/train travel, Vehicles &
Maintenance, Communication -Mobile phone & services ), Education, Leisure (Holidays/Entertainment incl. Eating out/Ordering food, Activity
classes, Recreational Equipment), Other goods & services (incl. insurance premium/service charge payment, EMIs, Personal care).

improved smartphone affordability and bet- by nearly 35 percent over the last decade
ter access to mobile internet gave a further doubling the proportion of affluent and
impetus to the adoption of mobile wallets. elite—the two highest-income segments.
Similarly, the rise of Ola and Uber has creat- By 2030, it is estimated that more than 20
ed a large mobility market in India—poten- percent of Indian households will be
tially impacting both the spends on tradition- either affluent or elite—double the
al public transport as well as auto sales. Truly proportion of such households today. Over
a situation of category creation with limited the same period, the proportion of people
lag to the rest of the world. An important in- in India’s lowest income segments—the
sight as we think about category growths is so-called “next billion” and strugglers—
not to assume that all categories will follow will fall significantly to 51 percent from 67
the S-curve—there will be categories where percent in 2019. (See Exhibit 2). Rising
India will leapfrog. affluence will strongly dictate not just the
overall spend but also the trends in
We believe that 4 core factors are likely to consumption.
drive long-term consumption; we call them
“the 4A’s”—Affluence, Awareness, Atti- • Awareness: Over the years, Indian consum-
tude, and Access. Additionally, factors such ers have been exposed to more and more—
as urbanization, nuclearization, and an in- news, entertainment, products and ser-
crease in the size of the working population vices—both directly and indirectly. While,
will continue to support and a give a fillip to media across all segments (including even
India’s consumption numbers. print and TV has been growing), the biggest
drivers of this increased awareness have
• Affluence: Income or affluence has been been the internet, social media, along with
a key driver of consumption in every travel. Today, the internet penetration in
country and market. The annual average India is nearly 50 percent, up from a <2
household income in India has increased percent in 2000. Further, of the 600 million+

10 | How India Spends, Shops and Saves in the New Reality?

 EXHIBIT 2 | How India's Income Tiers will Change Between Now and 2030
NUMBER AND % OF HOUSEHOLDS (M) IN DIFFERENT INCOME BRACKETS

2010 2019 2030

Average HH income1
(INR Lakhs p.a.) 3.9 5.2 7.3

Annual gross HH income1 Growth

(INR Lakhs p.a.) ('19 -'30)

ELITE 3 (1%) 10 (3%) 23 (7%) 2.3x

>20.0

AFFLUENT 13 (5%) 26 (9%) 56 (16%) 2.1x

10.0-20.0

ASPIRERS
35 (15%) 59 (21%) 93 (26%) 1.6x
5.0-10.0

NEXT BILLION
108 (45%) 130 (45%) 142 (40%) 1.1x
1.5-5.0

STRUGGLERS 79 (33%) 64 (22%) 40 (11%) 0.6x

<1.5

Number of HHs
238 289 354
(in million)

Source: CCI proprietary income model, BCG analysis.

1 Annual household gross income are based on 2019 prices.

internet users, more than half are active increase their spending, according to the
social media users. Similarly, domestic air Reserve Bank of India’s (RBI’s) Consumer
travel has increased by 10x while interna- Confidence Index (CCI). The CCI for
tional departures from India have risen by a India’s economic situation rose nearly 10
factor of 8. The ability to move both percent while the index of anticipated
virtually as well as physically across geo- personal spends increased by 78 percent
graphical boundaries has led to better over this period.
product knowledge and awareness. It has
also encouraged consumers to try out new • Access: Spending is not only contingent
things. As one of the people who took our upon the amount of money an individual
survey in a tier 3 city told us, “Earlier, we has but also upon convenient access. In
only knew about Pantaloon and Raymond,” this respect, India is undergoing a trans-
two Indian clothing brands. “With e-com- formation. Twenty years ago, there were
merce and social media, we now know three malls in India—one each in Delhi,
many brands—from Anokhi, Biba, to HRX Mumbai, and Chennai, respectively. In the
and Zara—and want to try them all.” first 10 years since then, access improved
largely through physical expansions
• Attitude: The last comment is tell- driven by brands. The next 10 years,
ing—“We want to try them all”. This however, saw a mix of digital and physical
indicates both the willingness to spend led access growth with the proliferation of
and the willingness to experiment. For the smartphones. People with smartphones,
most part, confidence about the future— for example, grew from approximately 11
the sentiment that keeps consumers million in 2010 to approximately 450
buying—has been on the upswing in million as of end 2019. With consumers
India. From 2013 to 2019, Indians became getting more comfortable with digital
significantly more optimistic about their channels, their proclivity to make sponta-
economic situation and their ability to neous online purchases or base decisions

Boston Consulting Group | 11

 10.5-11 percent yoy growth to reach INR
on online content also started increasing.
360-370 trillion by 2030. However, in the
In the coming decade, access growth is
short-term, COVID has put a spanner in the
going to be led by digital. In COVID—the
works with both access linked constraints and
winners in terms of channel were the
income uncertainty, negatively impacting
small independent retailer at one end and
household consumption. Inevitably, there is a
the online channels at the other—with
degree of uncertainty regarding consumption
“traditional modern retail” losing out.
recovery and questions around growth
trajectory in the coming decade.
Over the next decade, these 4 factors are ex-
pected to show a secular and steady improve- Our analysis suggests that consumption is
ment and consequently drive consumption likely to be significantly impacted in the very
growth in the country. However, in the short- near term and decline by 10-12 percent in
term, two of these (Affluence and Attitude) 2020. The world has already begun a slow
have witnessed a severe impact due to COVID, pivot from managing the pandemic to recov-
contributing to the immediate slowdown in ery and resumption of economic activity.
consumption. Our model suggests that the av- However, consumption recovery will hinge
erage annual household income in India is ex- upon how COVID-19 can be sustainably man-
pected to rise to around INR 7.3 lakhs by aged and is expected to take 1 to 2 years to
2030—nearly 40 percent higher than it is to- recover to previous growth levels. In the me-
day but that is 7-8 percent lower than our pre- dium term, we expect household consump-
COVID projections. This reflects the impact of tion to witness a steady state growth of 10-12
the pandemic on the Affluence factor. percent up to 2030. It is difficult to have a
definite estimate, however our consumer in-
Further, expectations on income growth and come and expenditure model suggests that
attitude towards consumption was significant- the total household consumption spending
ly (and not unexpectedly) impacted in the im- will reach INR 290-300 trillion by 2030 (See
mediate aftermath of COVID. As per our Exhibit 3)—similar to our initial pre-COVID
COVID sentiment survey of April-May 2020, estimates for 2028. This leads us to the con-
55 percent of the respondents expected a de- clusion that while the pandemic will impact
cline in income over a 6-month period. This short-term consumption trends and delay the
sentiment has started improving as the lock- overall consumption spends by around 2
downs have been relaxed and disease spread years, the long-term growth trajectory re-
has been lower than most projections. The mains intact.
proportion of respondents expecting income
to decline came down to 44 percent as per
our August 2020 survey. Similarly, the RBI The Rise of Middle India.
CCI for anticipated personal income has seen The impact of COVID-19 has been varied
an improvement of 25 percentage points across consumer and geographic segments.
from May to November 2020. As sentiment Certain trends like the increasing role of rural
further improves and people feel more secure is likely to be short-term in nature while oth-
about their future health and wealth, they ers like the increasing contribution of tier 2
are likely to be more confident about increas- and 3 cities to consumption growth is likely to
ing their consumption spend. persist in the long-term.

Our research indicates three major themes Our research suggests that the impact on in-
for the post-COVID world. come levels has been higher among the lower
income classes and in bigger cities. At the
same time, rural has been relatively resilient.
Long-Term Secular Growth This can be attributed to minimal disruption
Drivers remain Steady; But, during lockdown (lower COVID cases), return
Consumption Growth likely to be of migrant workers, and higher dependence
Delayed by 2 years. on less-impacted farm income. However, this
Pre-COVID, India’s total household trend is unlikely to persist over the long-term
consumption was expected to witness a due to 3 key reasons.

12 | How India Spends, Shops and Saves in the New Reality?

 EXHIBIT 3 | India's 2030 Household Consumption Likely To Touch INR 300 Trillion

CONSERVATIVE CASE BASE CASE AGGRESSIVE CASE

Household
consumption growth -10 to -12%
in 2020

Time frame to
recover to pre-covid ~2 years ~1.5 years ~1 years
levels1

Household YoY
consumption growth 9.5 – 10% 11 – 11.5% 12 – 12.5%
rate post recovery

Estimated household
consumption in 2030 250 – 260 290 – 300 330 – 340
(INR tn)

Source: CCI proprietary consumption model, BCG analysis.

1 Recovery time frame considered from end of 2020.

• Share of rural in coronavirus cases has role in the country’s consumer spending
steadily climbed from approximately 23 boom, accounting for approximately 45 per-
percent in April-May 2020 to approximate- cent of India’s consumer spending in 2030, up
ly 55 percent in August 2020, thereby from 33 percent today. Additionally, with the
increasing disruption in these areas. proportion of high-income households getting
widely distributed across approximately 100
• Urban to rural remittances were at nearly cities in the country, the contribution of peo-
80 percent of pre-COVID levels in Septem- ple in tier 2, tier 3, and tier 4 cities (all with
ber 2020, compared to just 20 percent in populations below 1 million) to the consump-
April 2020, indicating that migrant tion boom is also likely to significantly in-
workers are returning to urban hubs. crease. (See Exhibit 4)

• The manufacturing index, which had This can be attributed to 3 key reasons.
declined in the months following the
onset of COVID, is now just shy of its • The population growth in non-metro
pre-COVID levels, indicating a revival in India (tiers 1-4) is expected to be over 3
non-farm incomes and narrowing the percent yoy up to 2030, as compared to 1
urban-rural gap. percent for rural and ~2 percent for
metros.
These factors combined with challenges relat-
ed to adequate medical infrastructure and • Rising connectivity and increased internet
vaccine distribution in rural areas imply that penetration is likely to improve access and
rural strengthening is likely to be a short- awareness, linking back to our 4As of
term phenomenon. consumption growth.

Over the next decade, India’s two highest in- • The smaller cities have been less impact-
come brackets are likely to play the biggest ed by the ongoing pandemic situation as

Boston Consulting Group | 13

 EXHIBIT 4 | SPENDING CONTRIBUTION OF SMALLER CITIES AND WEALTHY HOUSEHOLDS TO INCREASE

CONSUMPTION ACROSS CITY TIERS CONSUMPTION ACROSS INCOME GROUPS

% Share of household consumption % Share of household consumption

8%
16 % 16 % 16 % 14 % 22 %
14 %
10 % 12 % 15 %
4% 19 %
4% 5% 22 %
19 % 29 %
21 %
23 % 26 %

42 % 24 %
52 % 47 % 41 % 34 %
23 %
14 %
6% 3%
2010 2019 2030 2010 2019 2030

Metro Tier 2 Rural Elite Aspirers Strugglers

Tier 1 Tier 3/4 Affluent Next Billion

Source: CCI proprietary consumption model, BCG analysis.

Note: Town class basis population – Metro (> 4 Mn), Tier 1 (1-4 Mn), Tier 2 (0.5-1 Mn), Tier 3 / 4 (<0.5 Mn); | Income class definitions: Elite: INR > 20
lakhs p.a., Affluent: INR 10-20 lakhs p.a., Aspirers: INR 5-10 lakhs p.a., Next billion INR 1.5-5 lakhs p.a., Strugglers INR <1.5 lakhs p.a.

observed in our COVID sentiment survey. tize the most basic needs and put discretion-
The survey reveals that 41 percent of ary spends on the back burner.
households in smaller towns expected
incomes to decline in the next few months There are two key parameters that influence
vis-a-vis 52 percent of households in big a consumer’s choice in times of crisis and
cities. consequently, determine the category wise re-
covery rates. These 2 parameters are i) type
We are already seeing signs of lower tiers of spend, i.e., essential or discretionary, ii) ex-
driving growth. For example, passenger traffic posure risk during purchase / usage. In gener-
at non-metro airports is growing at about al, the more essential the category is consid-
twice the rate of traffic at metro airports. ered to be and the lower the risk associated
These smaller towns are also accounting for with consumption or purchase of the catego-
an increasing percentage of the country’s ry, the faster is the recovery for the category.
e-commerce. Using these parameters, 5 clusters of con-
sumption categories emerge (See Exhibit 5).
Essential AND low risk categories such as
Differential recovery across food, household care continue to see no
categories. change in demand. Essential BUT high risk
Pre-COVID, a key trend in consumption pat- categories such as education, doctor visits is
terns had been a shift towards more discre- where a lot of new business models leverag-
tionary purchases. In developing countries ing online are emerging. High risk AND dis-
like India, consumer spending is primarily fo- cretionary categories such as travel, eating
cused on necessities like food. As countries out are severely impacted. Within the
move up the economic development curve, semi-discretionary AND low risk categories,
consumers increase discretionary spending. two sets are emerging. The first has catego-
However, uncertainties triggered by the pan- ries like durables, OTT, home which have all
demic have compelled consumers to priori- witnessed a positive demand uplift due to

14 | How India Spends, Shops and Saves in the New Reality?

 EXHIBIT 5 | Category Recovery Timelines Vary on Two Dimensions—Nature of Demand and Associated
COVID Risk

LOW
Rent, Maintenance
RISK Semi-discretionary Low-risk: Home Wifi connection Mobile services & Utilities
COVID-induced negative Insurance
demand shift (lower out of Paid OTT DTH/Cable services
home/ social occasions) Durables Fresh foods,
Packaged food
& Electronics Dairy and Staples
Cosmetics & make-up & beverages Household
Cars/2W Mobile care products Healthcare-Medicines
Apparel & Footwear
COVID RISK ASSOCIATED WITH

devices Essential Low-risk:

CONSUMPTION/ PURCHASE

Recovered/ fast recovering

Home construction
Food delivery categories
/ renovation
Semi-discretionary Low-risk:
COVID-induced positive demand
shift (time at home/ need for
Discretionary High-risk: hygiene & health)
Severely impacted Essential High-risk:
Impacted or migrated to online
OOH entertainment
Education
(cinemas, spas, concerts etc.) Public transport
Travel Salon services
Eating out Doctor visits/procedures

ESSENTIAL
HIGH DISCRETIONARY
RISK NATURE OF DEMAND

Demand impact Positive Neutral Negative

Source: BCG analysis.

greater need to be at home or due to en- albeit with a delay of approximately two
hanced need around health and hygiene. The years. While existing categories will witness
other has categories like apparel, cosmetics varying levels and speed of recovery and ac-
which have seen a negative demand shift cordingly contribute to consumption growth,
largely due to lower social occasions. we also expect the rise of new categories that
will lead from the front. Overall, a confluence
This, however, does not imply that all catego- of rising affluence, better awareness, im-
ries in the ‘discretionary’ or ‘high risk’ clus- proved access, and positive consumer attitude
ters will necessarily take longer to recover. By will fuel consumption growth in the coming
changing consumers’ perception around the decade.
underlying factors, one can change the recov-
ery rate. For example, alcohol brands can
push for faster recovery by enabling conve-
nient home delivery services and solving the
challenges around the risk associated with
visiting bars for consumption.

T he COVID-19 pandemic has precipitated

a sharp shift in the country’s consump-
tion behavior. In the short-term, we are likely
to see a consumption slowdown as 2 of the 4
core factors influencing consumption growth,
i.e., Affluence and Attitude, get severely im-
pacted. However, we believe that long-term
growth drivers are intact and should bring
consumption back on its growth trajectory,

Boston Consulting Group | 15

HOW INDIA SHOPS

S hopping is not merely a transaction

that begins and ends with the exchange
of goods for a consideration. COVID has
functional needs. However, in addition to in-
come uncertainty, there are several other fac-
tors that are accelerating this shift towards a
impacted every element of the shopping more functional demand scenario.
journey of an Indian consumer.
For example, our survey revealed that in food
The ‘why’, ‘what’, and ‘how’ of consumer be- ordering, approximately 20 percent of triggers
havior is undergoing transformation due to are now functional, 3X higher than pre-
the COVID-19 outbreak. The triggers and in- COVID levels. Correspondingly, societal / cel-
fluencers of purchase are changing while ebratory triggers have halved since COVID.
brand decisions are taking on a new mean- With housemaid (cooking) services getting
ing. In order to understand the key changes disrupted, many consumers were compelled
that have transpired, we evaluated the impact to order from restaurants to serve a function-
of COVID on multiple categories. These cate- al need, rather than for social / celebratory
gories are i) staples, ii) apparel, iii) mobile de- occasions.
vices, and iv) eating out / food ordering—se-
lected to be representative of different Likewise, in apparel, the purchase decision
spends in consumers’ baskets. There are high, was primarily triggered by social / celebra-
medium, and low-frequency shopping catego- tory occasions (accounting for 42 percent of
ries in our selection. Further, there are also triggers). However, due to social distancing
products and services with high, medium, and norms and an overall reduction in physical
low-ticket prices. interactions, the social / celebratory occasions
no longer hold much sway in the purchase
There are five key themes to keep in mind. decision. Instead, the single largest trigger is
now functional—clothes for home workouts,
additional pair of jeans due to daily washing,
Move Towards Functional worn out innerwear replacement, etc.
While the purchase triggers varied highly by
category before the advent of COVID, there
has been a marked shift towards functional Price and Value key—Except
triggers across categories in the post-COVID maybe Health
world. Inevitably, income uncertainty has en- Not surprisingly, in most categories, price con-
couraged people to tighten their purse strings tinues to be the most important factor. For
and eschew luxuries in favor of basic and example, in mobiles, price has become the

16 | How India Spends, Shops and Saves in the New Reality?

most important purchase driver for nearly a ples, “Earlier we used to buy chakki atta.
third of the consumers, a significant rise from But now, it is no longer safe as we don’t
pre-COVID levels. On the other hand, brand know if and what precautions are being tak-
has become less important, with only a en there. So, I have started buying Aas-
fourth of the respondents stating brand to be hirvaad now as safety and quality is the
the most important purchase driver, com- most important.”
pared to one third previously. COVID seems
to have exacerbated the price-consciousness
of Indians even further, given the short-medi- Online as the Single Largest
um term income risks and financial concerns. source of Influence across
Multiple Categories
COVID has put a spotlight on the importance Over the last decade, the proliferation of dig-
of maintaining health and hygiene and made ital media has significantly impacted the
eating clean and healthy a priority. In this way consumers make decisions. Even pre-
context, one of the key changes observed in COVID, online was the most dominant influ-
the post-COVID world is the importance of ence in categories like order-in. Post-COVID,
‘brand’ in food related purchase decisions. online media has overtaken traditional me-
This is especially relevant in categories like dia (TV, print, and radio) as the single largest
staples where nearly 20 percent urban Indi- source of influence even in previously tradi-
ans rated it as the topmost decision criteria tional media or word-of-mouth dominant
as compared to 14 percent before COVID. In categories like mobiles and apparels (See Ex-
general, the perception is that a higher rated hibit 6). Online not only facilitates consump-
brand is likely to maintain better standards of tion in a safe environment (home in most
hygiene and quality. cases) but also reduces information asymme-
tries, thereby providing individuals choice
A 30-year old woman from Coimbatore em- and enabling them to make more informed
phasized the enhanced role of brand for sta- decisions.

EXHIBIT 6 | Online Emerged as The Single Largest Source of Influence Across most Categories

PRE-COVID VS POST-COVID: SOURCES OF INFLUENCE

% respondents

25 21 30 22 33

46 53
64
29 42
54
65
35
61
19 43
41
36
22 17 19
14
4 6

Order-in Staples Apparel Mobile

Pre-Covid Post-Covid TV/Print/Radio Online (reviews/social media/search) Word of mouth

Source: CCI category consumption survey (Pre-COVID: Period-2019, N= 8,500; Post-COVID: Period- Sep'20, N= 1,200).
Note: Question text: Which of the following sources of information influences your decision the most for purchase of the XYZ for yourself/kids?
Pre-Covid data collected in 2019 & post-Covid data collected in Sep 2020. Data of only urban consumers.
Considering Rank 1 responses only.

Boston Consulting Group | 17

 Increasingly, urban Indians are choosing the percentage of consumers who like to buy
restaurants based on online content (65 per- from a preferred set of brands has gone up
cent) rather than on content consumed from 38 percent to 61 percent in staples and
through traditional media (35 percent). from 77 percent to 87 percent in food order-
Across categories, online media as the key in- ing. (See Exhibit 7)
fluencer in purchase decisions has increased
by more than 10 percent, as compared to pre- The reason for the shift is aptly captured in
COVID. one of our interviews with a 43-year-old
woman from Mangalore, “I now buy branded
While there are multiple sources of influence staples as I don’t want storekeepers to touch
within online media, a large part of the influ- loose grains while packing.”
ence tends to be through shopping sites such
as Amazon and Flipkart or various shopping Reflecting on her brand buying behavior, an
apps. The exception is with categories for affluent 30-year-old Mumbaikar who has con-
which other peoples’ perception is important, sciously started eating healthy post-COVID
such as apparels and leisure travel. In these shared, “Earlier, I didn’t care which brand of
categories, shopping apps trail social media sugar or bread I bought—but now, I regularly
and search sites in their level of influence. buy brown sugar from a brand which my
friends recommended and have also started
buying whole wheat or multi-grain bread
Mixed Brand Loyalty across from a known store.”
Categories
In categories such as food ordering and sta- However, by and large, there aren’t a lot of
ples, which are associated with health and categories where urban Indians set out with a
the need for avoidance of any risk of infec- single brand in mind, which is how we define
tion, consumers are becoming more brand brand loyalty. Its relevance is further reduced
brand conscious. Our survey indicates that across categories like mobiles and apparels,

EXHIBIT 7 | Increased Brand Consciousness, Loyalty in Food Categories; Not in Others

PRE-COVID VS POST-COVID PRE-COVID VS POST-COVID

BRAND CONSCIOUSNESS BRAND LOYALTY

77 31

87 Order-in1 35

38 27

61 Staples2 34

33 10

35 Apparel 9

76 46

77 Mobile 33

% respondents who have a set of brands in % respondents who have a single preferred brand in
mind while purchasing mind while purchasing

Pre-Covid Post-Covid

Source: CCI category consumption survey (Pre-COVID: Period-2019, N= 8,500; Post-COVID: Period-Sep'20, N= 1,200).
Note: Question text: Thinking about your last purchase for XYZ, which of the following statements best describes your purchase behavior at that
time?; Brand loyalty is considered as "I had one specific brand in mind" & brand consciousness is considered as "I had 1-3 brands in mind";
Pre-Covid data collected in 2019 & post-Covid data collected in Sep 2020. Data of only urban consumers.
1 Represents place loyalty/consciousness; 2 Represents loyalty/consciousness for packaged staples.

18 | How India Spends, Shops and Saves in the New Reality?

where price becomes the more important de- users were added to the universe of online
terminant. The only exception is food-related shoppers in this period. Many of the catego-
categories that have seen an uptick in loyalty ries witnessed sharp acceleration in adop-
due to being associated with ‘health and hy- tion—with staples seeing upto 40-50 percent
giene’, which holds utmost importance in the new users. (See Exhibit 8).
post-COVID world.
A large number of these new online shoppers
started off with non-traditional channels of
Accelerated Online Commerce online shopping that comprised buying
Before COVID, online channels were popular through social media apps like WhatsApp
in select categories. For example, mobile and Facebook instead of traditional e-com-
phone purchases were driven by the fact that merce websites. This has been driven by the
online had a much larger variety and better need for simple interfaces (familiar
deals. In other categories, modern trade or WhatsApp / FB chat interface) and a more
general trade (kirana) won for a different set ‘guided’ / interactive shopping experience.
of reasons. In apparel, for example, prefer-
ence for modern trade was driven by greater As one of the consumers we interviewed re-
variety and ability to touch and feel whereas marked, “We feared stepping out due to
in staples, preference for general trade was COVID-19. After initially buying through Am-
driven by trust / relationship and proximity. azon, we came to know that our regular kira-
na store is accepting grocery and fresh food
COVID changed all this for consumers. Many orders on WhatsApp. Likewise, even local
consumers adopted online shopping for the pharmacies started accepting orders on
first time due to both greater perceived safety WhatsApp—you just share the picture of the
in ordering online as well as constraint of medicine and they deliver it to your home.”
availability from other channels. BCG re-
search showed that around 20 percent new In addition to bringing new users online,

EXHIBIT 8 | Strong Uptake in Online Shopping Among New and Existing Shoppers

INCREASE IN ONLINE SPENDS AMONG

RISE IN FIRST TIME ONLINE SHOPPERS EXISTING ONLINE SHOPPERS

Current users indexed to pre-Covid users % consumers who increased online spends during COVID

1.43x 49%
1.18x 1.10x 1.04x
32% 32%
25%

Staples Apparel Mobile Order-in Staples Apparel Mobile Order-in

Source: BCG COVID-19 Consumer Sentiment Survey 20th Jul-02nd Aug'20 (N= 3,000).
Note: Question text: "What is the online purchase behavior for following categories that you have purchased in last 3-4 months"; "Since lockdown,
how the share of online spends changed on the following categories".

Boston Consulting Group | 19

 COVID has also led to higher online spends
among the existing users. There has been a
1.4x times increase in the average number of
categories bought online per existing shopper
with 45 percent of these shoppers claiming to
have increased online spends during the lock-
down period.

The combination of new users and increased

spends among existing users has accelerated
the e-commerce trajectory in India. The sin-
gle largest barrier in e-commerce adoption
has always been to get consumers to make
the first transaction. This first transaction is a
significant moment of truth for the consum-
er—if their experience goes well, they are
highly likely to keep coming back to shop
again. However, if not, it is less likely that
they will give another try. Our survey suggests
that there have been wide differences in sat-
isfaction levels among first time online shop-
pers across categories. Categories like staples
and electronics saw 70-80 percent consumers
satisfied while apparel and cosmetics saw 40-
45 percent consumers satisfied.

O ver the next decade, the triggers for

consumption are likely to change as con-
sumers’ attitudes change in response to the
environment. Increasingly, functional triggers
will dominate the purchase decision with
health and safety continuing to be a priority
in the post-COVID world. Further, in certain
categories like food and staples, where brand
represents a certain quality, brand conscious-
ness will hold significant sway. Additionally,
the convenience and relative safety offered
by virtual consumption will lead to a strong
uptake in online shopping across categories
with varying future growth rates.

20 | How India Spends, Shops and Saves in the New Reality?

 HOW INDIA SAVES

I ndia has historically had one of the

highest savings rates in the world—with
Indian households setting aside nearly 23
The overall reduction in India’s savings rate
cannot be viewed only through a negative
lens. It is also an indication of Indian con-
percent of their monthly incomes for a rainy sumers’ growing confidence and desire to
day. Obviously, this varies, with higher income spend.
segments having a higher savings rate and
lower income segments not having too much The savings rate is the highest among Indians
left for savings. However, a rising aspirational earning the most, with households in the elite
middle class, changing perceptions, greater segment setting aside 48 percent of what they
exposure to global trends, easier financing earn. This could be primarily attributed to
and access to credit, and a new retail land- higher disposable income in this cohort. The
scape brought about a shift in the savings savings rate declines from there and is actual-
habit of Indians. The proportion of savings is ly negative among strugglers. (See Exhibit 9)
on the decline and has been since 2013, when
the rate was in the 30s. At every level of In explaining why they save, the biggest por-
household income, a higher proportion of tion of Indians (44 percent) cited their desire
people reported a decrease in savings over to be able to handle an unforeseen future
the last five years rather than an increase. need or emergency. “I save mainly to handle
anything unexpected that might come up, in-
The feeling that their savings have declined is cluding a medical emergency involving my
more common among urban consumers (57 parents”, explained a big-city millennial. An-
percent) than rural consumers (35 percent). other 25 percent of respondents expressed
Strugglers who live in cities are the most like- their desire for a nest egg in retirement as a
ly to have this feeling, with 72 percent of reason for saving.
them saying that they are saving less now (or
perhaps more accurately, going into more The next-most-common reason for saving, cit-
debt) than five years ago. ed by 15 percent of respondents, is to finance
their own or a family member’s education.
Though on the decline, India’s savings rate of Correspondingly, Indians are also spending
23 percent is higher than many of its emerg- more on education, clearly underscoring the
ing markets counterparts like South-East Asia relevance of this category in India today. Few-
(SEA), Brazil, Mexico, Russia, etc., which are er than 1 in 10 said that they were saving to
in the 10-20 percent range, with the exception finance some kind of social ceremony (usual-
of China. ly a wedding). Finally, only 4 percent of peo-

Boston Consulting Group | 21

 EXHIBIT 9 | Savings Rates in India by Household Segments and Mix of Financial Instruments

SAVING RATE (% of Income) FINANCIAL INSTRUMENT MIX (% of Savings)

12 % 15 % 20 %
27 %
15 %
18 % 15 %
Overall average 19 %
23%
42% 32 %
54 % 45 % 20 %
33%
25%
19 % 16 %
11 %
11 %
3% 11 % 14 % 18 %
8%
-9% Next Billion Aspirers Affluent Elite

Strugglers Next Aspirers Affluent Elite Fixed Deposits Life Insurance

Billion
Savings/Current Deposits Others1
Cash at home

Source: CCI category consumption survey (Pre-COVID: Period-2019, N= 8,500; Post-COVID: Period - Sep'20, N= 1,200), BCG analysis.
1 Others: Post Office Schemes/ MFs (SIPs), PPF, EPF, Pension, Stocks/Shares. Analysis pertains to financial instruments (including currency).

Note: Question text: "What proportion of your total household income (total income of you and your family members combined) did you save in this
year?"; "What proportion of your total savings do you invest on each of the following instrument".
Annual Household income—Strugglers: INR <1.5 lakhs; Next Billion: INR 1.5-5 lakhs; Aspirers: INR 5-10 lakhs; Affluent: INR 10-20 lakhs; Elite: INR
>20 lakhs.

ple saved for house-related spending—either the key reasons for his increased savings
to make a down payment or buy something since April this year.
that would beautify an existing home or
make it more livable. If owning a house was However, we expect this to be a short-term
the American dream, education for the next phenomenon rather than a secular trend. In
generation is the Indian dream the long run, with financial uncertainties and
incomes getting impacted, these savings are
Short term increase in savings, however, likely to revert to pre COVID levels. Ms. She-
long term reversal very likely. With the ad- noy, a dentist with her own-practice residing
vent of the pandemic, there has been an in- in a metro, expressed concern in being able
crease in savings since February 2020—most to sustain her current level of savings, “My
likely driven by lack of expenditure avenues clinic has had very few patients since the
due to lockdown measures, restrictions on start of the lockdown in April. I don’t expect
mobility and a clampdown on expenditure the situation to be any better in the near fu-
due to uncertainty. Poor visibility about the ture either. My monthly income has fallen by
future further compounded the need to in- more than 50 percent. I will have to dip into
crease savings. Underscoring this shift, de- my savings or investments at this rate.”
posits (both savings and fixed / term) with
banks have risen nearly 5 percent from Preference for tangible assets becomes
March 2020 to September 2020. In the same even stronger. Even though it might seem
period, the currency (cash in circulation) that the savings rate in India is moving in the
with the public increased by 11 percent. Mr. direction of developed markets, the savings
Ashish Gupta, a 30-year old salaried profes- behavior of Indians is markedly different.
sional residing in Delhi stated a sudden halt Similar to consumers in other emerging mar-
in eating out at restaurants, no visits to malls kets, Indians prefer to invest their savings in
/ theatres, and reduced social occasions (no assets that they can touch, principally real es-
festive clothes / gifts / jewelry purchases) as tate and gold. As an aspirer Bharat Garg in

22 | How India Spends, Shops and Saves in the New Reality?

Mohanlalganj, a tier 3 city told us, “Every is cash kept at home. The less populous the
year I buy 20 grams of gold for my daughter geography, the more common this practice. In
to safeguard her future.” rural Indian households, 42 percent of finan-
cial-instrument savings are in the form of
Together, real estate and gold account for cash held at home. Correspondingly, this
more than 90 percent of all household sav- number is 38 percent in tier 3 and tier 4 cities
ings in India (with 80 percent in real estate and 15 percent in metros.
and 10 percent in gold), reflecting their pref-
erence for tangible assets. In contrast, in de-
veloped markets, real estate accounts for 40
percent to 55 percent of household savings
T he savings rate in India, even though
relatively high when compared to its
emerging markets counterparts like South-
while gold is not a part of the savings picture. East Asia (SEA), Brazil, Mexico, Russia, etc.,
has been on the decline. In the wake of the
During COVID, Indians gravitated towards pandemic, there has been a short-term
tangible assets and showed a preference for increase in the savings rate—most likely
gold. Almost 30 percent consumers further in- driven by a lack of expenditure avenues due
creased their investments in gold. Indians’ to lockdown measures and restrictions on
preference for tangible assets even extends to mobility. However, this is expected to be a
the savings they have in financial instruments. short-term anomaly rather than a long-term
trend. On the other hand, the Indian consum-
Even within the financial savings, the largest ers’ proclivity towards tangible assets remains
slice of the pie (about a third of all the mon- intact as Indians continue to hold savings in
ey that Indians have in financial instruments) the form of real estate and gold.

Boston Consulting Group | 23

HOW TO THINK ABOUT
THE INDIAN CONSUMER IN
THIS DECADE

T he future landscape in the post-

COVID world looks uncertain and
checkered with several unknowns. As compa-
categories is dependent on the type of
purchase, i.e., essential or discretionary,
and perceived health risk involved in
nies look to form their strategies to capture purchase and consumption. Marketers
consumer demand in the ‘next normal’, they should focus on solving for these barriers
should keep the following in mind. through innovative models. For example,
categories dependent on out of home
• Plan for different recovery scenarios: consumption and the associated health risk
Given the uncertainty around the pan- can look to mitigate challenges by making
demic being under control and the product / service easily accessible at home.
availability of a vaccine, it is challenging
to put a definite timeframe to recovery • Amp up on digital interfaces throughout
across different categories. Therefore, it is the purchase journey: Digital is increas-
better to plan for different recovery ingly playing an integral role in the pur-
scenarios and strategies for each, instead chase journey of an individual. Consumers
of having one definitive view. are seeking more information online,
transacting more online, and engaging
• Re-look at strategies to reflect the online with the brand post purchase.
changing consumer behavior: Many of Therefore, it is imperative for brands to be
the old models of consumer behavior present on online media and proactively
have been challenged in the current crisis. manage their digital interactions. It is
While some of those changes were important to think of online not only in the
temporary, there are many as highlighted context of purchase transactions, but
in this report, which are likely to persist broadly in terms of engaging with consum-
over the mid to long-term. It is important ers throughout their purchase journey, both
to re-look at all elements of the offering pre and post-purchase as well.
from a renewed perspective. For example,
a shift towards more functional purchases • Take select bets on new opportunities:
and enhanced value consciousness can Changing habits is hard and painstakingly
imply greater focus on casual portfolio slow—however, the current combination
and bundle packs for an apparel player. of an enormous health scare combined
with economic uncertainty has made
• Remove barriers to consumer demand: consumers open to change. This has
As discussed in the report, recovery of created an opportunity for new value

24 | How India Spends, Shops and Saves in the New Reality?

 propositions or offerings. For example, champions who have disrupted the business
with consumers avoiding eating out, a model. Companies who sense the new cus-
foods player can consider offering a range tomer needs and service them well will
of ‘ready ingredient packs for easy at- emerge as winners in the space.
home cooking’. Or, a home care player can
look at the heightened need for hygiene
and evaluate not only products, but also
end-to-end cleaning services around the
C OVID has had far reaching implications
on Indian consumers across how they
spend, shop, and save. It has engendered both
same. Companies can evaluate few of new challenges and new opportunities for
these in context of their business and companies. In order to win in the post-COVID
invest either as a part of the core business world, companies need to recognize these
or as a near term adjacency. threats and opportunities and accordingly
modify approaches to fit the new consumer
Every major crisis in the past has seen the context.
rise of new categories and new category

Boston Consulting Group | 25

FOR FURTHER READING

Boston Consulting Group publishes Demystifying the online Edition 2: COVID-19 and the
other reports and articles on relat- food consumer: An $8 Billion Emerging-Market Consumer—
ed topics that may be of interest to Opportunity The Power of Resilience
senior executives. Recent examples ( Jan 2020) ( June 2020)
include
Retail 4.0: Winning the 20s - Reigniting Retail Demand
Three decades gone by, a new ( July 2020)
world of possibilities awaits
(Feb 2020) CPG Companies Face an
E-Commerce Tsunami
Reimagining Go-to-Market ( July 2020)
Strategies After the Pandemic
(May 2020) Edition 3: Who Is the Emerging-
Market Consumer in the
Shining a Light on Customer Postpandemic Era?
Demand During the COVID-19 (Sep 2020)
Crisis
(May 2020) Ten Trends Altering Consumer
Behavior in India
Edition 1: COVID-19 and the (Oct 2019)
Emerging-Market Consumer—
Five Trends to Watch Demystifying Global Consumer
(April 2020) Choice
(Dec 2020)
Turn the Tide | Unlock the new
consumer path to purchase
(May 2020)

26 | How India Spends, Shops and Saves in the New Reality?

 NOTE TO THE READER

About the Authors For Further Contact Acknowledgments

Abheek Singhi is a Managing If you would like to discuss the This report has been prepared by
Director and Senior Partner in the themes and content of this report, Boston Consulting Group. The
Mumbai office of Boston Consulting please contact: authors would like to thank and
Group and led the Consumer acknowledge the support provided
practice in Asia Pacific. India by Nivedita Balaji, Indira Zaveri,
Abheek Singhi Mitesh Goradia, Prashant Srivash
Kanika Sanghi is a Partner & Managing Director and Senior Partner and Deepshikha Maheshwari.
Associate Director in the Mumbai BCG Mumbai
office of Boston Consulting Group +91 22 6749 7017 Special thanks to Jasmin Pithawala
and is the India head of the Centre [email protected] and Micky Chittora for managing
for Consumer Insights. the marketing and communication
Kanika Sanghi of the report and Jamshed
Partner & Associate Director Daruwalla, Pradeep Hire and Ratna
BCG Mumbai Soni for their contribution towards
+91 22 6749 7134 design and production of the report.
[email protected]

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How India Spends, Shops and Saves in the New Reality