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| Going down slow: Unless consumer confidence
improves, empty stores like these could become the norm |
That's
right. A lower-than-low 12 is where the first ever Indica Research
Index of Consumer Sentiment (IRICS, pronounced Eye-Ricks) stands.
Given that it is based on a nationwide survey of respondents belonging
to the top two socio-economic strats, SEC A and B, that number should
worry marketers. Still, the magnitude of consumer confidence is
strangely low. After all, don't 77 per cent of the respondents admit
their incomes this year are the same or more than last year's? And
don't 69 per cent of them expect their individual financial status
to be better or same next year? Purely from the consumer's actual,
and expected financial status, then, things look normal, if not
upbeat. "There is no inflation and disposable incomes are going
up," argues Ashok Bhasin, Vice President (Marketing), Whirlpool
of India. "Fundamentally, there is a reason for the consumer
to feel good."
Blame it on the government's patchy record
at getting second-gen reforms off the ground, blame it on a slower
than anticipated recovery in the US economy, or simply blame it
on the monsoon, but there is an air of uncertainty in the larger
business environment-reflected in the performance of the stockmarket.
"Consumers directly relate this uncertainty with adverse employment
opportunities," says S. Srikant, Principal Consultant, PricewaterhouseCoopers.
"This sentiment puts them on the defensive mode". That
it does: a staggering 73 per cent expect there to be fewer jobs
12 months from now; and another 77 per cent expect prices to go
up in the same period.
| THE TWIST IN THE TALE |
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| Sops make it the best time to buy durables |
It is typical of the Indian mindset
not to believe in anything whole-heartedly. Thus, while some
Indians have no great hopes for the economy, and even fewer
think their incomes will keep pace with prices, most believe
there's no time like now to buy durables, even cars.
Is this an aberration? Or is it merely part of the trend?
''A downward trend in prices, plus tactical discounts and
easier finance options on durables is certainly helping release
the pent-up demand,'' says Anand Bhardawaj, Executive Vice
President (Marketing & Marketing Services), Electrolux
Kelvinator. And at a subliminal level the consumer is merely
fortifying herself for the future. ''It is all about parking
money in an asset which has resale value and also improves
your lifestyle, in the absence of any other attractive investment
option,'' adds Meena Kaushik, Managing Director, Quantum Research.
That sounds better.
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So, that's it, then, a natural response from
consumers to troubled times. Not quite, says Satish Deshpande, a
sociologist at the New Delhi-based Institute of Economic Growth.
"Marketers haven't succeeded in creating a consumerist mindset,
where she feels the 'lack' of not possessing what they are selling".
He may be right. In a desire to spur demand, marketers have slashed
prices across the board, all under the guise of 'delivering added
value'. Sometimes that works-Coca Cola India saw a 26 per cent rise
in sales following a price-play with lower-priced 200 ml and pet
bottles-but more often than not, it doesn't. Most consumers realise
that this is the time to buy assets, durables and real estate mainly,
and that is evident in the survey: 57 per cent of the respondents
say it is a good time to buy durables; 50 per cent, automobiles;
and 55 per cent, real estate. Only, this cognisance of timing doesn't
translate into purchase-intent, leave alone the actual purchase.
The product that boasts the highest purchase-intent in the next
12 months is the cellular phone with a mere 11 per cent of the respondents
planning to acquire one. Across durables purchase intent varies
from 4 per cent for CTVs and refrigerators to 6 per cent for washing
machines and 9 per cent for personal computers-not exactly the kind
of numbers that excite marketers. Little wonder then, despite falling
interest rates, household savings have risen to almost 11 per cent
of GDP, a straight increase for four years.
Despite Deshpande's indictment, there's little
that marketers can do to stimulate demand. "The government
can help by slashing taxes," says Kodandarama Setty, managing
director of Chennai-based retail chain Viveks. That could help,
but just incrementally. Our recommendation: a healthy dose of government
spending, an easier tax regime, effects to attract some big ticket
FDI, the onset of much-needed second-gen reforms, and an away-series
win for the Indian cricket team. If that doesn't do it, nothing
will.
THE INDICA RESEARCH OPINION:
The Need For A lighter Shade Of Grey
Architects of the confidence survey
feel a fact-based perspective will help. |
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| Indica Research's Executive Director B.
Narayanaswamy |
Consumer spending is estimated
to account for about 54 per cent of the Indian output. (the
comparable figure for the US is approximately 66 per cent).
Consumer confidence-or sentiment-measures the mood of consumers
towards buying, and thus helps predict buying patterns.
There is no rigourous metric in India available to decision-makers
in the corporate sector or the Government. This Indica Research
initiative is designed to address this need. The Index minimum
is 0 if all were to be pessimistic: and the maximum it can
be is 100 at complete optimism. Anything above 50 is optimistic.
The metrics reflecting the customer's expectations of economic
situation has been given a higher weightage than assessment
of current situation and customer's expected consumption.
The Indica Research Index as it stands, at 12, suggests intense
pessimism. There is also a cynically laced feeling that it's
worth buying some durables now because of all the discounts
that are going. So this verily reflects a poor mood as regards
the future.
The accompanying article details the main drivers and how
this is unwarranted in light of the factual reality on the
economic fundamentals. But clearly the mood of the Indian
consumer is at a complete disconnect.
In our view, this connect is an unintended consequence of
portrayal. The larger media world needs to reflect on this.
Besides emitting content, more subtly the media also rewires
the way the people at large see the world around them. If
the economic fundamentals are indeed fine, and now the monsoon
is also not as bad as it was feared it might be, perhaps the
time has come to share these good news.
We are not talking about a Reaganesque ''Good Morning, India''
mood management here. Between that at one end, and a complete
obsession with an imagined 'reader or viewer interest' at
the other, surely there is room for a more fact-based manufacture
of objective reality in the portrayal.
And the corporates are doing the right thing all considered-trying
to energise consumer behaviour by making it easier to buy.
The Government probably needs to not just design confidence
boosting measures, but make sure such news gets its share
of voice as well.
The Methodology
Indica Research met a scientifically designed sample of
adults between 20 and 55 years old, in the socio economic
class (sec) a and b.
The survey was conducted using purely random sampling process.
All interviews were done face to face using a structured questionnaire.
Totally 1,221 respondents were met across ten cities of Delhi,
Mumbai, Chennai, Bangalore, Kolkata, Nagpur, Hyderabad, Ahmedabad,
Cochin, and Lucknow.
The sample had equal representation of male and female and
all age groups. Most of the females met were housewives-42
per cent of the total sample. Two per cent of the respondents
met were studying. Among the balance 56 per cent working respondents,
18 per cent were businessmen, 16 per cent held salaried jobs
at clerical/supervisory levels, 10 per cent were self employed
and 12 per cent had managerial jobs.
The questionnaire covered three core areas: current assessment
of economic situation, expectations about the future economic
situation, overall consumption mood. Besides the key variables
for indexing, the survey also measured explanatory measures.
All data was weighted. Each of the variables was then first
indexed for Nett optimism. Only in the case of price, expecting
the price to remain the same has been considered an optimistic
response.
The data was then indexed as proportion of total score possible.
This index was then weighted to arrive at All India Index
of Consumer Confidence.
This is the first of a series, planned to be done every
quarter. Other economic indicators do serve as predictors
of buying patterns. Consumer confidence measurement is also
designed to capture the effect of events that may affect buying
patterns, but are not immediately reflected in other economic
indicators. Moreover, Consumer confidence can be made available
sooner than those.
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