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Youth fuelling retail boom, says KSA study

February 13, 2004 10:25 IST

With the average age of an Indian as low as 24 years and salaries growing at a faster clip than the rest of the world, there would be no shortage of business for the country's retailers, said the KSA Technopak's Retail Outlook Study 2004.

The good news, however, comes with a caveat that the 500 million Indians below the age of 21 are a vastly different buying species that their predecessors.

Arvind Singhal, chairman of retail consultancy KSA Technopak said the socio-economic classification of consumers no longer made sense, at least in the urban areas as disposable incomes were fast starting to even out.

Instead he suggested that marketers and retailers should classify them by age. According the study, consumers in the 8 to 19 year category spend the most on books and music, eating out, personal care and apparel, while those in the 20-25 age group expend on consumer durables, music CDs and eating out.

Generally, the purchasing decisions made by those in the 20-25 age group are impulsive. "Since this group represents 16 million consumers in the urban areas, it is imperative for retailers to pay attention on details like store design and comfort to keep them inside the shops for longer periods," said Singhal.

With the boom in the BPO sector and people having access to a disposable income of Rs 8000-Rs 10,000, a month will mean that they will spend more on travel, tourism and entertainment, said the study.

"Travel figures quite high on the priority list after a house and a car," said Singhal. Twelve per cent people in SEC A and B are currently paying EMIs for loans, of which 43 per cent have taken a loan for a house.

And in order to spend more on non traditional things like travel the consumers are willing to "downgrade" their purchases. Discretionary income grew by 15 per cent in 2003, the survey said.

The youth, according to the study want to enjoy a wide range of services.

So they are spurning bigger and expensive brands and going in for value-for-money products. "That is again a key message for the retailers that the younger consumer in extremely cost-conscious and at the same time, quite demanding in terms of quality of services," said Singhal.

'Malls with kiosks sell better'

India should go for malls with kiosks as these would eventually score over malls with large departmental stores, Harman Meerzorg, director of Hari Darmawan Corporation of Indonesia, said on Thursday.

"Malls with big departmental stores will die. India need not look at the US or Europe for example," he said, while speaking at the 6th KSA Technopak Retail Summit.

Meerzorg had to stand in for Hari Darmawan -- the honorary chairman of Indonesia's largest retail chain Matahari Corporation -- who could not make it to the summit.

Such a model, Meerzorg added, was being experimented in Indonesia for the first time. "This retail format is different from whatever the world has seen till now," he said.

Meerzorg argued that since kiosks were owned and operated by small entrepreneurs, who were better motivated than employees of large departmental stores, they were in a position to offer superior service.

"An employee just cannot compete with an entrepreneur," he said. Such an arrangement, Meerzorg added, also resulted in cost-savings, since a kiosk is largely managed by the entrepreneur himself with minimal help.

When asked if it would become difficult to sustain the ambiance of a mall with a large number of small kiosks, Meerzorg reiterated that kiosk-owners had a vested interest in offering a high quality of service, unlike employees. "When it comes to service, nobody stands a chance against them," he said.

Most of the big malls offer competitive rates on the basis of their huge purchasing power. Meerzorg said small entrepreneurs could match these rates.

"Many of them have their own sweatshops," he added. However, he said malls, which were not cost-competitive and didn't have the technology to handle their back-of-the-house work could not hope to survive in the long run. Meerzorg also exhorted Indian businessmen to look at smaller cities and towns to set up malls.

"There is a bigger opportunity in secondary and tertiary cities. Don't look at only those cities with a population of over 20 million because the competition is fierce. Also the multinational corporations will not go to the smaller cities," he said.
BS Corporate Bureau in New Delhi