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Nielsen Featured Insights Delivering consumer clarity

Understanding India’s New Breed of Shoppers

By: Adrian Terron, Executive Director, Retail & Shopper Manoj Kulkarni, Director, Retail & Shopper n n n

A fifth of urban Indian shoppers now shop regularly at Modern Trade Uptick in deal-seeking behaviour, over half of shoppers now seeking promotions A third of shoppers choosing ‘bulk packs’ as a strategy to beat price rise

Shift in the Indian Shopping Landscape The dramatic shifts in India’s retail landscape have created an unprecedented view of what the future shape of consumption in India will look like. Driven by a surge in the number of Indian shoppers experimenting with new formats, Modern Trade has firmly taken its place in the Indian marketplace. However, the opportunity to grow even further is tremendous. A simple comparison with other developed and emerging economies in Asia indicates room for a manifold increase in Modern Trade density. With a modest six Modern Trade stores per million consumers, even matching the pace of countries like Thailand and Indonesia points to an inflection point that is yet to occur. Contrasted with the density for Traditional Trade outlets (at approximately 7000 stores per million), the lower density of Modern Trade is poised to change.

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Modern Trade in Urban India poised for rapid growth A closer look at the more relevant markets that possess Modern Trade, are an interesting laboratory to observe the continued rise of the Modern Trade shopper. In the 17 key markets that account for threefourth of India’s Modern Trade sales, each city’s Modern Trade presence has been witnessing high doubledigit growth rates, with the share of modern retail’s contribution to sales exceeding a fifth of total sales on an average.

Footfalls to Modern Trade outlets spike India’s shoppers are clearly headed towards the next super or hypermarket. A comparison of long term trends and a study of shopper behaviour reveals that the number of shoppers who visit Modern Trade on a regular basis, has doubled over a five year period. And they are not simply strolling through the airconditioned aisles – they are purchasing more than ever before as well. Today, over a fifth of shoppers (21%) claim that they spend more at Modern Trade than traditional trade compared to just 12 percent five years ago.

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MT dominates the share of wallet With 18 percent of urban shoppers now regularly shopping at Modern Trade according to Nielsen’s ShopperTrends study, the longest running study of the Indian shopper’s evolution, this signals a stabilization of shoppers who spend a majority of their money within Modern Trade. These visits have become a part of the regular buying cycle for India’s new breed of urban shoppers who have now habituated to the modern trade environment and will continue to drive its adoption through the demonstration effect. This is clearly seen by the proportion of shoppers who claim to shop at Modern Trade occasionally, growing over the last year from 54 percent in 2011 to 66 percent in 2012.

The Deal-seeking Shopper One of the key attitudinal and behavioural changes noticed is more ‘deal-seeking’ behaviour amongst the emerging Indian shopper. The proportion of shoppers actively seeking offers in the stores they frequent has shot up from 39 percent to 54 percent marking a sudden affinity for promotions at a time when shoppers are price sensitive and retailers and have succeeded in creating ‘deal-weeks’ as annual events that cater to a growing breed of bargain seekers.

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Deals are now a Big Deal This shopping behaviour is also manifest in a macro-analysis of branded packaged FMCG sales across the country. Today, an estimated one in six rupees spent on FMCG products is spent on items that are on offer. These offers may vary in nature and entice shoppers with additional volume for the same price, price discounts, ‘kind offers’ such as free gifts or a combination of these promotional tactics. Marketers now have the opportunity to see how this varies by category and more importantly, by geography to develop strategies specific to varying and heterogeneous shopper segments.

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Bulk buying to beat inflation Deal seeking is now combined with a growing preference for bulk packs acting as an important strategy to neutralize the impact of rising prices. 35 percent of Modern Trade shoppers today cite buying bulk as their response to rising food prices. The percentage of those adopting this within Traditional Trade is significantly lower at 29 percent. This also highlights the ability of organized retail to drive growth of the monthly purchase basket and a shift towards larger quantities.

The Impulse & In-store stimuli factor The underlying change occurring amongst shoppers is where the real opportunity lies. Analyzing shopperspeak tells us that while a majority of purchases are planned, a significant proportion is based on reminders at the point of sale and based on in-store stimulus and impulse. Extrapolate these numbers to FMCG spends and it draws up a hypothetical opportunity of nearly USD seven billion of sales that have the opportunity to be influenced in store. Even for the most successful brands in their categories, this can represent an opportunity to win over competitors and signal a vulnerability that can be exploited by more nimble competitors.

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SEC C Shoppers Increasingly Adopting MT The allure of modern retail and its ability to offer a vast variety of options is not restricted to the upper SEC anymore. Mapped over a half a decade, while upper SECs have stabilized in terms of the proportion visiting Modern Trade, so too has the number of shoppers from SEC C. Juxtaposed with the fact that there are a growing number of ‘occasional’ shoppers walking into modern retail, this explains the crowded shopping aisles across the country.

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Emergence of a ‘Cross-Over’ Shopper All these factors have led to a sizeable proportion of ‘Crossover Shoppers’ – shoppers who flit between modern and traditional formats. When the spends of these shoppers are analyzed by looking at how they claim they split their spending across formats, even a single percentage of spending transferred to modern retail across meta categories such as packaged foods, home care and personal care, translates into a quarter of a million dollars that India’s modern retail could gain.

The implications of these changes and opportunities are clear for marketers who want to reenergize their strategies. Merely understanding consumers in a generic manner will no longer be a complete method of converting insight into marketable opportunity. Developing a thorough and ongoing appreciation of the shopper decision journey along the path to purchase and all the extrinsic and intrinsic factors influencing it, will be a critical element in the marketing mix. Mapping the present and prospective shoppers for your brand across various retailing environments will be a necessary precursor to converting demand into sales.

About Nielsen Nielsen Holdings N.V. (NYSE: NLSN) is a global information and measurement company with leading market positions in marketing and consumer information, television and other media measurement, online intelligence, mobile measurement, trade shows and related properties. Nielsen has a presence in approximately 100 countries, with headquarters in New York, USA and Diemen, the Netherlands. For more information, visit www.nielsen.com

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