‘Time to open my wallet or not? – The new spending patterns emerging from a consumer’s perspective. The report aims to highlight gradual key changes that we are witnessing in the overall Indian consumer sentiment given the new normal.
The pandemic had brought in a major impact into the life of Indian citizens and has also acted as a game-changer for the consumer market sector. Consequently, COVID-19 has given abundance of new opportunities for retailers in India. As a result of the pandemic, consumer sentiments have been under the spectrum due to their evolving mindsets. While the new reality sets in, consumers are more aware than ever and have been reevaluating their priorities. Our survey brings out the changes that has been observed among Indian consumers in the new normal. We see that a new consumer is emerging — one that is financially constrained, more advanced in their use of digital technologies, more thoughtful and selective in their decision-making, and keen to see COVID-19 as an opportunity to reset values.
The survey has been conducted with 2,376 respondents (of which 66 per cent were male and 34 per cent female). It was conducted across tier-1, tier-2 and tier-3 cities, amongst different spender types and age groups, between May 18, 2020 to June 7, 2020.
Harsha Razdan, Partner and Head – Consumer Markets and Internet Business, KPMG in India says, “Our survey focuses on the evolving consumer sentiments amongst Indian citizens as well as the emerging trends that are gaining momentum during this continuously changing new normal. Our study indicates that 22 per cent consumers in Tier-2 and 30 per cent consumers in Tier-3 feel that their spending will either increase or remain the same as prior to COVID-19 and this could be the next focus area for retailers to expand their presence. In the next three months, 49 per cent respondents intend to spend upto INR5000, across categories which makes this the most popular basket value and indicates that consumers are cautious about spending.
While 68 per cent of respondents expect “Safety Precautions” to be their primary priority, value pricing / promotions will continue to be key to purchase decisions. Consumer Goods companies & Retailers will need to identify ways to continue to build consumer trust and confidence going forward. As a consequence, companies will need to develop their online presence and last-mile logistics & delivery capabilities and manage supply chain hygiene across all levels. With the advent of a strong digital wave, it will be important for companies to adapt to the situation quickly & continue to innovate keeping consumers at the centre of their plans.”
Key themes of the survey:
The optimistic consumer: Overall 51 per cent of respondents feel that the impact of COVID-19 will be short-lived and normalcy is not far. Tier 2 and 3 cities are 1.9X more positive than the Tier-I cities
The rise of ‘online’ shoppers: A comparative of pre and post COVID-19 scenario clearly shows that preference to online channels have increased 1.6X growth
Unlocking through digital payments: Survey indicates that UPI and Wallet modes put together are 1.3X more than card payments. Cash payments were opted by only 15 per cent of consumers
Key highlights from the report:
Consumer spending habits:
78 per cent of the respondents claim to reduce on discretionary spending
City Tier: Tier-3 is found 1.9X more optimistic on their spending habits than Tier-1, hence could be the next focus area to monitor the spending habits
Consumer Age Band: Among age bands, the 20-30 age band is more optimistic on discretionary spending
Gender: Spending habits reduced considerably among both male (76 per cent) and female (82 per cent) consumers
Optimism for the future:
City Tier: Tier -3 consumers are the most optimistic among all city tiers, as 22 per cent of them feel no impact on their routines and spending
Consumer Age Band: The age band 20 – 30 is most optimistic across all age bands with respect to duration of impact on their routines and spending
Gender: 36 per cent of women and 38 per cent of men feel that the impact will last 6-12 months (Women seemed more optimistic)
Awareness of economic stability and safety among Indian citizens
The driving forces for 70 per cent of consumers buying post pandemic are economic uncertainty and Fear of COVID-19
City Tier: Consumers in Tier-1 cities are more concerned about maintenance of hygiene in supply chain than Tier-2 and Tier-3 cities
Consumer Age Band: The age band 20-30 is 1.8X more concerned about maintenance of hygiene in supply chain than Age band > 51
Gender: Male respondents are more concerned about economic uncertainty (M: 39 per cent, F: 32 per cent). Female respondents are more concerned about poor maintenance of hygiene in supply chain (F: 25 per cent, M: 16 per cent)
Favorable discretionary spends among consumers
North (32 per cent) and East (23 per cent) India consumers are more inclined towards spending more than INR 5000 across categories as compared to other regions
City Tier: Consumers in Tier-3 cities are 1.4X more inclined towards spending on Apparel than Tier-1 cities for spending more than INR5000
Consumer Age Band: The 41-50 age band consumers intend to spend 1.6X more than the 21-30 age band consumers in Apparels for spending more than INR 5000. However, the 21-30 age band consumers (65 per cent) are more attracted towards spending up to INR 5000 in Apparels
Gender: Across all categories, Males intend to spend more than females in the spending range of more than INR 5000. 60 per cent of males intend to spend up to INR 5000 in skin care and cosmetics
Incentivisation across physical stores:
Organisation needs to embrace new practices to maintain the trust of consumers in physical stores
With the combination of personalisation and ease, virtual trial rooms may emerge as the new face of innovative shopping experiences
Consumer Age Band: Respondents between 41-50 are more concerned about hygiene at store (73%) and social distancing (74%)
Gender: Female respondents (74 per cent) are more concerned about hygiene at stores
Heading towards a cashless economy
85 per cent respondents have chosen contact-less modes over cash
City Tier: Tier -2 and Tier-3 city consumers are more inclined towards contactless payment i.e. UPI and Online Wallets than Tier-1 consumers
Consumer Age Band: Respondents > 40 years are more inclined towards credit/ debit cards than UPI/ Online wallets
Gender: UPI and online wallets are equally popular among male (50 per cent) and female (47 per cent) respondents
KPMG in India’s Point of view
Focus on new emerging markets: Organisations will need to reinvent their business and operating models. 22 per cent consumers in Tier 2 and 30 per cent consumers in Tier-3 feel that their spending will either increase or remain the same as prior to COVID-19
Safe buying coupled with pricing/promotions’ are key to purchase decisions
Get closer to your consumers and create an experience in physical stores
Create a digital footprint and close that last mile
Prioritise Digital payments as security