The Top-End Urban Consumer

The heterogeneity that characterizes the modern Indian consumer has created a maze that marketers would like to unravel in order to target their products and services precisely. In this fortnightly series, Indicus Analytics presents the various facets of urban consumers, across geographies and socio-economic groups

In India, it is not only the rural-urban divide that is remarkable in consumer markets, but also the diverse income segments within the urban centres. Income-wise segments can be created in many ways. The Indicus Urban Consumer Expenditure Spectrum has five categories--households earning less than `1.5 lakh a year, between `1.5 lakh and `3 lakh, between `3 lakh and `5 lakh, between `5 lakh and `10 lakh, and households earning more than `10 lakh a year.

The top end of urban consumers is a small segment, comprising about 5% of all urban households in India and around 6% of the urban population. Despite being a small group, this segment contributes one-third of total urban consumer expenditure, making it one of the most sought after markets in India. This segment also constitutes close to half of the total urban household savings, with the highest disposable income and earning opportunities.

On average, the three items that make up the largest share in the household expenses are travel and conveyance, consumer services and rent. Households in this segment can af- ford to own vehicles, travel around the country or holiday abroad. The high income also allows them to spend on consumer services, especially salaries of maids, drivers, tailoring and personal care services, telephone and other communication expenses, and so on.

Even within personal care services, these households tend towards the high end of the spectrum as they can afford such luxuries. Apart from those who have always been in the upper income segments, the so-called old rich of urban India, there would be those house- holds who have made it into this category in the past decade or so. For these newcomers, high-end purchases are a sign of making it into the elite and all the latest in services, brands and gadgets are on the shopping list.

The third category that makes it into the big-ticket expenditure is rent--upper-income households prefer to stay in neighborhoods and apartment societies that are again on the top end of urban real estate. In cities such as Mumbai, renting is often an easier alternative to owning a flat in a good locality, a reflection on the high real estate values. Paying high rent, however, eats into household budgets.

Maharashtra and Gujarat have the highest share of these rich households, with more than 10% of the urban rich Indians in this segment. Looking at the distribution region-wise, the largest share overall comes from the northern region, which also has the largest population; here it is the cities of Delhi, Chandigarh, Faridabad, etc., that have a high share of rich households.

While Mumbai and Delhi top the list of cit- ies with the highest share of urban Indian rich households in this segment, other cities that feature in the top 20 list include the other large metros and Ahmedabad, Surat, Vadodara, Rajkot, Nagpur, Ludhiana, Visakhapatnam, Faridabad and Coimbatore. There are, of course, differences across regions and cities.

These households are on an average made up of four-five members; larger-sized house- holds are found in Jammu and Kashmir, Rajasthan and Bihar, and smaller ones in Chandigarh, Kerala and Himachal Pradesh. In particular, Bikaner, Aizwal, Bhavnagar, Cuttack and Srinagar top the cities with large households, while Salem, Kottayam, Solan and Shimla have the smallest household sizes in this segment.

The broad segment of households earning more than `10 lakh a year will have within it various categories of households whose expenditure and savings characteristics vary de- pending on region, city, occupation and life- stage of the chief wage earner, etc. While there would be even finer income cuts possible in this segment, by and large this broad segment is the one that is seen to be shopping in malls, eating out often, experimenting with new tastes and fashion, and so on. This is the class all urban Indians aspire to belong to.

(Source-: mintlive)