Consumer Durables In The Villages: Who's Buying?
The Economic Times - August 1999
Rural India's recently discovered predilection to enthusiastically consume everything from shampoo to motorcycles has been the subject of much discussion. However the dominant view of the market is as seen through the product window (i.e. from the perspective of "how much of what is being bought").
To gain a better insight into the structure and drivers of consumer demand in Rural India, we need to also develop a view of the market by looking at it through the consumer or 'people' window (i.e. from the perspective of "how many of what kind of people are buying"). We need to enlarge the discussion from 'the market' to also include 'the consumers'; from not just what is being bought, but also who is buying; and from thinking 'product segments' to also thinking consumer segments. This article presents one vignette of the rural market based on data from the IRS 1998 study, conducted by the MRUC (Media Research Users Council), and ORG - MARG.
But first, a quick 'context setting' run through of what's happening to rural demand for durables, as seen through the familiar product window. Data presented at seminars and conferences on this is all drawn from the NCAER study - by far the best data source in the country on macro market facts. It appears that NCAER, in its Indian Market Demographics report, 1998, has estimated that Rural India's market for consumer durables as being worth around Rs. 4500 crores, with an average annual growth rate of around 8%. They have introduced a very useful product segmentation of durables, where they have grouped durables into three price baskets - a sort of equivalent of the "premium, popular and low priced " construct which we all instinctively use when thinking about packaged consumer goods brands. Group I comprises a basket of basic low cost durables like watches, radios, irons, fans etc. Group II comprises higher order durables like black and white televisions, sewing machines, mixers and two-in-one music systems. Group III comprises the high priced, high aspiration durables like colour TVs, refrigerators, motorised two wheelers and music systems - the litmus tests of whether Rural India is awakening to join the mainstream of New Indian Consumerism! The first group is well penetrated, accounts for the lion's share of rural durables demand, and is slow growing. The second is modestly penetrated, accounts for one fifth of the total value of rural durables demand and is growing at a healthy clip, while the last group is nascent but explosively growing. And that is the view from the product window.
Who is buying all this? IRS 98 has chosen occupation of the chief wage earner as a basis to define the rural consumer, and thrown up some interesting findings. The analysis in the table alongside provides occupation profiles of owners of three 'much in the news' durables. Why occupation? Because our learning from Urban India is that occupation and education of the head of the household is a good determinant of propensity to consume - being as it is, a good indicator of both economic and social capital (that's how the urban SEC classification that we use came into being). The surprise finding is that the non agricultural occupation groups of shopkeepers / traders and those employed in 'service' are the heavy consuming segment. Yes, our mental picture of land owning farmers being an important consumer group still holds. But they comprise a mere one third of rural households (their estimated number being 43.2 million households), and own one third of the stock of these durables. Their population weight and ownership weight, aggregating across all these durables, is the same. Further, NCAER have been pointing out to a decrease in this occupation category over time.
The shopkeepers and the service occupation on the other hand, are both not directly engaged in agricultural pursuits. The shopkeeper / trader is typically the hotelier, wine / kirana shop owner, petty trader. The 'service' segment comprises those who work in the village as nurse, postman, teacher, village accountant etc, and those who work outside the village as office workers, private factory workers etc. Shopkeepers / traders and 'service' together account for just 21% of the rural households (their estimated number is 26.8 million households) but between them own a disproportionately higher number (between 45 and 60%) of rural televisions, two wheelers and refrigerators. To put this group in perspective, they are 27 million households in number, which is more than half of all urban households!
Between these two groups the service class seems to be far more fertile as a target group for higher order durables than the shopkeeper / trader. And even within the service class, those who work outside the village are far more fertile as a consumption group than those who work inside the village. The shopkeepers / traders comprise 8% of rural households but own 14 to 20% of these durables - their ownership weight is, on aggregate, 1.8 times their population weight. The service class comprises 13% of the rural households but owns 30 to 40% of these durables. Their ownership weight is, on aggregate, 2.6 times their population weight, making them a very fertile target group indeed. Even better news - there is a communication channel open to around 10 million of these high consuming households, since TV ownership in the service class is 43% , and 31% amongst shopkeepers and traders.
The rest of the occupation categories are less fertile consumer groups - they are smaller in number and are lower consuming. However if we agree that television viewership is a good driver of creating consumer aspiration, then the picture through the consumer window is that television ownership even amongst unskilled labour is not insignificant - 10% of a rather large number of 21 million households!
There definitely does appear to be an interesting consumer opportunity offered by this non agricultural sector of rural India!
Co-authored with Ravi Murthy,
General Manager, ORG-MARG