Consumers in north India can beat the gloom, says Indica Research study

By , agencyfaqs! | In | September 24, 2002
Discounts are the main drivers of volume currently and the automobile and consumer durable sectors are the two biggest gainers from this mood

North, south, west and east - this is the route marketers should follow while rolling out their business strategies. An all-India study conducted by Indica Research, a Delhi-based consumer behaviour-focused consulting and research company, indicates in these days of consumer pessimism, buyers in the north can break the jinx somewhat in their hunt for bargains. The study indicates that consumers have become firm believers in striking a good bargain to beat price rises in the future.

The survey concludes that corporates so far have done right by offering discounts and price-offs to woo consumers. In the process brand building and nurturing brand loyalty have been put on the back burner. The automobile and consumer durable sectors are the two biggest gainers from the scramble of the bargain happy consumers who are making big-ticket purchases to take advantage of the low prices. Sales in these two segments are expected to see healthy growth with 69 per cent of the consumers preferring to buy consumer durables and 72 per cent considering it a good time to invest in automobiles.

However, industries that depend on festive shopping to drive up sales (paints and tiles) have a tough road ahead with only 30 per cent of the consumers planning to spend more this festival season.

The Indica Research Index of Consumer Sentiment (IRICS) is at a low 12 on a spectrum of 100 (The measure of consumer confidence or sentiment helps in predicting buying behaviour, with zero as the most pessimistic consumer sentiment and 100 as the other extreme). Though more than half of the consumers surveyed feel that either their financial status has improved or is the same as last year, a majority expect a bleak future. Eighty per cent see a price rise, while 73 per cent expecting a worsening employment scenario.

As far as their own financial status is concerned, 39 per cent of the consumers expect an enhancement in financial status in the next year, and 46 per cent think they would be able to sustain their present levels. For the current financial year, IRICS points out that 46 per cent feel their financial status has improved and 34 per cent feel it's status quo vis--vis last financial year.

The study says, the buy decision today is driven more by expectations of a worse future - with higher prices - than by a buoyant mood to spend. Says B Narayanaswamy, executive director, Indica Research, "Consumer confidence in the economy is at an all-time low. The consumer is hedging against future risks of price rise, job loss and reduction in actual income. This is underscored by the fact that in spite of a significant fall in the interest rates, 74 per cent still prefer to increase savings."

Commenting on the region-wise dichotomy in the demand and spending patterns, Narayanaswamy says, "North India has been the traditional demand leader whether it is consumer durables, automobiles, FMCGs or festive shopping. This region has lead sales revenues. What is surprising and worrisome is that west India is at number 3 indicating India's business capital is not very confident about the economy. But there is a strong consensus about rising prices and the deteriorating employment situation across all four regions."

In the north, over 80 per cent of the consumers are positive about their current financial status and about 85 per cent feel things will remain the same in the coming year. Consumers have a similar outlook towards other parameters like business condition and income.

However, in the west, people feel more tough times lie ahead for companies banking on festive shoppers. That is because while 38 per cent of the people plan to keep their festive spending at the last year's level, only 6 per cent plan to buy more. But there could be a ray of hope with 36 per cent expecting better financial status in the immediate future.

In the south, the study says, a little sales push would do the trick. South India is the second most promising destination for corporates. Consumers are positive about current positions with 28 per cent feeling their financial status has improved and 32 per cent have held on to the status quo. While 55 per cent believe that business has improved or has remained the same compared to last year, a similar percentage of people feel their income level has improved or has remained the same compared to last year. More than 60 per cent expect betterment or maintenance of the current levels of income and financial status.

What the east needs is the feel good factor. This region seems to be in the grip of extreme pessimism with a majority (53 per cent) feeling that financial status has actually fallen. However, another 61 per cent feel that either their income has gone up or has remained the same. A logical conclusion could be that consumers feel overtaken by the price rise over last year. The negativity seems to be so deep-seated that the for the coming year 42 per cent expect a fall in their status, 57 per cent expect a worsening business scenario and 58 per cent expect their income increase to be less in comparison to the price rise. © 2002 agencyfaqs!

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