Seductive markets

Consider what’s in the average Indian’s shopping cart today: Plasma TV, home theatre, luxury car, high-end cell phone/PDA/laptop, iPod video, PlayStation 3, gym and club membership, travel to exotic international locales, premium school education for the kids, equity-linked finance scheme, spa treatments, expensive restaurants at least once a week, designer clothes, fragrances, funky jewellery.

That’s a far cry from yesterday’s buys… basic home appliances and rotary phones, Premier Padmini, post office saving scheme, insurance policy, home loan, gold jewellery and saris that appreciated in value over time, eating out only on occasion etc.

Now, the Indian mindset seems to have changed, buying into the ‘spend now, think later’ culture. The reasons for this phenomenon are varied. For one, spending power has increased manifold with formidable disposable incomes. According to the 10th World Wealth Report, India now boasts 83,000 millionaires (people with more than $1 million in net assets). And we’ve seen te world’s second fastest growth of 19.3% in the number of high net-worth individuals (HNWI) in 2005. With the HNI population increasingly spending within the country, the market for luxury goods is estimated to touch US$ 452 million in coming years.

It’s a significant trend that’s most seen in the below 35s. But even older people are assimilating hedonism into their behavior because of the uncertainty of life. With so many disasters happening people want to live in the now.

A decade ago, a graduate would be offered a starting salary of two to three thousand rupees a month. Today, this amount has increased exponentially. And indulgence is surely in. Young professionals see their friends’ Pajeros and they at least want an Optra or a Mercedes C Class. And when they get one, no one bothers to ask. If you bought a big car in the early ‘90s, the Income-Tax department would inquire where you got that much money from and people in the neighborhood made frantic enquiries.

The fact that Indians are thinking ‘glocal’ (global + local) and adapting to an international culture has boosted spending too. Earlier, people would get about three promotions in their lives and a salary increase of about 12% and they’d be ecstatic. Today even a 15% increment in salaries, employees are not satisfied. People double their salary from one job to another and hence have a lot of money to spend.

Consumer goods no longer symbolize things of utility but lifestyle products. They are now a mark of class distinction, embodying certain aspirations, values and class of the consumer which indicates a sharp rise in spending on consumer durables, apparel, entertainment, vacation and lifestyle products.

There’s a lot of visual temptation, thanks to aggressive marketing. It’s a seductive market, with the marketers not just soliciting your custom, but luring you into buying their wares. Everything is literally available at your doorstep, from medicines to raw to ice cream. This continuous sensory stimulation and easy access, coupled with the fact that plastic money makes everything appear free, makes for a heady combination. Living within your means isn’t the norm anymore and EMI is the new buzzword. From young rickshaw drivers with flashy cell-phones to BPO employees who drive Mitsubishis, everyone’s buying.

In the past people used to be debt averse and would try and save as much as possible before approaching a financial institution for even a housing loan. But in the last five or six years, borrowing is no longer considered bad from a social point of view. Banks have moved from whole sale to retail banking and are promoting credit card, personal and car loans like never before. So, while affordability of consumer goods has gone up, the cost of borrowing has gone down and people are learning to leverage their options. People are taking loans for everything from plasma TVs to European vacations.