Bikes, cars & durables big hits with Class I consumers

MUMBAI: Small towns have arrived. Consumers in these towns are spending on lifestyle goods as if there’s no tomorrow, according to an ACNielsen study.

Plastic card spends in tier 2 towns over the last three years was in line with the metros. ICICI Bank expects its credit card base of 20 million to expand to 75 million over the next four years. And bulk of this growth will come from the middle class and smaller towns.

“Buying a top-end car or a bike has now become a reflection of personality for the emerging Indians in Class 1 towns as disposable incomes have picked up substantially. Product replacements are done even when their is no deterioration in the value of the product,“ says Bajaj Auto’s marketing head S Sridhar. Product replacement cycles have reduced from seven-eight to three years.

ACNielsen’s study on shopping trends in Class 1 towns show that consumers are more concerned about keeping up with the Joneses. They visit big towns to check what’s in, what’s out. “They may not buy a fridge but buying a computer was on top of their priority list in order to be updated about what’s happening in the world,” the study says.

Not surprisingly then, the study suggests marketers should work on unconventional marketing strategies like ‘word-of-mouth’ which travels faster in smaller towns. “FMCG companies will have to work harder at catching the consumer’s attention in smaller markets which have now set sight on the more happening durables products. FMCG spends are fighting with a basket of durables that have definitely got bigger,” said Rasna CMD Piruz Khambatta.

The ITeS and BPO boom have seen the rise of several young consumers, who typically live with their families and have huge disposable incomes. Says R Chandramouli, VP (marketing), TVS Motors, “Earlier a Class I consumer who would rather save now spends confidently. That’s a very pronounced behaviour we have been noticing.“ In the past, rural consumers were conservative and averse to debt. But now they don’t hesitate to take a loan to pay for a house or consumer durables, said an industry source.

Two-wheeler penetration stood at 19.5 in Class I markets vis-à-vis 15% in metros, while urban rest was placed at 17%. Four wheeler penetration was placed at 18% in Class I towns with metro at 15% and urban rest at 14%. The numbers reveal that consumers in the Class I markets have made more aspirational purchases like two wheelers, cars and durables.

Emerging India is a market as big as the metros with a rising monthly household income, which is yet to catch up with the metros.