Milennials to be the key segment of India's consumer market, says Deloitte

12 March 2018 Authored by Consultancy.in

Millennials make up nearly a third of the world’s population, and more than a third of the Indian population. Given their affinity for technology and their propensity for online consumption, millennials are expected to boost India’s online consumption levels to a compound annual growth rate (CAGR) of more than 30% till 2021.

Milllenials, Generation Y, Echo Boomers: call them as you may, the generation of people born between 1980 and the early 1990’s have grown up in the age of rapid technological advancement, and are well versed with the economic applications of the plethora of digital tools that have emerged over the last two decades.

Globally, this generation constitutes 27% of the entire population, placing them somewhere between 2 and 2.5 billion people. In India, Millennials comprise 34% of the population, which makes it the largest ratio of millennials in the world, ahead of 33% of Brazil’s population and 31% of China’s population.

While the generation is known for its technological capabilities, millennials in India constitute the productive population at a time when the country is set to have unprecedented levels of digital access. Simultaneously, economic prosperity in India is on the rise, which is driving the consumer market up at a rapid rate.

Millennial population as a percentage of country’s population

Put both these factors together, and one can smell the recipe for a highly vibrant digital economy. A new report from Big Four professional services firm Deloitte, prepared in collaboration with the Retailers Association of India, predicts a boom of this precise nature in India’s digital economy, and offers detailed insights on how the different priorities in this generation will transform the nature of the consumer market.

In terms of economic prosperity, the report reveals that Asia as a region has the highest level of prosperity among the millennial population. The cumulative disposable income of millennials in Asia is placed by the report at an imposing $6 trillion. India, which is expected to drive growth for the region, has the highest level of disposable income, as a percentage of the income, in the world.

As per the report, 50% of the population population in India lives comfortably, in that they are able to spend on some commodities that they want rather than need. A further 36% of the population is even higher on the economic prosperity scale, possessing the ability to spend their income freely.

Online retail as % of country’s total retail

As a result, the ratio of online retail to the overall retail market in India had grown to 3%, when measured in 2015, up from negligible levels in 2010. Although online consumption in India is yet to gather momentum, the factors mentioned above are expected to drive this consumption up by a CAGR of 30% between 2016 and 2021. While fairly well ahead of a number of global economies, the current levels of online retail are lower than other major economies such as Brazil (3.7%), USA (9.2%) and China (12.9%).

Shifting priorities

Therefore, in years to come, most retail will take place online, and most consumers will be millennials. So what will this do to the consumer market? The report uses survey results to identify key differences in the priorities of millennials and their preceding generation: the Baby Boomers.

The study uses a set of product-characteristics to determine which attributes justify the payment of a premium, thereby gaining an idea of consumer priorities. For instance, around 60% of Baby Boomers consider high-quality material as a fair reason to pay a premium, compared to only half of the millennials.

Attributes that justify product’s premium

Similar trends can be seen for superior performance and handcrafted products, whereby the number of Baby Boomers exceeded the number of millennials who think a premium is justified.

Meanwhile, what attracts millennials in a product are attributes such as exclusivity, rarity and, most substantially, a superior customer experience; wherein 40% of millennials felt that paying a premium was worth it, compared to around 30% of Baby Boomers.

According to Anil Talreja, a Partner at Deloitte, “Retail organisations have been constantly on the growth trajectory which is coupled with personalised marketing, tailor-made solutions, and a new shopping experience for customers. In order to achieve this, it becomes incumbent for these organisations to engage with the next generation of consumers to join their front-end operations as these individuals are best placed to resonate with the Next-gen.”

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