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Consumption story set to treble to $4 trillion by 2025: Report

A nominal year-on-year expenditure growth of 12 per cent in the country is more than double the anticipated global rate of 5 per cent and will make the country the third-largest consumer market by 2025 at USD 4 trillion, says a BCG report.

March 21, 2017 / 03:49 PM IST

The domestic consumption story is set to treble to USD 4 trillion by 2025 as rising affluence levels drive changes in consumer behaviours and spending patterns that have big implications for companies, says a report.

A nominal year-on-year expenditure growth of 12 percent in the country is more than double the anticipated global rate of 5 percent and will make the country the third-largest consumer market by 2025 at USD 4 trillion, says a BCG report.

The country is already the third largest economy in terms of purchasing power.

"The consumer market is poised for fundamental changes," says Nimisha Jain, a BCG partner and the coauthor of the report.

"As consumer market continues to grow and evolve, companies will need to shed conventional wisdom, try multiple business models simultaneously, and be prepared for rapid changes internally to adapt to changing consumer needs and behaviours," she adds.

The report notes the elite and affluent income segments will constitute 40 per cent of all spending by 2025, and the wealthy will represent the largest consumption segment for the first time.

Further, digital channels will influence 30-35 percent of all retail sales by 2025, and 8-10 per cent of retail spending will be online.

Among the factors that will shape consumption is also the country's unique pattern of urbanisation, in which emerging cities are the fastest growing. Emerging cities with populations of less than 1 million will be the fastest growing and will constitute one-third of total consumer spending by 2025, it said.

About 40 per cent of the population will be living in urban areas by 2025, and city dwellers will account for over 60 percent of consumption.

Spending in these cities is already rising by nearly 14 per cent annually, while consumer spending in the biggest cities is increasing at about 12 per cent.

Consumers in these cities behave differently from big-city consumers, the report said.

Another important trend is shifting family structures with extended joint family has given way to nuclear households, it said, adding the ongoing shift is significant to marketers because nuclear families spend 20-30 percent more per capita than joint families.

BCG surveyed 10,000 consumers in 30 locations nationwide and studied consumption in over 50 categories.

first published: Mar 21, 2017 03:49 pm

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