Increased Demand For Premium Products In Smaller Towns Due To The Pandemic

For centuries; India has been seen as an agrarian economy whereby for the longest time, we’ve perceived our farmer brothers as trend followers vs. setters. That India or Bharat has changed, and the 2020 COVID pandemic has acted as the final frontier to showcase it. In order to really understand how this change has arrived, we need to take a step back into history and revisit 1985, where on a visit to drought-affected Kalahandi district in Odisha, Rajiv Gandhi had quoted that of every rupee spent by the government, only 15 paise reached the intended beneficiary.

For the longest time in free India, this was the state of affairs, owing to which rural India continued to stay behind the curve consuming staples while discretionary spends remained concentrated to large urban cities. Over the last decade, India has seen such monumental changes in its direct beneficiary initiatives aided by faster Internet connections and the Unified Identification of Indians via Aadhar that in 2021 ~85 percent aka 85 paise of that rupee sent from the centre reaches its intended beneficiary.

Technology alone has bridged the geographical barriers between urban & rural India which coupled with the government initiatives such as the Atmanirbhar Bharat Abhiyan, Vocal for Local Campaign, Make In India are all contributors to the doubling of farmer’s incomes.

Now that we have set aside the macros, lets dive into to the micros of where we see India heading. Personally, I feel in the decade up ahead, the great ‘Indian Middle Class’ won’t exist! Yes you read that right. My bold prediction comes from evaluation of the trend that’s been set into motion since the last decade, but fuelled further over the last 20 months of this pandemic. Since most of our parents were middle class, it doesn’t necessarily mean we need to be the same is the motto of today.

A new Bharat (Tier-2 & below) with a renewed zeal is levelling-up. Data such as retail broking account additions/market participation, startup registrations and Crypto accounts are all indicative of this. A young and aspiring nation like ours is all out to buy a better lifestyle for themselves vs. what their forefathers had. In this new Bharat, you either graduate from the Middle Class to a level above or fall off the reconning.

I recall a quote by Adam Davidson - “Economics is all about consumption. People either spend money now or they use financial instruments like bonds, stocks and savings accounts - so they can spend more later”. With the mad liquidity rally we are in, clubbed with work from home for millions of migrant white collared workers, the domestic savings of most families across Bharat have been on the rise. While savings accounts & FDs are unable to beat inflation, money has found its way to the capital markets/cryptos, where the returns have been extraordinary.

That compounded money is now finding its way into consumption drivers. A look at real estate demand/prices across Tier-2, 3, 4 & 5 towns, car sales is on the rise; discretionary sales of electronics such as iPhones and TVs are all on the upswing. India is firmly going the China way, where smaller cities and provinces are sitting on years of pent-up demand for consumption, which is finally being satiated by brands reaching-out to consumers either directly or via ecommerce (Top three e-tailers in India today deliver to over 90 percent of all Indian pin codes!).

Late last year, I happened to speak to a friend of mine who in her group of friends within the quaint city of Kanpur placed an order for 150 Louis Vuitton bags exactly 30 days post the nationwide lockdown being lifted. Being an early investor at ECom Express (2nd largest e-Commerce logistics firm in India), we see a monthly dashboard that showcases the demand for discretionary spends has firmly moved to Bharat, and its upon brands now to fight for the next 400-550 million untapped customers.

Brands today are being discovered via social channels like Chingaari, Instagram Reels, Snapchat and others. The next leg of customers from Bharat possess very high aspirations, and trend setting/positioning will hold the key for brands to succeed in the years up ahead. Gone are the days when a simple Amitabh Bachchan ad would do the trick; India has evolved, and it is time that brands that wish to create a mark follow suit. A whole new brand guide needs to be invented to crack open the vaults of consumption that are waiting to be opened.

Like Jeff Bezos quoted, “I predict that the 21st century is going to be the Indian century. The dynamism, the energy… everywhere I go here, I meet people who are working in self-improvement and growth. This country has something special, democracy”.

My personal note to brands of this century - ‘Go Big or Go Home!’