time to open my wallet or not€¦ · 18/5/2020 · time to open my wallet or not? july 2020...

Time to open my wallet or not?

July 2020home.kpmg/in

The new spending patterns emerging from a consumer’s perspective.The report aims to highlight gradual key changes that we are witnessing in the overall Indian consumer sentiment given the new normal.

Cont

ents Demography and research methodology

Global learnings and emerging business scenario

COVID-19: a window of opportunities

Key themes of our survey

KPMG in India – point of view

Acknowledgements

3© 2020 KPMG, an Indian Partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity. All rights reserved.

Demography and research methodology

This survey was conducted by KPMG in India and covered various demographics in Indiato analyse the changing consumer sentiment with respect to the COVID-19 pandemic

Based on City Tier Based on Age demographic Based on Gender

Tier-1 Tier-2 Tier-3

40%37%23%

20-30 31-40 41-50 >51

58%27% 11% 4% 66%

34%

Male Female

85%

27% 20%

Deep PocketsCautious SpendersTight Fisted

Based on Spender type

21%19%60%

Overall Number of Respondents: 2,376

Survey timeline -May 18, 2020 to

June 7, 2020

Collection Method: Online Questionnaire


Global learnings and emerging business scenario

Consumers are increasingly aware of the brands they invest in, hence trust will play a vital role for their purchase decisions. Companies need to prioritise their needs in terms of providing a safe environment for shopping as well as provide easier and convenient modes of payment. They also may need to gear-up and realign their supply chains, including logistics and warehousing for a better consumer experience. Such measures could help induce brand loyalty among consumers, which will serve as a long-term benefit.

Post COVID-19, Consumers will undergo a shift of patterns that are changing in three major aspects.

While the pandemic has set in a new reality, the forthcoming situation will bring in a new consumer mindset. Consumers will be diligent in terms of their financial stability and companies need to adapt this new way of thinking in order for them to re-evaluate and re-invent their business models.

While several organisations have been proactive in these trying times, consumers have also been digitally inclined and have adapted to a complete digital experience. The adaption of such technology for an omnichannel offering is observed across all age groups and organisations must focus on the digital enablement of consumers.

Pandemic aftermath Digitally savvy Trust

*Source: KPM G International - Consumer and the new reality


COVID-19: a window of opportunities

The global COVID-19 pandemic has had a deep impact on consumer behaviour. Consequential impact may be witnessed in quick and hasty decisions, emotional conclusions over rationalism, commitments which may or may not be required. During this juncture of shifting priorities, it is wise to categorise into ones which are here to stay for long and the ones that have a momentary existence. Basis which, strategic decisions could be taken by organisation to cater to these prioritiesInterestingly, the industry was already witnessing alterations in trends which have now accelerated and are here to stay. These include strengthening of omni-channel modes of operations, digital payment facilities, hygiene standards and need-based product preferences. A strong presence of hyper-local channel partners in urban centers has been observed recently, bringing consumer expectations to a different league. Kirana stores are adapting technology through contactless payments and offering doorstep delivery.It is believed – “What is here to stay will stay - if you adapt, it becomes an opportunity…” This survey highlights some interesting facts that we believe could find a place in every boardroom discussion, help give ideas to retailers and e-entrepreneurs to deal with the new operating procedures. It’s a window of opportunities and it’s time to capitalise. We hope you find the survey insightful!


Key themes of our survey

A new consumer segment is emerging — one that is financially cautious, digital savvy and more thoughtful and wise to ensure correct decision-making. The survey has captured consumer opinion in terms of – impact of technologies, spending habits, preferred modes of shopping (online / offline), preferred payment modes, hygiene and safety requirements and others.

Unlocking through digital paymentswe expect to see digital payments reinvigorated with contactless payments on the rise due to the pandemic. National Payment Corporation of India (NPCI) announced the highest ever transactions by UPI mode in June 2020. Consumers have received a flavor of convenience and are now getting habituated to the new normal. Our survey indicates that UPI and Wallet modes put together are 1.3X more than card payments. Cash payments were opted by only 15 per cent of consumers.

1 2 3The optimistic consumerOverall 51 per cent of respondents feel that the impact of COVID-19 will be short-lived and normalcy is not far. Surprisingly, Tier-2 and 3 cities are 1.9X more positive than the Tier-I cities. Possibly because of less fear of viral spread – lower density of population, city congestion is avoidable and community transmission is slow.

The rise of ‘online’ shoppersThe new consumer is digitally savvy and embraces interactions with organisations through digital channels with ease. A comparative of pre and post COVID-19 scenario clearly shows that preference to online channels have increased 1.6X growth. Our survey indicates that senior age consumers have also chosen online modes as a means to shop – possibly keeping in mind safety and convenience which otherwise remained unexplored.


Survey - definitions

Particulars Category Parameter

Wealth Interpretation

Elite LSM Real estate + Four-wheelerEstablished LSM Real estateNew Affluent LSM Four-wheeler

Emergent LSM Two-wheeler and none of the above


Summary of

Wealth and Spent

Deep PocketsAll Spendthrifts

Elite LSM / Established LSM+ Average Spenders

Cautious Spenders

Elite LSM/ Established LSM+ Tightwads

New Affluent LSM+ Average spenders

Tight fistedEmergent LSM+ Average Spenders/ Tightwads

New Affluent LSM+ Tightwads


Spent Interpretation forward three months

Tightwads INR 0 -10000

Average Spenders INR 10001 -25000

Spendthrifts INR > 25000

LSM - Living Standards M easure

City Tier * City Name

Tier-1 Ahmedabad, Bangalore, Chennai, Delhi, Hyderabad, Kolkata , Mumbai, and Pune

Tier-2

Agra, Ajmer, Aligarh, Amravati, Amritsar, Asansol, Aurangabad, Bareilly, Belgaum, Bhavnagar, Bhiwandi, Bhopal,Bhubaneswar, Bikaner, Bilaspur, Bokaro Steel city, Chandigarh, Coimbatore, Cuttack, Dehradun, Dhanbad, Bhilai, Durgapur, Erode, Faridabad, Firozabad, Ghaziabad, Gorakhpur, Gulbarga, Guntur, Gwalior, Gurugram, Guwahati,Hamirpur, Hubli–Dharwad, Indore, Jabalpur, Jaipur, Jalandhar, Jammu, Jamnagar, Jamshedpur, Jhansi, Jodhpur, Kakinada, Kannur, Kanpur, Kochi, Kolhapur, Kollam, Kozhikode, Kurnool, Ludhiana, Lucknow, Madurai, Malappuram,Mathura Goa, Mangaluru, Meerut, Moradabad, Mysuru, Nagpur, Nanded, Nashik, Nellore, Noida, Patna, Puducherry, Purulia, Prayagraj, Raipur, Rajkot, Rajahmundry, Ranchi, Rourkela, Salem, Sangli, Shimla, Siliguri, Solapur, Srinagar,Surat, Thiruvananthapuram, Thrissur, Tiruchirappalli, Tiruppur, Ujjain, Bijapur, Vadodara, Varanasi, Vasai-Virar City,Vijayawada, Visakhapatnam, Vellore and Warangal

Tier-3 All other cities

*Source: M aps of India accessed on 20 M ay 2020


1. Pandemic introduces a new dimension in habits of consumer spending (1/2)

78%

18%4%

ReducedSame as prior toCOVID-19

Increased

83%78%

70%

14%19%

24%

3% 3% 6%


Reduced Same as prior to COVID-19 Increased

Majority respondents claim to reduce on discretionary spending, however 22 per cent are still optimistic.

Positivity has been noted in Tier-2 and Tier-3 respondents. Tier-3 is found 1.9X more optimistic on their spending habits than Tier-1, hence could be the next focus area to monitor the spending habits

Based on Spending Habits Based on City Tier


82%76%

16% 20%

2% 4%

Female Male


21%14% 17% 19%

4%3% 3% 4%

20-30 31-40 41-50 >51


1. Pandemic introduces a new dimension in habits of consumer spending (2/2)

Among age bands, the 20-30 age band is more optimistic on discretionary spending

Based on Consumer Age Band Based on Gender

75%

83%80% 77%

21%14%

17%19%

4%3% 3% 4%

20-30 31-40 41-50 >51

82%76%

16%20%

2% 4%

Female Male


15%

37% 36%

12%16%

34%38%

12%

No Impact 3 to 6 months 6 to 12 months 12 months ormoreFemale Male

2. Optimism for the future

No Impact

3 to 6months

6 to 12 months

12 months ormore

16%

35%

37%

12%

Duration of Impact on routines and spending

51 per cent of respondents believe thatthe impact will not last more than 6 months.

9%

37%42%

12%18%

35% 34%

13%

22%

33% 35%

10%

No Impact 3 to 6 months 6 to 12 months 12 months or more

Tier-1Tier-2Tier-3

Based on City Tier

Tier -3 consumers are the most optimistic among all city tiers, as 22 per cent of them feel no impact on their routines and spending

15%

37% 36%

12%16%

34% 38%

12%


Based on Gender

17%

39%34%

10%13%

30%

42%

15%15%

32%39%

14%19%26%

42%

13%


20-30 31-40 41-50 >51

Based on Consumer Age BandThe age band 20 – 30 is most optimistic across all age bands with respect to duration of impact on their routines and spending.


Economic uncertainty Fear of COVID-19 Poor maintenance of hygiene in supply chain Others

34% 41% 39% 41%33% 33% 34% 35%21% 18% 17% 12%12% 8% 10% 12%

20-30 31-40 41-50 >51

3. Awareness of economic stability and safety among Indian citizens

Post COVID-19, A greater positive impact on consumer sentiment may be observed in the event of an economic stimulus.

Reasons that will affect consumer buying post COVID-19

11%

19%

33%

37%

Others

Poor maintenance of hygiene in supplychain

Fear of COVID-19

Economic uncertainty 41%35% 33%29%

37% 35%23%

16% 18%7%

12% 14%


Based on City Tier

The driving forces for 70 per cent of consumers buying post pandemic are economic uncertainty and Fear of COVID-19.

Consumers in Tier-1 cities are more concerned about maintenance of hygienein supply chain than Tier-2 and Tier-3 cities

Based on Consumer Age Band

The age band 20-30 is 1.8X more concerned about maintenance of hygiene in supply chain than Age band > 51

32%39%

34% 33%25%

17%9% 11%

Female Male

Based on Gender


36%

64%60%

40%

Online Mode Physical Store

44%29% 36%

63% 56% 63%


Pre COVID-19 - Online Mode Post COVID-19 - Online Mode

19% 27% 27%

36% 39% 31% 23%

61% 61% 58% 54%

20-30 31-40 41-50 >51



31 %25 % 22 % 27 % Typically, the >51 age band is the toughest to crack in terms of onboarding for e-commerce but has doubled from Pre-COVID-19 levels. Interestingly, from 23 per cent preferring prior COVID-19, the jump is as high as 54 per cent.

4. Omnichannel disruption to be relevant? During the pandemic, an increase in adoption and willingness for e-commerce purchases over physical stores has been noted.

The “Extra push": While e-commerce has been gaining for a while, the pandemic has provided motivation for consumers to engage in online shopping. Safety and hygiene being a non-negotiable requirement, under online buying mode 84 per cent of consumers prefer Click and delivery over pickup at store, where as under physical buying modes 67 per cent of consumers prefer standalone stores over malls

44%29% 36%

63% 56% 63%



19% 27% 27%

Based on City Tier

Tier-2 and Tier-3 cities are more inclined towards online buying mode almost 2X than Pre – COVID-19. 50 per cent hike noted in - Uttarakhand, New Delhi, Telangana and Punjab.

24 %

Preferred Buying modes

36% 36%

62% 59%

Female Male

Based on Gender26 % 23 %

Pre-COVID-19 Post-COVID-19

24 %


85%

27% 20%

Deep Pockets Cautious Spenders Tight Fisted

5. Favorable discretionary spends among consumers (1/4)

In the next three months, 49 per cent respondents intend to spend a decent value up to INR5000, across categories which shows consumers are cautious about spending.

By Spending Range ( INR )

<5000>5000

No Spend

North (32 per cent) and East (23 per cent) India consumers are more inclined towards spending more than INR5000 across categories as compared to other regions

30%

16%

20%34%

By Product Category

Furniture andElectronics

Apparels

Skin care andCosmetics

Fashion Accessories

Apparels, Furniture and Electronics have been in the limelight for quite a while and are the preferred segments followed by skin care and fashion accessories.

28%

46%

16%

38%

63%

42%

61%

28%

9%

9%

23%

34%

Skin care andCosmetics

FashionAccessories

Apparels

Furniture andElectronics

No Spend < 5000 > 5000

85 per cent of “Deep Pockets” are believed to spend an above-average amount on Furniture and Electronics of more than INR5000

85%

27%20%

Furniture and Electronics> 5000 based on spenders

49%

32%19%



Consumers in Tier-3 cities intend to spend 2X than Tier-1 cities on accessories and skin care & cosmeticsof more than INR5000.

Consumers in Tier-3 cities are 1.4X more inclined towards spending on Apparel than Tier-1 cities for spending more than INR5000.

56%

45%

38%

16% 16% 16%

39% 40%

34%

27%31%

23%

36%

45%48%

64%62%

55%

26%30%

27%

66%61% 63%

8%10%

14%

20% 22%

29%

35%

30%

39%

7% 8%

14%

Tier 1 Tier 2 Tier 3 Tier 1 Tier 2 Tier 3 Tier 1 Tier 2 Tier 3 Tier 1 Tier 2 Tier 3Fashion Accessories Apparels Furniture & Electronics Skin care & cosmetics

No Spend Upto 5000 5000 or more

Skin care and cosmeticsFurniture and Electronics


56%

45%

38%

16% 16% 15%

39% 40%

34%

27%31%

23%

36%

45%48%

64%62%

55%

26%30%

27%

66%61% 63%

7%10%

14%

20% 22%

29%

35%

30%

39%

7% 8%

14%




The > 51 age band consumers intend to spend twice than of the 21-30 age band consumers in Skin care & cosmetics in spending more than INR5000.

The 41-50 age band consumers intend to spend 1.6X more than the 21-30 age band consumers in Apparels for spending more than INR5000.However, the 21-30 age band consumers ( 65 per cent) are more attracted towards spending up to INR5000 in Apparels

Clear preferences on discretionary spending across categories are being seen among all age bands


47% 50% 46% 42%

16% 15% 18% 17%

42%33% 34% 28% 29% 24% 27% 30%

45% 39% 39% 44%

65%57% 51% 53%

28%28% 25% 39%

64%64% 61% 56%

8% 11% 15% 14% 19%28% 31% 30% 30%

39% 41% 33%

7% 12% 12% 14%

( 20-30 ) ( 31-40 ) ( 41-50 ) ( >51 ) ( 20-30 ) ( 31-40 ) ( 41-50 ) ( >51 ) ( 20-30 ) ( 31-40 ) ( 41-50 ) ( >51 ) ( 20-30 ) ( 31-40 ) ( 41-50 ) ( >51 )Fashion Accessories Apparels Furniture & Electronics Skin care & cosmeticsSkin care and cosmeticsFurniture and Electronics


56%

45%

38%

16% 16% 15%

39% 40%

34%

27%31%

23%

36%

45%48%

64%62%

55%

26%30%

27%

66%61% 63%

7%10%

14%

20% 22%

29%

35%

30%

39%

7% 8%

14%




Across all categories, Males intend to spend more than females in the spending range of more than INR5000.

It is worth noting that 60 per cent of males intend to spend up to INR5000 in skin care and cosmetics.

52% 46%

14% 16%

47%34%

22%31%

41%43%

67% 58%

25%

30%70%

60%

7% 11%19% 26% 28%

36%

8% 9%

Female Male Female Male Female Male Female MaleFashion Accessories Apparels Furniture and Electronics Skincare and cosmeticsSkin care and cosmeticsFurniture and Electronics


47%

38%31%

Deep PocketsCautious SpendersTight Fisted

6. Redefining resilience in the new normal

Need to refresh strategy - Consumer experience will ride its way up through the priority list of retailers. In the New Normal – 68 per cent respondents face a the new reality and continue to be sensitive towards the safety followed by pricing and promotion.

68%

59%

39%

36%

26%

Safety at Store

Pricing and Promotions

Proximity to home

Brand Loyalty

Reviews

Factors affecting consumer buying decision post COVID -19

71%

65%

55%

36%

27%

66%

53%

29%

33%

23%

68%

58%

30%

40%

29%

Safety at store

Pricing andpromotionsProximity toyour home

Brand loyalty

Reviews

Based on City Tier

Tier-1

Tier-2

Tier-3

Post COVID-19, Congestion and extensive travel time are factors for Tier 1 consumers to prefer shopping from a near by store and will play a major role in consumer satisfaction

69%

59%

40%

35%

27%

67%

58%

39%

36%

26%

72%

60%

38%

37%

23%

58%

58%

30%

41%

20%

Safety at store

Pricing and promotions

Proximity to your home

Brand loyalty

Reviews

Based on Consumer age band

20-30 31-4041-50 >51

Consumers in the 41-50 age band are prominently concerned about the safety at store compared to other age bands

73%

51%

43%

35%

22%

66%

62%

37%

36%

28%

Safety at store

Pricing and promotions

Proximity to your home

Brand loyalty

Reviews

Based on Gender

FemaleMale

47%

38%31%


7. Incentivisation across physical stores

Retailers will have to walk the “extra mile” to retain consumers for their physical stores. Hygiene at store and contactless transactions serve as the most important factors for a “safe” environment in physical stores. Virtual trial rooms is the emerging trend that assists consumers to ‘see’ how the products appear on them. This feature can act as an incentive for consumers to visit physical stores and assist in their decision-making.

69%

68%

56%

29%

Hygeine at store

Social Distancing

Availability of contactlesstransactions

Virtual Trial Rooms

Consumer preferred measure to visit physical store

Organisation needs to embrace new practices to maintain the trust of consumers in physical stores - Check of body temperature, capping on Consumer entries, etc..

With the combination of personalisationand ease, virtual trial rooms may emerge as the new face of innovative shopping experiences

77%

71%

62%

29%

75%

71%

50%

30%

74%

70%

55%

36%

Hygiene at store

Social Distancing

Availability of contactlesstransactions

Virtual trial rooms

Based on City Tier

Tier-1Tier-2Tier-3

69%

66%

57%

28%

70%

70%

54%

29%

73%

74%

59%

32%

62%

66%

43%

27%

Hygiene at store

Social Distancing

Availability of contactless transactions

Virtual trial rooms

Based on Consumer age band

( 20-30 ) ( 31-40 ) ( 41-50 ) ( >51 )

74%

66%

58%

27%

67%

69%

55%

29%

Hygiene at store

Social Distancing

Availability of contactless transactions

Virtual trial rooms

Based on Gender

FemaleMale


14% 14%

39% 36%47% 49%

Female MaleCash Credit card/Debit card UPI/ Online Wallets

Based on Gender

8. Heading towards a cashless economy

The sudden surge in the cashless mode of payments happened, post demonetisation – The talk of the town is, COVID-19 gave the agenda a better push. Also, 85 per cent respondents have chosen contact-less modes over cash. India’s path towards digitalisation and transformation: Companies are evaluating online platforms to boost their bottom line. Due to increase in importance for safety and sanitisation, cashless transactions have gained more momentum now.

37%

48%

15%

Credit / DebitCard

UPI/ OnlineWallets

Cash

12%17% 13%

42%35% 33%

46% 48%54%


Based on City Tier

Cash Credit card/Debit card UPI/ Online Wallets

Among which 26 per cent opted for UPI and 22 per cent opted for Online Wallets

Tier -2 and Tier-3city consumers are more inclined towards contactless payment i.e. UPI and Online Wallets than Tier-1consumers

12% 9% 14% 12%

39% 44%57% 58%

49% 47%

29% 30%

( 20-30 ) ( 31-40 ) ( 41-50 ) ( >51)

Cash Credit card/Debit card UPI/ Online Wallets


14% 14%

39% 36%47% 50%

Female Male

Based on GenderConsumers in the Age bandof > 40 yearsare more inclined towards credit/ debit cards than UPI/ Online walletsOn the contrary, UPI/ Online wallets are more popular amongst consumers in the Age Band of 20-40


KPMG in India - Point of view

Organisations will need to reinvent their business and operating models. 22 per cent consumers in Tier-2 and 30 per cent consumers in Tier-3 feel that their spending will either increase or remain the same as prior to COVID-19. Our study indicates that Tier-2 and 3 consumers are more liberal in their spending habits, hence these could be the next focus area for retailers to expand their presence. Further, a greater impact on positive sentiments could be expected in the event of an economic stimulus

Approximately, 68 per cent of respondents expect "Safety Precautions" to be their primary priority following "Pricing and Promotion“. Companies will need to assess their sense of safety across the value chain and ensure it is aligned to the new normal expectations of consumers. Pricing and promotions will also continue to be a significant driver for purchase decisions.

While 69 per cent of consumers have claimed safety as a priority, social distancing and availability of contactless transactions as priorities are not far behind. For physical stores, safety will continue to be play a key role in attracting footfall. Tight adherence to social distancing and personal safety, contactless transactions and virtual trial rooms are options retailers could consider. Retailers will need to identify ways to gain consumer trust and confidence going forward

With the shift of preference towards online, mainly due to the pandemic, companies will need to develop their online and last-mile logistics and delivery capability and manage supply chain hygiene across all levels. Evidently, we know that for India, providing a seamless journey for consumers through a mix of digital and physical infrastructure will require the backing of a strong supply chain.

86 per cent respondents have chosen cashless modes as a preference that comprises UPI, online wallets and credit/debit cards. Organisations will have to consider shifting to digital modes of payment.

Focus on new emerging markets

‘Safe buying coupled with pricing/promotions’ are key to purchase decisions

Get closer to your consumers and create an experience in physical stores

Create a digital footprint and close that last mile

Prioritise Digital payments as security

COVID-19, in all its volatility and stress, has brought with it an opportunity to take a hard look at the entire consumer and retail supply chain to meet tomorrow’s needs. This is an opportunity for retailers and consumer goods companies to demonstrate that they are committed to delivering on their purpose and their values either

through direct or indirect actions (say by extended warranties/immediate resolution to queries) or indirect support (offering a COVID-19 helpline).


Acknowledgements

• Harsha Razdan• Nikhil Sethi

• Amit Bhandari• Bijal Shah

• Shreya Bapna• Shreyans Motani

Report Authors Contributors Design and compliance

• Dipesh Vasa• Pratik Jain

• Anupriya Rajput• Rasesh Gajjar

• Sameer Hattangadi• Satyam Nagwekar


Contacts

Harsha RazdanPartner and Head - Consumer Markets and Internet BusinessKPMG In IndiaE: [email protected]

Nikhil SethiPartner – Management ConsultingKPMG In IndiaE: [email protected]

Amit BhandariPartner – Deal AdvisoryKPMG In IndiaE: [email protected]

Bijal ShahDirector –Risk ConsultingKPMG In IndiaE: [email protected]

About KPMG in IndiaKPMG in India, a professional services firm, is the Indian member firm affiliated with KPMG International and was established in September 1993. Our professionals leverage the global network of firms, providing detailed knowledge of local laws, regulations, markets and competition. KPMG has offices across India in Ahmedabad, Bengaluru, Chandigarh, Chennai, Gurugram, Hyderabad, Jaipur, Kochi, Kolkata, Mumbai, Noida, Pune, Vadodara and Vijayawada.KPMG in India offers services to national and international clients in India across sectors. We strive to provide rapid, performance-based, industry-focussed and technology-enabled services, which reflect a shared knowledge of global and local industries and our experience of the Indian business environment.

Thank you

The information contained herein is of a general nature and is not intended to address the circumstances of any particular individual or entity. Although w e endeavor to provide accurate and timely information, there can be no guarantee that such information is accurate as of the date it is received or that it w ill continue to be accurate in the future. No one should act on such information w ithout appropriate professional advice after a thorough examination of the particular situation.

© 2020 KPMG, an Indian Registered Partnership and a member f irm of the KPMG netw ork of independent member f irms aff iliated w ith KPMG International Cooperative (“KPMG International”), a Sw iss entity. All rights reserved.

The KPMG name and logo are registered trademarks or trademarks of KPMG International.

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time to open my wallet or not€¦ · 18/5/2020 · time to open my wallet or not? july 2020...

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