The Hindu Business Line : Yuppies on a shopping spree

India's economy, which has been growing at an average of 8 per cent over the last few years, has emerged the darling of foreign investors and a preferred destination for global manufacturing companies.

Two themes that have attracted widespread interest in the economy are the changing demographic profile and the huge domestic-driven demand.

With 55 per cent of India's population below the age of 25 and the proportion of upper middle-class rising constantly, consumption is likely to be the enduring theme over the next five years or so. And the role of youth is likely to assume greater significance.

Free-spending

Be it mobile phones, iPods, latest fashion and sports accessories or the newest gizmos in the market — the `Yuppie' or Young Urban Professional who is lapping them up.

The Yuppie has brought the gleam back to the eyes of marketers and advertisers. Rising disposable incomes, willingness to spend and greater exposure to media drive make this class a spending machine. Yet, there is a spending pattern too.

For today's youth (17-25 years), apparel figures on top of the list. This is followed by fashion and lifestyle brands, sportswear, gifting and travel. Two basic characteristics associated with the shopping behaviour of the young generation are its preference for shopping online and the increasing brand consciousness. With information just a click away, Yuppies spend considerable time comparing various products, their features and prices before making an informed buy decision.

For online advertisers this is a huge opportunity, as manufacturers and marketers of mobile phones, watches, shoes and other fashion accessories are able to reach a large number of youngsters through this medium.

While regular spending (groceries, staples and other necessities) has grown by about five per cent over the last one year, that on lifestyle (clothing, travel and so on) has raced at over 20 per cent, with the youth accounting for more than half this growth.

The need to own a product/service that fits the `luxury' bill appears to drive the compulsive spending on branded products.

The average contribution of the youth segment to total brand sales is as high as 60 per cent! Youth spending in India is estimated to increase by over 50 per cent to about $8 billion over the next year alone. The conventional mindset of "saving for the future'' is being widely replaced by the "live for today'' attitude.

Coffee bars, multiplexes, restaurants and shopping malls are the favourite hangouts. It is the experience and the ambience that matter most to this segment. Coffee chains, smartly sensing a huge potential, frequently come out with attractive promos and offers to draw the attention of youth.

Of late, the urge to build and grow social networks among the youth is getting stronger and this holds much promise to social networking sites, blogs, coffee chains and restaurants.

That the world's largest coffee chain and the iconic brand — Starbucks — will soon be in India is only going to add to the bonanza for the Yuppies. Home-grown coffee chains such as Cafe Coffee Day and Barista will have to gear up for competition from the retailing outfit that revolutionised the concept of drinking coffee.

Drawing from experience

As they move up the spending curve and have fun and enjoyment, it may not be a bad idea for them to think of investing in some of these businesses. By doing this they would of course assume dual-roles: Customer and investor!

As consumers, they may be able to draw upon experiences and pick stocks intuitively. Perhaps, even better than seasoned professional analysts. This is what the famous fund manager, Peter Lynch, says in his book One Up on Wall Street.

With more foreign brands foraying into India and domestic ones scaling up their presence, brand proliferation may turn to explosion.

As a good number of them hold significant potential, it may be worth considering investing in their stocks.

Sectors such as apparel, retail, telecom services, multiplexes, media, automobiles and travel are likely to be the prime beneficiaries of the consumption-linked growth story.

Higher valuations enjoyed by companies in retail, FMCG and entertainment sectors speak about the investor fancy for these sectors.

To cash-in on the boom, mutual funds have come out with various products focussing on the consumption theme. Birla Gen Next and Kotak Lifestyle are a few that capitalise on this theme.

Indian retailers which are on the radar for alliances, tie-ups and joint-ventures with foreign biggies such as Wal-Mart, Tesco and Metro are likely to benefit from this exercise.

These companies are expected to gain from the free-spending habits of India's young urban professionals, driven by aspiration and disposable income.

Happy shopping and investing too!

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