Despite saturating growth in the metros, the small-town consumers are starting to splurge. Godrej, a family-owned conglomerate, saw its sales of white goods drop by over a tenth in big cities in the past fiscal year. But sales in towns of less than 100,000 people rose by 19%, and in villages by over 40%. Bajaj, another conglomerate, says small-town and rural sales have risen handily in recent years, to a quarter of its home-appliances business. Sales of motorbikes and mopeds have decelerated more gently than cars, an urban luxury.
The factors encouraging these changes in the non metro consumers are government subsidies, good monsoons, high land prices and a low reliance on credit like Chengalpattu’s shoppers who are mostly farmers benefit from government-fixed floor prices for crops. Poorer shoppers from nearby villages make money from a government scheme that guarantees 100 days of work a year. Rural incomes have also grown more rapidly than urban ones since 2008.
Godrej is pushing even deeper into the hinterland, trying to reach villages with as few as 5,000 people. It is also designing washing machines with manual motors and tiny fridges for homes with unreliable electricity. Foreign firms such as Samsung and Panasonic are following suit.
As reported in an article in The Economist, Mahesh Krishnan, who heads Samsung’s home-appliances division in India, hopes to increase the firm’s presence in rural shops by a fifth in time for November’s Diwali festival, a big shopping season. Foreign firms typically have skimpier distribution networks than their local rivals, but their products are more popular where they are available. A foreign brand is often a status symbol.
As India gets richer, rural folk are becoming more entwined with the national economy. Ramesh Iyer, the managing director of Mahindra & Mahindra Financial Services, a rural lender, now has 2m customers, twice as many as he had in 2008. As they move up the chain, the demand for credit will only get higher, they are getting aspirational.
The changes in consumption patterns can be easily seen from the observation that families are now buying one bike per adult, rather than one for everyone to share, as they did a few years ago. Shopkeepers are starting to stock 3D televisions that cost Rs. 95,000.
However, the only thing working against rural shoppers is that they cannot always be relied on to splurge. Their wealth often depends on handouts rather than increased productivity. A poor monsoon may curb their spending for a whole year.