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Home  » Business » It's time to save or spend?

It's time to save or spend?

By Sarang Panchal
June 24, 2005 09:44 IST
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The Indian consumers, in tandem with their Asian counterparts, are clearly the world's most optimistic. In contrast, a vast majority of Europeans and Americans maintain a dismal economic outlook. This tends to be looked at as an indicator of the economies that are likely to enjoy economic growth.

Will the economic optimism in India stay? The most telling sign is that Indian consumers are also the most optimistic in terms of their expectations for employment opportunities and the health of their personal finances.

An overwhelming percentage, 83 per cent, think that employment prospects are likely to be good and 85 per cent of Indian respondents expect their personal finances to be in good shape.

The impact of outsourcing and a growing pool of literate, employable young adults have resulted in an opportunity boom. For individuals, it means that their disposable income will increase more rapidly than before.

But for businesses this leads to a key challenge. Especially in the services sector, maintaining a check on wage inflation will be a task.

However, the findings certainly signal an exciting and vibrant time for consumer marketing. Because of the positive outlook on employment, job prospects and personal finance, the Indian consumers feel that it's a good time to buy products and services.

A majority (67 per cent) responded that the next 12 months will be a good time to buy.

This is contrary to what consumers think in other economies of the Asia Pacific region. Despite being optimistic on most fronts, consumers here were less confident when it came to their individual financial status over the next 12 months.

Only 57 per cent were positive about their personal finance compared with 71 per cent in South Africa, 65 per cent in Latin America and 61 per cent in North America.

Similarly, while more than half of the respondents across the globe described their state of personal finances as good, they also said that it is not the time to spend money on things they wanted to buy.

Globally, consumers remain cautious about economic volatility and seem quite prepared for a sudden change in circumstances. The only exceptions were the Norwegians and Turks who believed that it was an excellent time to buy the things they want.

How to spend it

For Indians who are willing to spend their spare cash (after basic living expenses are accounted for), there is a clear order of priority, even though a majority (54 per cent) intends to save.

Most Indians intend to use their disposable income to invest in equities and mutual funds (41 per cent); indulge in out-of-home entertainment (34 per cent); buy new clothes or embark on a vacation (33 per cent); invest in decorating their homes, or buy new technology (30 per cent).

Clearly, some industries will benefit more than others, as consumers prioritise their purchases. These are the industries to watch out for since they will command a greater proportion of the consumer wallet and witness fierce competitive action.

It will be essential for marketers to gain an insight into factors driving the desire for these products if they are to successfully ride this wave of optimism.

On a global basis, over one-third (36 per cent) of the world's consumers put their spare cash into savings, followed by out-of-home entertainment, holidays and new clothes.

At the time of the survey in early May, many Europeans were already looking forward to their summer holidays, with over one-third of consumers (35 per cent) putting spare cash into upcoming vacations, more than any other region.

The region also led the world in terms of shopping for new clothes (32 per cent) -- perhaps for their impending holidays.

Overall, Asians remain the world's super-savers with 51 per cent of consumers storing spare cash for a rainy day, with Filipinos topping the list (63 per cent). In Thailand, the new year, which was around the time of the survey, ensured that the appetite for holidays remained strong among Thai consumers (56 per cent chose to spend their spare cash on a vacation).

Mainland Chinese consumers were simply unbeatable when it came to shopping and formed the biggest group of fans in the region for out-of-home-entertainment (50 per cent), new clothes (44 per cent) and new technology (41 per cent).

The equity markets, out-of-home consumption, apparel and tourism will benefit the most in India. Clearly, the optimistic will inherit the earth.

Sarang Panchal is the executive director, customised research services, A C Nielsen South Asia.
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