“The primary reason for conducting Nielsen UMAR was to obtain first of all a realistic estimate of this segment, and secondly to profile their media and consumption habits,” said Partha Rakshit, Managing Director, South Asia at The Nielsen Company.

Nielsen’s survey of more than 18,250 affluent individuals across 35 Indian metro areas, initiated a new method of defining affluence. The study was based on a household’s lifestyle and ownership of consumer durables as opposed to monthly income or education.  Variables used included the employment of domestic help such as a maid or driver, holiday trips abroad, dining out habits, ownership of home computers, cars, air conditioners and type of home Internet connections.

Based on this study, Nielsen estimates a total of 2.5 million affluent households in India, of which 2.2 million belong to the “upper middle” segment; 200,000 in the “upper upper middle” segment and about 100,000 in the “rich” segment.  Delhi ranked as the most affluent city in the country, followed by Bangalore and Greater Mumbai.

Sixty percent of affluent households are nuclear families, and nearly a quarter have elders living at home.  Ninety percent own their homes, 75 percent have automatic washing machines and nearly 40 percent have a home theater and modular kitchen.

The affluents are energetic consumers of media.  At home, they will speak in regional Indian languages, but they prefer their newspapers to be in English (nearly 75%).  They like to watch TV in Hindi.  Sixty percent go to movies outside of the home, and more than half use the Internet at home.  Surprisingly, they are not that keen on reading magazines: more than 60 percent said they did not read magazines.

“Our survey delves deep into the media consumption habits of the affluent class of Indian society and provides a wealth of consumption pattern information to aid marketers in preparing their strategy and media plan,” said Rakshit.

Overall, the study found that the economic slowdown has not had a major impact on the spending habits of affluent individuals. However luxury accessories along with travel/vacations were areas where spending was curtailed significantly in comparison. [see graphic]

So what will be different in terms of consumer spending in just 11 years?  A weakened Social Security system and underfunded private pension plans will make it difficult for a large number of retirees to maintain their current standard of living. From now until 2020, the Struggling and Lower Mid affluence groups will be the only ones to gain share, pulling households from all other groups.  Household sizes will decrease.  Consumer spending will grow modestly over the next 11 years, but actually fall after 2020.  And the changes that occur after that year – both in terms of demographics and spending – will require marketers to dramatically change the way they do business if they hope to continue to grow.

Read an in-depth look at the demographic changes projected to take place in the U.S., and the challenges and opportunities for manufacturers in the July edition of Consumer Insight.

A fellow Nielsen associate recently sent me an article she had received from a client about how private label was receiving high acceptance among even affluent American households.  While I am a huge fan of the attitudinal insights from consumer survey data, I am also a huge fan of the behavioral insights from consumer panel data.  The best of both worlds is when we get to integrate both data types in our analytical work in the consumer packaged goods industry.  But turning back to the issue regarding private label development among more affluent households, if we examine annual private label buying over the four year period from 2004 through 2008 in the U.S., we find the following:

1.      The top two income brackets in our analysis (those with incomes of $70,000 to $99,999 and $100,000 +) demonstrated the biggest increase in private label dollar sales moving from 32.1% in 2004 to 35.0% in 2008.

2.      However, this growth is really a function of population growth, not an increase in demand.  That is, when we divide the percentage of dollar sales from affluent households by the percentage of household population they represent, we get an index of 102 in both 2004 and 2008.  In other words, the growth in dollar sales among these households was commensurate with their overall increase in population importance (growing from 31.5% of households in 2004 to 34.3% in 2008).  A variance of 2% in both years says these consumers buy private label in proportion to their population base and nothing has changed.

3.      Drilling down into more finite income groups, private label development (again, expressed as an index of sales over population importance) is lowest among the lowest and highest income groups and there has been minimal change over the past four years.   Private label sales development indices in 2008 ranged from a low of 88 for households with incomes of $20,000 or less to a high of 107 for households with incomes between $50,000 and $69,999.  With annual private label penetration near 100%, it is not surprising to see little variance across the income groups.  In other words, private label has somewhat universal appeal across all income groups, but households with incomes between $50,000 and $99,999 show the greatest positive variance from expected levels.

In other Nielsen Wire articles posted this year, we discussed how more affluent consumers are taking advantage of value retailers (club stores, supercenters and dollar stores) at a more rapid rate than other consumers and affluent consumer were also seeking out promotions at a greater and faster rate than other groups.  With brands driving most of the in-store promotions and accounting for almost 80% of unit sales in food, drug and mass-merchandisers (including Walmart), affluent consumers are speaking through their buying habits, and brands are still their preferred choice.  However, with the increased importance placed on price, value and promotion support, manufacturers must continue to innovate and drive a point of differentiation versus the increased innovation, focus and marketing support retailers are putting behind their private label initiatives.

For further information or to arrange a comprehensive presentation on consumer shopping patterns, please contact Todd Hale at todd.hale@nielsen.com or 859-905-4615.

Declines were especially steep during the last four weeks of the quarter, which saw the collapse of Lehman Brothers, the near-collapse of Merrill Lynch, and the government bailout of AIG.

Traditional mass retailers (excluding supercenters), department stores, and office supply stores saw the most dramatic declines in the number of shopping trips last quarter vs. a year ago.  Trips to mass retailers dropped by 9.1%, trips to department stores were down by 8.9%, and trips to office supply stores fell by 7.9%, Nielsen reported.

Retail channels offering low prices, strong value, and mostly “need to have” products — versus “nice to have” items — fared the best during Q3 2008.  Trips to online retailers (+7.5%), supercenters (+3.6%), and dollar stores (+3%), for instance, showed the largest increases, compared with Q3 2007.

More affluent consumers looking for bargains drove the growth in trips to value retail channels, while lower-income households adopted more drastic cost-cutting measures, eliminating shopping trips entirely, according to Nielsen.

U.S. consumers surveyed by Nielsen in late September and early October also reported having significantly less discretionary income than their global peers. 

Almost 25% of U.S. consumers reported having no spare cash after covering their essential living expenses.  In comparison, just over 10% of consumers worldwide reported a similar lack of expendable income.

U.S. consumers were also more likely than consumers worldwide to use expendable income to pay off debts, Nielsen found.  More than 35% of U.S. consumers reported using their spare cash for debt payments, while only 30% of consumers worldwide reported the same.

In early October, Nielsen’s holiday retail forecast estimated that 85% of U.S. consumers plan to spend the same or less on holiday shopping, versus 2007.

Stay tuned on Nielsen Wire for regular updates on U.S. retail trends, and other key economic indicators.