The legendary former CEO of Tesco, Sir Terry Leahy, rose from modest beginnings to become the most respected retailer not only in the UK but across the globe. He made several path-breaking initiatives in Tesco which included amongst others the use of large scale data for consumer insighting. He was always keenly tuned into consumer trends and needs.
I once had the opportunity of asking him how he was able to forecast future industry trends, to which his answer was simple but had immense strategic clarity.
He said that mega trends, transformative forces on society and consumer behavior, do not happen overnight. It is today’s incipient trends that build up to become mega trends of the future. He called them micro trends.
Sir Terry Leahy’s strategy was to identify the prevailing micro trends well in time and work on most of them till eventually some became mega trends in the future.
These embryonic trends start deep and create the structural disruptions that later end up as gigantic changes. For some these mega trends come as shocks that overturns their business models but it need not be so if one starts identifying and working on the micro trends early in the cycle.
Think of some of the micro trends in India during the early nineties – globalization, proliferation of media and travel; all of them are today well-established megatrends of the Indian market.
So what really are the current micro trends that can become mega trends for ecommerce market of tomorrow? Many of them are known but their power to almost overhaul consumer behavior, market dynamics and organizational strategy is underappreciated.
Influence of the Affluent and Premiumisation
The affluent class (purchasing power parity (PPP) income > $117,000) is insignificant in numbers now and hence its influence is limited. In a few years, this class will become substantial in size (14 million by 2020) and hence with its higher buying power will have wider ramifications on consumerism and aspiration.
Luxury car sales predominantly to this class is growing at a phenomenal pace (expected to jump to 6 times by 2020 according to a study by Frost & Sullivan) and is now having a profound impact on the rest of the market in driving preferences like demand for more features.
This class will push the demand for a certain type of products like experience travel, heritage items and niche true-luxury products and hence fine segmentation will be essential in business planning.
Rapidly rising incomes across all classes will enable more affordability and lead to premiumisation in almost all types of products. Premiumisation does not necessarily imply high prices, but means better quality and features. This is a clear trend that will become the dominant characteristic of the market.
The lower income value-seeking consumers of today are also looking for more quality and experience in products and services. These consumers are highly aspirational in their buying behaviour and the degree of premiumisation they want is disproportionately higher to their incomes for personal status symbol products like mobiles, vehicles and shoes.
Asian not only Western
If the last three centuries belonged to the West, this is going to be the Asian century led by China, India and Indonesia. With economic prosperity, there is a commensurate increase in cultural influences.
We are seeing wider and deeper acceptance of Asian sensibilities in food, fashion, design and lifestyle. Sushi, holidays in Bali, Gangnam style, Yoga are acquiring the cache that European origin cultural elements used to enjoy.
Age wise Buying Preferences
The differences in buying based on age are slowly becoming tenuous. Better health, consumption of the same media and increasing exposure have made 50 the new 30 and 60 the new 40. In most categories there is an overwhelming overlap of preferences and attitudes amongst various age groups. In electronics, casual clothing and entertainment there is already more convergence than before between various age segments.
Emergence of New Segments
The future ecommerce market is not going to be solely dominated by the youth.
With simpler ways to use technology and more familiarity, segments like the well-off 50 plus woman or the time constrained urban 30 to 40 age women will become big groups to target.
Going Green and Social Responsibility
Green is still not an essential attribute of the brands in India. But it is a huge source of differentiation for the next generation of consumers. The high costs of going ‘Green’ today make it limited to a niche class. But as volumes rise, technology improves; the associated costs will come down and anything not environmentally friendly or socially harmful will find it hard to compete.
Design, personalization, influence of the social media on brands and growth in small towns are the other micro trends that will likely be firmly established in the next 5 to 10 years.
The companies that start responding to them now will reap the early mover dividend.
(About Author : Salil Sahu is responsible for running HSIL, a part of Wadhawan Retail Limited. He has extensive experience in Sales, Marketing, Strategy and General Management and has spent the last 10 years in P&L management. He has worked in Wipro, Heinz, Shaw Wallace and a start-up and has been part of many pioneering initiatives.)
Image Credits: Thedrum.com & randomstruik.co.za