Consumerism goes berserk

Industry sources say the August-November "festive" season will see a 30 percent year-over-year spurt in the sales of branded products. Many supermarkets registered even higher growth. Nokia alone sold 400,000 cellular phones on a single day -- probably a world record.

As branded products seduce the elite, shopping and spending become its status symbols. So do free gifts and prizes. Yet, the consumer is not King in the New Consumerist Age. Rather, s/he is a passive object of manipulation by the marketing and sales promotion industry.

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A survey covering 2,100 consumers and 800 retailers in 10 cities finds that "87 percent of Indians participated in some form of [sales] promotion." A whopping 53 percent are attracted to brands or shops because of free gifts. These could be: a gold/silver coin, air tickets, holiday packages, a crockery set, a car, television sets, a house, DVD players, cash, even candles.

People don't choose gifts. They're attracted to them not because they fulfil a need, but because they are free. Your home may be overflowing with kitchen gadgets, but you'll take yet one more -- out of greed.

People in all capitalist societies are lured by discounts. They develop "loyalty" to brands. But it's perhaps only in India that gifts and guaranteed "scratch-to-win" prizes have become inseparably tied to the purchase decisions of a majority of consumers.

A special kind of greed is at work here -- acquisition of goods for acquisition's sake, irrespective of utility/quality. The Indian consumer is not insensitive to the price of a good. But s/he's nevertheless a victim of boundless avarice.

Such avarice is typical of a first- or second-generation middle class which has internalised what sociologists term the Poverty Syndrome -- or the fear of falling into the ranks of the poor. Until recently, the Indian middle class would save. Now, with its steeply rising incomes -- themselves related to warped economic processes -- its upper layers are splurging.

These strata can buy houses at a young age like 28, and still spare tens of thousands of rupees every month on luxury products. The top spenders are young people in "sunrise" service-sector businesses like Information Technology, insurance, banking, hotels, and in investment firms.

The disproportionate clout they command is reflected in faster growth of high-end goods. For instance, flat TV sales are growing by 47 percent a year, while the sales of old-style TVs are limping. Sales of semi-automatic washing machines are rising at less than half the 13 percent growth of fully automatic machines.

Sales of large frost-free refrigerators (above 300 litres) are growing at 24 percent, but smaller fridges show a negative trend. Split air-conditioner sales are rising at a feverish 97 percent.

Gift- and prize-driven consumerism has grown rapidly partly because of competition which breaks out during the "festive season," which accounts for about 40 percent of the sales of "white goods."

Riding on this consumerism is organised retail, comprising chain stores, malls, supermarkets and hypermarkets. This is the fastest-growing sector of the Indian economy, annually expanding at a scorching 20 percent-plus.

A leading business consultancy, A.T. Kearney, says the Indian organised retail business will more than triple in size, from $7 billion to $23 billion by 2010.

The Tata Management Consultancy Group forecasts that organised retail will annually grow at 22 percent. Its top five categories would be food, grocery and general merchandise, apparel, durables, food service, and home improvements. Big companies are trying to entice consumers with a wide choice of goods, an air-conditioned ambience, and a one-stop "shopping-cum-entertainment destination."

According to multinational consultancy Pricewater-houseCoopers, a staggering Rs 19,000,000 crore ($412 billion) of investment will flow into the Indian retail sector by 2011. Most of this will flow into "hypermarkets and supermarkets."

Half the investment will be directed to food-related retail and the remaining to non-food items. PwC is pleased that "Indian consumers' lifestyles and shopping habits" are increasingly directed at purchases of "non-essential goods such as luxury watches, cars, high-tech products, etc."

Investments in malls are growing rapidly. Of the 361 malls under construction, 227 are in the top 7 cities. The remaining are coming up in smaller cities. Close to 85 hypermarkets, 325 large department stores and more than 10,000 new outlets too are under development.

Malls have become an inseparable feature of most Indian cities -- and a favourite haunt of upper middle class youth. With 51 percent foreign direct investment allowed in single-brand stores, malls are likely to grow even faster.

Supplementing them are supermarkets like Big Bazar, which have established themselves in mid-sized cities like Lucknow, Nagpur, Ludhiana and Cochin. They have already driven the small shopkeeper into bankruptcy and are becoming predatory upon the greengrocer. The supermarkets can buy commodities at rock-bottom prices.

This temporarily benefits the affluent consumer at the cost of the agricultural producer, small trader and artisan. The worst hit would be the millions of local shopkeepers who earn low margins and provide a variety of services, including credit, which are denied to most poor people.

Organised retailing is socially divisive and will widen rich-poor and urban-rural disparities. It's highly energy-intensive. It encourages waste: people buy more food than they need -- because of discounts. Impersonal organised retailing transforms the buyer-seller relationship, eliminating human contact.

These effects will get greatly magnified if global hypermarket chains like Wal-Mart, Tesco, Carrefour, and Metro enter India. They will destroy livelihoods and a range of economic activities. There's growing resentment against these companies in Western Europe. They have bankrupted fruit, vegetable, and grain producers in many developing countries too.

It would be suicidal for India to repeat the West's blunders and promote organised retailing.

Praful Bidwai is an eminent Indian columnist.