Consumer Products at Marketplace

The Indian Personal Care Market is expected to grow at CAGR 9% from $14Bn in 2018 to $23Bn in 2022. The growth is on account of increasing disposable income in the hands of people due to an increase in salaries/ wages more than inflation. Lately in the budget 2020, the government has tweaked tax slabs to increase money in the hands of people. This will aid the growth of segments of consumer products.

Evolving consumerism has played a significant role in shaping this market. Buying patterns and frequencies help identify consumers as loyalists and experimental. Consumer preference indicates that daily care products are purchased online predominantly due to product standardization, offers and discounts on various portals whereas mid-premium and premium products are purchased offline since consumer still believes in the ‘touch & feel’ of the product.

The personal care products are divided into seven major categories – cosmetics, fragrance, men’s grooming, skincare, bath, hair care & oral care. The seven categories can be further divided into 3 positionings – mass, mid-premium & premium + (includes premium, super-premium & luxury brands). In the period 2012-17, the mass category has shown slower growth as compared to the other two categories indicating the shifting of preference of people towards premium products. The premium+ category is set to grow at 15% with the evolving mindset of consumers and increasing penetration of brands.

The mass category is dominated by Colgate, Axe & Himalaya. Mid-premium category is dominated by Olay, Fiama Di Wills, Biotique. The Premium+ category is dominated by Hugo, Boss, L’Oreal, Armani and Sephora.

Category	Brands by Category			Revenue
	Mass	Mid-Premium	Premium+	Mass	Mid-Premium	Premium+
Cosmetics	Lakme Maybelline		Sephora	61%	31%	8%
Fragrance	Axe Nivea	DAVIDOFF SKINN	BOSS ARMANI	28%	22%	50%
Men's grooming	Gillette Old Spice	Mooch USTRAA	ERNO LASLO	69%	26%	5%
Skin Care	Dove Vaseline	Olay Neutrogena	La Prairie	60%	30%	10%
Bath	Lux Dove	Fiama Di Wills	Aesop	75%	23%	2%
Hair Care	Bajaj Godrej	Biotique L'Oreal	L'Oreal	77%	17%	6%
Oral Care	Colgate Listerine	Sensodyne Glister	Oral-B	82%	12%	6%

The sale of these products is through general trade (comprising of local Kirana, general and novelty stores), modern trade (comprising of Big Bazar, DMart, Hypercity, Saloon, Spa) and e-commerce. The general trade sells 75%, modern trade 22% & e-commerce 3%. USP for growth of general trade is its proximity to consumer and the “touch & feel” that it provides at the time of purchase. The modern trade channel is expected to grow significantly with regular tracking-pitching to consumers. The growth drivers for online channels are online ads, social media, DIY videos, etc.

The modern trade channel comprises of Large Format Stores (27% share of the total modern trade channel), exclusive brand outlets (EBO) & multi-brand outlets (MBO) (27%), saloon & spa (9%), direct selling (23%) and others (14%). Large Format Stores like Lifestyle are preferred for bundle shopping and brand discovery whereas stores like big bazaar are preferred for daily care products owing to many deals and discounts. Customers with an idea of which product/ brand they want to buy make up a bulk of the buyers from this format. Hence this format has a high retention rate.

Saloons and spa cater to the elite customers.

The cosmetics and luxury products are purchased from Shoppers Stop & Lifestyle that deals with indulgent customers.

The exclusive brand outlet & multi-brand outlet comprises of Health & Glow, The Body Shop, Lakme, MAC, Sephora etc. Lakme has great penetration in the Indian demographic and has one-fourth of its stores in Tier2 cities.

The online channel with a share of about 3% is segregated into horizontal players (Amazon, flipkart) and vertical players (Nykaa, Purplle) each with about 50% share of the pie. Horizontal players cater to daily care needs and has about 19000 brands and 2million SKUs and vertical players sell cosmetics and fragrances which falls in specialized category and has about 700 brands and 80000 SKUs.

Personal Care market has seen rapid growth in tier2 cities. This is attributed to increased internet penetration and the increasing image consciousness of consumers. Growing demand for exclusive products coupled with attractive offers, greater product authenticity and reliability of supply-chain have driven this growth.

Customers are the most important node in any market. The customer goes through a purchase cycle that starts with him becoming aware of the product and culminates with the customer using the product and providing reviews wherever possible. The 4steps identified in the purchase journey includes awareness, engagement, conversion and delight.

To achieve brand awareness, companies are spending on marketing both online and offline. L’Oreal generates 1% of its sale online but spends about 28% of its annual marketing budget. HUL is penetrating Tier2 cities in offline model because ‘touch & feel’ aspect through demos and trials at stores still carry heavy weightage. Online platforms are using personalized customer experience to convert the customer into a buyer. This also helps to increase customer retention rate.

There is vivid difference in age of cutomers buying online and offline wherein for a customer aged 18-25years, the awareness is achieved through online sources (Facebook, Instagram etc). The same for customer above 35years is achieved through word of mouth and prefer ‘touch & feel’. The final step in purchase cycle is consumption wherein the customer uses the product and based on its experience, becomes a promoter or detractor.