Friday, October 8, 2010

Responsible Consumerism - A Promising Concept For Entrepreneurs

A Concept Which Is Taking The Shape Of An Industry

What is Responsible consumerism or Ethical consumerism? It is the intentional purchase of such products which jave been produced with mimimum harm to or exploitation of humans, animals and environment. In the UK, the Co-operative Bank has produced an Ethical Consumerism Report (formerly the Ethical Purchasing Index) since 2001. The report measures the market size and growth of a basket of 'ethical' products and services, and valued UK ethical consumerism at GBP 36.0 billion (USD 54.4 billion) in 2008. This is about just one market in the global village.

Growing awareness among the consumers about the wrong-ways of bringing products into the market, has led to the world-wide acceptance of the concept of 'responsible consumerism'. It's like a 'movement'. In order to protect the environment and bring a fair play for the human capital involved and sensitivity to the animals, consumers are even ready to pay little bit higher price for the ethically produced goods.

Sensing the growing culture of ethical consumerism and the ‘Go Green’ drive in India, The Body Shop has recently taken some strategic measures to ride on this industry’s growth trajectory. The Body Shop has been since known for adopting responsible consumerism and its business ethos.

In a recent interview to ET, Jonathan Price, managing director, Asia Pacific, The Body Shop, said that The Body Shop, the iconic British skincare brand , has slashed the prices of about 800 products by up to 35% in India to speed up its growth in one of its fastest growing markets. The pricing markdown only for India was part of an ambitious plan to expand its reach to more people and smaller cities in quick time, says Jonathan Price. According to him, India is the pillar of future growth for The Body Shop.

If there is any credence to the strategic thinking of the product makers around the world, then it would be appropriate to consider it lucrative enough to launch more entrepreneurial ventures. It is a 'movement' which is evolving as a growth industry. Let us analyse a few factors here:
The scalabilty Potential:
  • Segments: Many [Cosmetics, household cleaning products, apparels, spices and other food ingredients]
  • Product Line : Vast
  • Product Range : Deep
  • Potential customers: Urban population
About 32% of population in India resides in urban cities currently. This will increase to about 35.2% of the Indian population residing in urban cities by 2019 - an increase of about 100 million. Out of this, it is important to highlight that much of the increase in urban population will comprise of migrants also. The migrating population will bring in their share of demand and to the total existing and growing demand for practising ethical consumerism.
Other factors to be considered while judging the potential of this industry:

1. Growth in Urban Population of India: estimated at about 41% of the total population by 2030. According to 2001 census about 64% of the urban population were living in homes which were in 'good condition', and hence can be assumed to be above poverty line. They will form the part of the urban population with some percentage of disposable income. Out of this share if you take around 20% [on the pessimistic side], as the prospects who would qualify as people with enough disposable income, you still have a huge market to tap.
2. Household Consumption: estimated to grow at about 8% per annum, which means by 2019-20, per capita income of households will double. This directly implies an increase in household expenditure budget in the coming decade.

Responsible Consumerism or Ethical Consumerism will force innovative ways to make products in the future. There will be growth for other related segments enabled by the growth of the core product industry based on responsible consumerism. For example the packaging industry, also will witness growth due to growth in other segments like those of apparels, food and beverages etc.

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