Retail-Nama

Almost every research report on media, marketing and consumer economics refers to SEC categories. These categories are important because they help in effectively segmenting markets and targeting relevant communication to core consumers for products and services.

Words like SEC A and SEC B are freely tossed around without realising that, barring a few experts, there is little, if any, knowledge about their real meaning. Very few, for example, may be aware that shopkeepers/ traders though affluent and, therefore, having more spending power than most executives would fail to make the ‘high’ grade, if they are not well educated.

Although, MRUC & Hansa Research have come up with a new concept of “Household Potential Index (HPI),” based on the data being regularly collected by IRS, to reclassify consumers, SEC continues to remain universally referenced classification of consuming classes. While, a detailed postings on HPI will soon follow, we explain below the basis of classification of different SEC categories and their relative importance in relation to marketing/ retailing potential:

The socioeconomic classification (SEC) groups urban Indian households on the basis of education and occupation of the chief wage earner (CWE: the person who contributes the most to the household expenses) of the household into five segments (SEC A, SEC B, SEC C, SEC D and SEC E households in that order). This classification is more stable than one based on income alone and being reflective of lifestyle is more relevant to the examination of consumption behaviour. Here, ‘high’ socioeconomic classes refers to SEC A&B, ‘mid’ socioeconomic class refers to SEC C and ‘low’ socioeconomic classes refers to SEC D&E. Data sourced from Indian Readership Survey (*IRS 1998-1999) gives the education and occupation profile of the chief wage earner of households.

The CWEs of nearly half the SEC A households work in executive positions. The other half comprises mainly of industrialist/businessmen or shop owners. Almost all of them are either graduates or post graduates. CWEs of SEC B households are primarily employed at clerical or supervisory levels (46%). 29% are shopkeepers while 10% are industrialist/businessmen. Less than half are graduates or post graduates (45%). 38% are educated till the 10th or 12th grade, while 13% have had some college education. (* IRS 1998-1999 refers to IRS round, July 98-May 99)

The mid socioeconomic class (SEC C) comprises households whose CWEs are employed at clerical or supervisory levels (37%), skilled workers (33%), petty traders (12%) or shop owners (18%). Three quarters of them are educated till the 10th or 12th grade while the rest have attended school till a maximum of the 9th grade. Less than half the CWEs of households belonging to the low socioeconomic classes (SEC D&E) are unskilled workers. About 28% are skilled
workers while 18% are petty traders. 45% have attended school till a maximum of the 9th grade and 31% are illiterate.

Table below shows the socioeconomic classification of urban Indian households. The high socioeconomic classes, i.e. SEC A&B, constitute over a quarter of the urban Indian population. The mid economic class, SEC C constitutes 21% of the population while the lower two SECs account for over half the population.

According to data sourced from the Indian Readership Survey (IRS 1998-1999), urban households have increased their average monthly household income (MHI) by 2.1 to 2.3 times between 1990 and 1999. The increase in average MHI has been higher in the low socioeconomic classes (SEC D&E which account for over 50% of the urban households), i.e. about 14 percentage points more than the percentage increase in average MHI of the higher socioeconomic classes (SEC A&B) as shown in Table. This suggests that improvement in the standard of living has not benefited only the ‘haves’.

TABLE: Socio-Economic Classes

It may be observed from the above that:

• Households belonging to the mid and low socioeconomic classes (SEC C, D &E) are becoming relevant target groups as they constitute more than 70% of urban households.
• In the last decade they have grown in economic power.
• This suggests that households in the mid (SEC C) and low (SEC D&E) socioeconomic classes are segments that can no longer be ignored marketers/ retailers should consider these segments more closely as potential source of growth.