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Despite boom, Indian consumers are totally under-served. Here's why - The Econom

Youarehere: ETHome Opinion Comments&Analysis

Despiteboom,Indianconsumersaretotallyunderserved.
Here'swhy
PostaComment

3Jan,2014,07.16PMIST

RamaBijapurkar
Wehavebeengloatingoverourconsumptionnumbersandhowtheystackupcomparedto
theothermarketsandhowdizzilytheyhavegrowninthepasttwodecades.
Butattheendofresearchingmynewbook,ANeverBeforeWorld,Icametotheconclusion
thatConsumerIndiaistotallyunderservedandthatIndiahasalongwaytogoinbecoming
arealconsumptiondriveneconomy.ThisisnotwithstandingthepercentageofGDP
contributedtohouseholdconsumptionortherateatwhichConsumerIndiahasbeen
shapingupTVsets,mobilephones,musicalringtones,automobiles,shampoo,bottled
water,eatingout,andlotsofotherthings.

RamaBijapurkarinanexclusivearticlesays,"Weeat1trillion
chapattiseachyearbutstilldon'thavea'justheatandeat'

ThehallmarkofaConsumerandconsumptionorientedeconomyisitscontinuousstriving
tosolvepeople'sproblemsandtoaddvaluetothewaytheyliveinventingnewandbetter
waysforthemtodothesmallandbigthingstheydoeveniftheyaresatisfiedwiththe
present.

brandofacceptabletastingwheatchapattisthatdoesntburna
holeinourpocket."

ETSPECIAL:
Saveprecioustimetrackingyour
investments

YouhavetofirstspendafewdaysinAmericatoexperiencewhatIhavejustdescribed.
Whetheritslittlethingslikethesockyousliponbeforeyoutagnewshoes(hencekeeping
theshoecleanforotherswhotryiton),orsafetysystemsforhouseholdsorthoughtfulpackagingforwalkingandeatingorthewaycarsare
designed,orwiredplayschoolclassroomsforhyperparentsordistantgrandparentstoseebabyatplay(ouch!),nottomentionSkype,
Amazon,Google,evenDiapers.comthatrecognizesthesimplefactthatmotherswithbabieshavetroublegettingoutofthehouseandmay
runshortofbabysupplies.
Ontheotherhand,wehavealotofthingsconsumersneedandwanttomakelifebetter,butwherearethey?Tojustbrainstormonafew:
>Televisionsetswithinvertorsbuiltintothemsothatwecanseeepisodesofourfavouritesoapandnotfeel'had'whentheelectricitygoes
offandelectricitygoingoffsparesnoone.
>Infactallgadgetsshouldhavesomeformofinverters(anappropriatelypoweredbatterythatchargeswhenthereiselectricityand
providespowerwhentheelectricitygoesoff.Igritmyteethinmymother'shouseinHyderabadwhenthereisamad6AMscrambletogeta
noisymixergrindergoingtogrindchutneyforbreakfastbeforethecurrentgoesoff.Whynothavealargeinverterwhichcantakecareofthe
wholehouse?Tooexpensive
>Whileontheissueofkitchengadgets,Ihaven'tseenanyonewhohasdesignedrefrigeratorsforIndianhouseholdusesandthereare
segmentsandsegmentsofusage.Infact,manypeopledon'tneedsuchapowerfullycoolingfridge.Theyneedacoldcupboardorasmall
sizedairconditionerforsomekitchencupboardswhichcanstoreallthepulsesandmaidaandthingsthatgetinsectsatabout18,and
not4.Thelistcouldgoon.
>Insteadofhavingatinymarketofdeodorantsforthebody,amuchmuchlargermarketawaitsifwecouldhaveacoloursafedeodorantfor
clothes.Manyofourclothesdon'tgetdirty,theygetarmpitsmelly,andwashingthewholegarmentwithdetergentandwater(another
scarceitem)andhangingitouttodryisavoidable.
>Asthequalitywatchmanaddstooursecurityconcernsratherthanmakesussafer,ifeveryhome,richandmodestincome,wouldlike
somekindofelectronicsecurityitseasynowtohavesomethingthatcanconnectwiththemobilephoneandringanalarm.Iamthinking
ofsomethingassimpleasaburglaralarmlinkedtoamobilephonebutdialsfouremergencynumberswhensomeonebreaksin.Myidea
hereisnottodesignanyproductsbuttodemonstratethatthereisalotthatcanandneedstobedonethatConsumerIndiaisreadyfor.

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1/5/14

Despite boom, Indian consumers are totally under-served. Here's why - The Econom

>MostroofsthatIknowofleakinthiscountryandmanyneighboursinflatsarelockedinbattleoverleakingroofsandfloors.Thelowcost
roofingsprayisyettocomeourwayin.
>Cometothinkofit,inacountrythatmakestheworld'slargestnumberofbabieseachyear,wedon'thavealargemassmarkettoybrand
orourownOshKoshequivalentorevenbiodegradablediapers.
>Andhowaboutorthopaedicseatstocushionthebackinpotholedroads?Giventhecostofabackproblem,bothemotional,medicaland
duetopoorproductivityofwork,consumerswillpaymore.
>Weeat1trillionchapattiseachyearbutstilldon'thavea"justheatandeat"brandofacceptabletastingwheatchapattisthatdoesn'tburn
aholeinourpocket.It'snotthatwewomenlovemakingchapattis.AsIhaveoftenpointedout,makingchapattisforyourchildrenispositive
labour.Makingitforyourhusbandorothermembersofthefamilycouldwellbenegativelabour.Andno.Tortillasandquesadillaswillnot
substituteforchapatis.
>Andonthesubjectoffood,nowthetimeforustohaveseenalotmoreoftomatopureeandonionpastegiventhepricesandpathetic
qualityofbothinthemarket.Theconsumerisn'tweddedtosomenotionoffreshfood.Sheisweddedtobuyingthebestqualitycost
equationbeprovidedtousheatoppressedconsumers
>ExploitingthetruepotentialoftheIndianmarketandtrulyinvestinginitisin'noman'sland'.Why?Becausemultinationalsareonly
concernedwithextensionmarketsfortheiralreadyexistingstrategy,productsandservices,businessmodelsandR&Dandotherassets.
Theyareasking"what'sthemarketforwhatIalreadyhave".Theyarenotasking"whatdoIneedtohaveforthismarket".Inmynewbook,I
giveexamplesofthebold,thebeautiful,theconservative,theforwardlookingMTVwhichwasdriventochangebyChannelVLorealthat
didthe"gotomarket"andproductadaptationverywellforacountrywithseveralshadesofskinandtypesofhairandsmall'mom&sister'
beautyparlours.Butwhichcouldhavedonesomuchmore.Adobethatputitscreativeandmarketingsuitesonthecloudwith'payasyou
use'modelsthatnotonlycutprivacybutalsowidenedtheuserbasewonderfullyandprofitablyforbothsides3Mtheworld'smostinnovate
companyhasgiventheIndianhouseholdcleaningmarketamicrofibrepocha"insteadofinventingwholenewcleaningsystemsfordusty,
pollutedIndianhomes.

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1/5/14

Despite boom, Indian consumers are totally under-served. Here's why - The Econom

TheycouldhaveleveragedtheirothercapabilitieslikefoodtestingandinnovatedtestingproductsforIndiansmalleateriesandhawkersor
cheaperpathologicaltestingforruralIndiaorusedtheirproprietarymaterialcalledThinsulatetocatalyzeaffordablewarmclothesforthe
modestincomeinruralIndiaandsoon.Theyhavehoweverdonesomesplendidworkaroundbringingtheirexistingautobusinesshere
adaptingittosmallcarsandridingtheautowaveinIndia.
Allthisdiscussion(andthere'slotsmoreinthebook,isnottobashMNCsbuttohighlightthattheirmindsetandbusinessphilosophyisto
sweatalltheirexisting('createdfordevelopedmarkets')assetsinnewgeographies,ratherthanbuildnewassetsthatwillhaveblockbuster
relevanceand'priceperformance'rightdesignsforanewmarketshareratherthanbuildinggenuinecustomerperceivedvalueadvantage.
Whatofdomesticcompanies?Whenresearchingfortheprologuetomyearlierbook"Customerintheboardroom",Ifoundthattheyhad
focusedonbuildingaleanmeansupplymachinetomakemaximumhaywhiletheGDPgrowthsunwasshining.Andthedemandsideof
theirbusinessvirtuallyreceivednofocus.
Whereitdid,thefavouriteweaponsthatpassedasmarketstrategywereallrelatingtomuscleflexingandgrabbling.'Feetonstreet',a
delightfultermcoinedbythefinancialservicessectormeantmoreandmoresalesforceletlooseonmoreandmorecustomers,pushing
themtosignonthedottedlineuntilfeeregulatorcamedownhardonmisselling,thenaturalfalloutofabadlytrainedteamoftemps,
looselysupervised,maximizingincentives.Thepolypillsisabigbreakthroughinthemakingforpharmatheworldoverdeveloped
marketsareexaminingitcarefullytoseeiftheycanadoptitandreducethecostofhealthcareANDimprove,patienthealth.
Here'swhatitisanddoes:createdbyateamofpreventivemedicineexperts,itisbasedonthepremisethatpatientsofconditionalsohave
othersforexampleheartdisease,diabetes,bloodpressureoftenoccurtogetherandpatientshavetotakethreeorfourmedications
together.Thecostofdoingsoishighandcomplianceislessthandesirableoften.ThePolypillresearchhasfoundwaystooptimally
combinevariousmedicationsinawaythatoptimizestheirefficacy.Thiscutscostsdramaticallyandalsoimprovescomplianceimagine
whatthiscoulddobywayofcreatingalargemarketinIndiagiventhefastergrowthofchronicdiseasesthanpercapitaincome,compared
tothedevelopedworld.
HoweverforseveralIndianPharmacompanies,investinginthismarketandthisproductdevelopment,islessattractivethanthebattlefor
transactionalmarketshareforgenericsinoverseasmarkets.
Whatismore,Indiancompaniesstillpreferearningindollars(atRs.60toadollar,whowouldn't)withsalesrevenueandprofitcomingfrom
overseasrequiredcompanies(acquiredbutoftenleftat'armslength').AsIarguedwiththeCEOofafoodcompanyplanninganacquisition
inthemiddleeast:imaginethevalueyouwouldcreate,longterm,bybuildingonsoundmultiprongedbusinessinacountrywithabillion
people,gettinglesspoor,eatingmoreandwithwomengettingmorebusy?SeveralIndiancompanieshaveforayedabroadwith
acquisitionsbuthavenotbeeninterestedintransferringthelearningorleveragingthecapabilityforthedomesticmarketnorhavemanyof
thembuiltsolidanddefensiblemarketposition(asopposedtoarevenuestreamthatpetersoutwhensalespressureisreduced).Wedo
supplytextilesandappareltothewholeworld,especiallydenim.
ButthereisnoAmericanEagleorGapequivalentyethere,noranysuccessfulbrandofjeans(madeforruralIndianweatherconditions)a
partoftheyouthcultureofayoungcountryandsoon.Ofcoursethereareseveralreasonsforthis,butthebottomlineisstillthefactthatthe
fullpotentialoftheIndianmarketisstillunexploitedand,asofnow,uninvitedinandunwanted.
Whatofsmallsuppliers?Andsmalltraders?Theydoafarbetterjobofinnovating,buthavelimitationsofscale.Indiaaboundswithlotsof
lotsofsmallsuppliersAndbecauseitisalargeconsumereconomyofalotofpeopleconsumingalittlebiteach,addinguptoalot,there
arealotofsmallsupplierstoo.Becauseoftheimmenseheterogeneityofcustomers,andhighpriceofrealestatedifficultpolicy,notto
mentionthekillercompetitionfromkiranas,therearemoresmallretailerscontrollingthemarketthanbigchains.
SowelcometothelandofLilliput.Smallsuppliers,sellingtosmallconsumers,throughsmallconsumers,throughsmallretailersand
creatingalargeconsumereconomy.Andthiswholeecosystemissophisticatingslowlybutsurely!TakeatriptoCrawfordmarketor
SarojinimarketespeciallybeforefestivalsandyouwillseeChineseinnovationinfullflowandZaveribazaargoldandsilvershops,butby
therisingpricesofinventory,haveconvertedthemselvesinto"fashionjewellery"houses,andtheirmanufacturinganddesignsaregiving
therealthingarunforitsmoney!
LetmereassertthatIamnotsayingthatIndiaisanunattractivemarketunlessyoutakethetroubleto'makeforIndia'andcreateawhole
newrangeofproductsandservices.IndiaisanattractiveenoughmarketevenifyouareanMNCtransplanting'global[productsand
servicesorareanIndiancompanywantingtoofferthe'regular'kindofproductsandservicesfoundeverywhereelseintheworld.
HoweverIamassertingthatthefullpotentialofaconsumermarketinanear2trilliondollareconomycannotbeexploitedbyofferingthe
'usual'orthe'global'orevenbyadaptingtheglobalforthelocal.Businessasusualwillyieldgrowth.Thetop20%ofIndia,whichiscalled,
erroneouslyinmyopinion,themiddleclass,andwhichmostcompaniesandtheirbigconsultantsbelieveistheonly"genuine"consumer,

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Despite boom, Indian consumers are totally under-served. Here's why - The Econom

hasover55%ofIndia'sincomeandforawhiletherichwillbegettingricher.Buttheremaining80%offerlargevalueandaregrowingtoo.
Iamalsoassertingthatalthoughfromthelargesupplysidenumbers,itappearslikewehaveplumbedthedepthsofourconsumption
potentialandmustnowwaitformorepeopletobecomemiddleclass,intruth,wehaven'treallyevenscratchedthesurfaceofour
consumermarketpotential.Alotofbusinessesstillfocusonthetop20%ofConsumerIndia,maximum,thetophalf.Withinthattheyfocus
onlyontheobvious"regular"products&servicesalreadyavailableelsewhere.Thentheypriceitatalevelwherethesupplier'smargins
arecomfortable,andwaitfortheconsumers'incomestorisetobeabletoafforditratherthantheotherwayround.

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Despite boom, Indian consumers are totally under-served. Here's why - The Econom

Themistakenmindsetisthatthedharmaofbusinessistodragcustomerstoacertainnotionalbenchmarkofmodernityinwhattheybuy
andtowaitforthemtoleapoveranotionalbarofincomethatqualifiesthemtobe'genuine'consumers.Inreality,thedharmaofbusinessis
toaddvaluetoconsumers,enablethemtolivebetter,feelbetter,andtoextractvaluefromconsumers.
TheholytrinityofIndianmarketwinnersNirma,Nokia,Nanohavedemonstratedthebestpracticeonthis.Andthoughtwohaveretired
hurtfornow,theywillresurrectandcomebacktofinishtheirstory.
Theycreatedlargenewmarketsbyrefusingtoacceptincome"thresholds"thatseparatethe"real"consumersfromtherestthey
understoodthatlowpricedoesn'tjustify(intheconsumermind)anacrosstheboardreductioninperformance.Rather,itrequiresasuperior
understandofhowtooptimizeanew"value"packagethatmeetswithconsumerapproval.Mostofall,ifpriceislow/thencostofdelivery
hastobelowtoo.Andsmallmarginsandhighvolumeswillmultiplytothesamememberaslargemarginsandsmallvolumes.
PartII
EversinceIwrote"Wearelikethatonly",Ihavebeenaskingmyselfthequestion"arewestilllikethatonly"(Imustadmittodoingitina
paranoidandinsecureway).EversinceIdeclaredthatIndiaisdifferentandthattheuglyducklingwillnotevolveintothefamiliarbeautiful
swanofadevelopedmarket,Ihavebeenaskingmyselfandtheworldofconsumersaroundme"isthisstilltrue".Andwhat'schanged,
whathasn't?Here'swhereIcomeoutonthesubject:
ConsumerIndiacontinuestobeaneverbeforeworld,anddemandsnewbusinessdesigns.Neverbeforeinbusinesshistoryhasthere
beenamarketofoverabillionmodestincomepeople,soyoung,subjectedtosomuchtechnology,comingofconsumptionageinanafter
Internetaftercellphoneeralivinginavolatileanduncertainworldbutinanageofoptimismfromhavinghadtheirrealincomes
consistentlygrowing.
Neverbeforehastherebeenamarketwithsomuchaspirationforabetterlifeandsuchaspectacularfailureofpublicgoods(thinkpublic
transport,lowcosthousing,hospitals,schools,colleges,water,electricity)forcingpeopletospendmoreonbuyingthebasicsofliving,
sincethestatecantprovidethematareasonablecost.Thismakesamockeryofthesimplisticformulaeconsultantsuseofwhatspending
patternsandconsumptionchoicespeoplewillmakeatagivenlevelofpercapitaGDP.
Neverbeforehaveweseenconsumerswhoarepoorbutnotbackward,andwhohavetheabilitytooutinnovatelargecompanies
(remember,theyinventedthe'missedcall',andmanyotherthings).
Goingforward,whatarethebigchangesandtrendsthatwillshapeordefinetheConsumerIndiaVersion3.0,inthethirddecadeafter
liberalisation,inthethirdtrilliondollarsofIndia'sGDP?InmybookIdiscusschangeswithrespecttosocietyandcultureaswell,since
marketsarereallymadeofpeoplewhosebehaviorisshapedbytheirsocialandculturalcontextaswell,notjusttheireconomiccontext.
Here,tojustpickafewrelevanttobusiness,
>Theriseofwomanpoweranditsimpactonearningandspendingchoices,shorttermandlongtermorientations
>Theblurringoftheurbanruraldivideandthearrivalofamassive"popular"massmarket
>TheamazinglyhighdigitalquotientorDQasIhavecalleditofIndiansrichorpoor,educatedornotandtheircomfortandfamiliaritywith
allformsofremoteservices.
>HybridmodernitycontinuesevenforyoungIndiatheytellusitisoktocutandpasteamantra108timesinsteadofsayingitorwritingit.
>Regionalisation,furtherfragmentation,heterogeneity,schizophreniacontinuestogrow,evenmorethanbefore.
>Acountryofmostlyselfemployedpeople,manynothavingregularincomes,nosocialsecurity,fragileinconsumerconfidence,small
entrepreneursthiswilldefinethenewmiddleclass
>Discretionaryincomewillshrinkassubsidiesgetwithdrawnandcostsoflivinggoesup,whileincomeincreasesslowdown.Therewill
beakillerbattlefortheconsumerrupee.Thesweetspotofthepastofincomesrising,inflationbeinglow,andsubsidiesinplacewillbe
reversed
>Generationnextisinseverepain,plaguedbyjoblessness,informalityandhypercompetition.About20%willbeingreatshape,therest
willbeachallengethatpolicyandsocietymustdealwith.

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Despite boom, Indian consumers are totally under-served. Here's why - The Econom

Allthingsconsidered,consumersaremarchingtothebeatofadifferentdrummerascomparedtosuppliers.Sotheraceisyettobegin,the
rulesareyettobeshaped.Willsupplierstransplant,translate,waitorinnovateandshapethismarket?Itsyettobeseen.
Thewriterisamanagementandconsumerbehaviourconsultantwho'sservedontheboardsofIndia'sbluechipcompanies.Herlatest
bookis"ANeverBeforeWorld:TrackingtheEvolutionofConsumerIndia"
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