Rama Bijapurkar in an exclusive article says, "We eat 1 trillion chapattis each year but still don't have a 'just heat and eat' brand of acceptable tasting wheat chapattis that doesn’t burn a hole in our pocket."
We have been gloating over our consumption numbers and how they stack up compared to the other markets; and how dizzily they have grown in the past two decades.
But at the end of researching my new book, A Never-Before World, I came to the conclusion that Consumer India is totally under served and that India has a long way to go in becoming a real consumption driven economy. This is notwithstanding the percentage of GDP contributed to household consumption or the rate at which Consumer India has been shaping up TV sets, mobile phones, musical ring tones, automobiles, shampoo, bottled water, eating out, and lots of other things.
The hallmark of a Consumer-and- consumption- oriented economy is its continuous striving to solve people's problems and to add value to the way they live - inventing new and better ways for them to do the small and big things they do - even if they are satisfied with the present.
You have to first spend a few days in America to experience what I have just described. Whether its little things like the sock you slip on before you tag new shoes (hence keeping the shoe clean for others who try it on), or safety systems for households or thoughtful packaging for walking and eating or the way cars are designed, or wired playschool classrooms for hyper parents or distant grand parents to see baby-at-play (ouch!), not to mention Skype, Amazon, Google, even Diapers.com that recognizes the simple fact that mothers with babies have trouble getting out of the house and may run short of baby supplies.
On the other hand, we have a lot of things consumers need and want to make life better, but where are they? To just brainstorm on a few:
Television sets with invertors built into them so that we can see episodes of our favourite soap and not feel 'had' when the electricity goes off - and electricity going off spares no one.
In fact all gadgets should have some form of inverters (an appropriately powered battery that charges when there is electricity and provides power when the electricity goes off. I grit my teeth in my mother's house in Hyderabad when there is a mad 6 AM scramble to get a noisy mixer grinder going to grind chutney for breakfast before the current goes off. Why not have a large inverter which can take care of the whole house? Too expensive
While on the issue of kitchen gadgets, I haven't seen anyone who has designed refrigerators for Indian household uses - and there are segments and segments of usage. In fact, many people don't need such a powerfully cooling fridge. They need a cold cupboard or a small sized air conditioner for some kitchen cupboards which can store all the pulses and maida and things that get insects - at about 18°, and not 4°. The list could go on.
Instead of having a tiny market of deodorants for the body, a much much larger market awaits if we could have a colour safe deodorant for clothes. Many of our clothes don't get dirty, they get armpit smelly, and washing the whole garment with detergent and water (another scarce item) and hanging it out to dry is avoidable.
As the quality watchman adds to our security concerns rather than makes us safer, if every home, rich and modest income, would like some kind of electronic security - its easy now to have something that can connect with the mobile phone and ring an alarm. I am thinking of something as simple as a burglar alarm linked to a mobile phone but dials four emergency numbers when someone breaks in. My idea here is not to design any products but to demonstrate that there is a lot that can and needs to be done that Consumer India is ready for.
Most roofs that I know of leak in this country and many neighbours in flats are locked in battle over leaking roofs and floors. The low cost roofing spray is yet to come our way in.
Come to think of it, in a country that makes the world's largest number of babies each year, we don't have a large mass market toy brand or our own Osh Kosh equivalent or even biodegradable diapers.
And how about orthopaedic seats to cushion the back in potholed roads? Given the cost of a back problem, both emotional, medical and due to poor productivity of work, consumers will pay more.
We eat 1 trillion chapattis each year but still don't have a "just heat and eat" brand of acceptable tasting wheat chapattis that doesn't burn a hole in our pocket. It's not that we women love making chapattis. As I have often pointed out, making chapattis for your children is positive labour. Making it for your husband or other members of the family could well be negative labour. And no. Tortillas and quesadillas will not substitute for chapatis.
And on the subject of food, now the time for us to have seen a lot more of tomato puree and onion paste given the prices and pathetic quality of both in the market. The consumer isn't wedded to some notion of fresh food. She is wedded to buying the best quality - cost equation be provided to us heat oppressed consumers.
Exploiting the true potential of the Indian market and truly investing in it is in 'no-man's-land'. Why? Because multinationals are only concerned with extension markets for their already existing strategy, products and services, business models and R&D and other assets. They are asking "what's the market for what I already have". They are not asking "what do I need to have for this market". In my new book, I give examples of the bold, the beautiful, the conservative, the forward looking - MTV which was driven to change by Channel V; L'Oreal that did the "go-to-market" and product adaptation very well for a country with several shades of skin and types of hair and small 'mom & sister' beauty parlours. But which could have done so much more. Adobe that put its creative and marketing suites on the cloud with 'pay as you use' models that not only cut privacy but also widened the user base wonderfully and profitably for both sides; 3M the world's most innovate company has given the Indian household cleaning market a micro fibre pocha" instead of inventing whole new cleaning systems for dusty, polluted Indian homes.
They could have leveraged their other capabilities like food testing and innovated testing products for Indian small eateries and hawkers or cheaper pathological testing for rural India or used their proprietary material called Thinsulate to - catalyze affordable warm clothes for the modest income in rural India and so on. They have however done some splendid work around bringing their existing auto business here adapting it to small cars and riding the auto wave in India.
All this discussion (and there's lots more in the book, is not to bash MNCs but to highlight that their mindset and business philosophy is to sweat all their existing ('created for developed markets') assets in new geographies, rather than build new assets that will have blockbuster relevance and 'price-performance' right designs for a new market share rather than building genuine customer perceived value advantage. What of domestic companies? When researching for the prologue to my earlier book "Customer in the boardroom", I found that they had focused on building a lean mean supply machine to make maximum hay while the GDP growth sun was shining. And the demand side of their business virtually received no focus.
Where it did, the favourite weapons that passed as market strategy were all relating to muscle flexing and grabbling. 'Feet on street', a delightful term coined by the financial services sector meant more and more sales force let loose on more and more customers, pushing them to sign on the dotted line - until fee regulator came down hard on mis-selling, the natural fall out of a badly trained team of temps, loosely supervised, maximizing incentives. The polypills is a big break through in the making for pharma the world over - developed markets are examining it carefully to see if they can adopt it and reduce the cost of healthcare AND improve, patient health.
Here's what it is and does: created by a team of preventive medicine experts, it is based on the premise that patients of condition also have others for example heart disease, diabetes, blood pressure often occur together and patients have to take three or four medications together. The cost of doing so is high and compliance is less than desirable often. The Polypill research has found ways to optimally combine various medications in a way that optimizes their efficacy. This cuts costs dramatically and also improves compliance imagine what this could do by way of creating a large market in India given the faster growth of chronic diseases than per capita income, compared to the developed world.
However for several Indian Pharma companies, investing in this market and this product development, is less attractive than the battle for transactional market share for generics in overseas markets.
What is more, Indian companies still prefer earning in dollars (at Rs.60 to a dollar, who wouldn't) with sales revenue and profit coming from overseas required companies (acquired but often left at 'arms length'). As I argued with the CEO of a food company planning an acquisition in the middle east: imagine the value you would create, long term, by building on sound multi pronged business in a country with a billion people, getting less poor, eating more and with women getting more busy? Several Indian companies have forayed abroad with acquisitions but have not been interested in transferring the learning or leveraging the capability for the domestic market; nor have many of them built solid and defensible market position (as opposed to a revenue stream that peters out when sales pressure is reduced). We do supply textiles and apparel to the whole world, especially denim.
But there is no American Eagle or Gap equivalent yet here, nor any successful brand of jeans (made for rural Indian weather conditions) a part of the youth culture of a young country and so on. Of course there are several reasons for this, but the bottom line is still the fact that the full potential of the Indian market is still unexploited and, as of now, uninvited in and unwanted.
What of small suppliers? And small traders? They do a far better job of innovating, but have limitations of scale. India abounds with lots of lots of small suppliers And because it is a large consumer economy of a lot of people consuming a little bit each, adding up to a lot, there are a lot of small suppliers too. Because of the immense heterogeneity of customers, and high price of real estate difficult policy, not to mention the killer competition from kiranas, there are more small retailers controlling the market than big chains.
So welcome to the land of Lilliput. Small suppliers, selling to small consumers, through small consumers, through small retailers - and creating a large consumer economy. And this whole ecosystem is sophisticating slowly but surely! Take a trip to Crawford market or Sarojini market especially before festivals and you will see Chinese innovation in full flow; and Zaveri bazaar gold and silver shops, but by the rising prices of inventory, have converted themselves into "fashion jewellery" houses, and their manufacturing and designs are giving the real thing a run for its money!
Let me reassert that I am not saying that India is an unattractive market unless you take the trouble to 'make for India' and create a whole new range of products and services. India is an attractive enough market even if you are an MNC transplanting 'global products and services or are an Indian company wanting to offer the 'regular' kind of products and services found everywhere else in the world.
However I am asserting that the full potential of a consumer market in a near 2 trillion dollar economy cannot be exploited by offering the 'usual' or the 'global' or even by adapting the global for the local. Business as usual will yield growth. The top 20% of India, which is called, erroneously in my opinion, the middle class, and which most companies and their big consultants believe is the only "genuine" consumer, has over 55% of India's income and for a while the rich will be getting richer. But the remaining 80% offer large value and are growing too.
I am also asserting that although from the large supply side numbers, it appears like we have plumbed the depths of our consumption potential and must now wait for more people to become middle class, in truth, we haven't really even scratched the surface of our - consumer market potential. A lot of businesses still focus on the top 20% of Consumer India, maximum, the top half. Within that they focus only on the obvious "regular" products & services already available elsewhere. Then they price it at a level where the supplier's margins are comfortable, and wait for the consumers' incomes to rise to be able to afford it - rather than the other way round.
The mistaken mindset is that the dharma of business is to drag customers to a certain notional benchmark of modernity in what they buy and to wait for them to leap over a notional bar of income that qualifies them to be 'genuine' consumers. In reality, the dharma of business is to add value to consumers, enable them to live better, feel better, and to extract value from consumers.
The holy trinity of Indian market winners - Nirma, Nokia, Nano have demonstrated the best practice on this. And though two have retired hurt for now, they will resurrect and come back to finish their story.
They created large new markets by refusing to accept income "thresholds" that separate the "real" consumers from the rest; they understood that low price doesn't justify (in the consumer mind) an across-the board reduction in performance. Rather, it requires a superior understand of how to optimize a new "value" package that meets with consumer approval. Most of all, if price is low then cost of delivery has to be low too. And small margins and high volumes will multiply to the same member as large margins and small volumes.
Ever since I wrote "We are like that only", I have been asking myself the question "are we still like that only" (I must admit to doing it in a paranoid and insecure way). Ever since I declared that India is different and that the ugly duckling will not evolve into the familiar beautiful swan of a developed market, I have been asking myself and the world of consumers around me "is this still true". And what's changed, what hasn't? Here's where I come out on the subject:
Consumer India continues to be a never - before world, and demands new business designs. Never before in business history has there been a market of over a billion modest income people, so young, subjected to so much technology, coming of consumption age in an after-Internet after-cell phone era; living in a volatile and uncertain world but in an age of optimism from having had their real incomes consistently growing.
Never before has there been a market with so much aspiration for a better life and such a spectacular failure of public goods (think public transport, low cost housing, hospitals, schools, colleges, water, electricity) - forcing people to spend more on buying the basics of living, since the state can’t provide them at a reasonable cost. This makes a mockery of the simplistic formulae consultants use of what spending patterns and consumption choices people will make at a given level of per capita GDP.
Never before have we seen consumers who are poor but not backward, and who have the ability to out innovate large companies (remember, they invented the 'missed call', and many other things).
Going forward, what are the big changes and trends that will shape or define the Consumer India Version 3.0, in the third decade after liberalisation, in the third trillion dollars of India's GDP? In my book I discuss changes with respect to society and culture as well, since markets are really made of people whose behavior is shaped by their social and cultural context as well, not just their economic context. Here, to just pick a few relevant to business,
- The rise of woman power and its impact on earning and spending choices, short term and long term orientations
- The blurring of the urban - rural divide and the arrival of a massive "popular" mass market
- The amazingly high digital quotient or DQ as I have called it of Indians rich or poor, educated or not - and their comfort and familiarity with all forms of remote services.
- Hybrid modernity continues even for young India - they tell us it is ok to cut and paste a mantra 108 times instead of saying it or writing it.
- Regionalisation, further fragmentation, heterogeneity, schizophrenia continues to grow, even more than before.
- A country of mostly self employed people, many not having regular incomes, no social security, fragile in consumer confidence, small entrepreneurs- this will define the new middle class
- Discretionary income will shrink as subsidies get withdrawn and costs of living goes up, while income increases slow down. There will be a killer battle for the consumer rupee. The sweet spot of the past of incomes rising, inflation being low, and subsidies in place will be reversed
- Generation next is in severe pain, plagued by joblessness, informality and hyper competition. About 20% will be in great shape, the rest will be a challenge that policy and society must deal with.
All things considered, consumers are marching to the beat of a different drummer as compared to suppliers. So the race is yet to begin, the rules are yet to be shaped. Will suppliers transplant, translate, wait or innovate and shape this market? Its yet to be seen.
The writer is a management and consumer behaviour consultant who's served on the boards of India's blue chip companies. Her latest book is "A Never Before World: Tracking the Evolution of Consumer India"