1) What is distinctive about India compared to other big emerging markets (Brazil, Russia, China)?
While most D&E markets have a lot in common they can be distinguished to a great extent, by the profile of their economy, politics, religion and colonial history. A few things set India apart from the other three BRIC countries; first and foremost it is below the BRIC average on certain metrics such as age, disposable income, discretionary spending, life expectancy and so on
- The demographic dividend – India has the youngest median age now but in the next decade and by 2050 will continue to be so with a median age of 31 years and the gap widening as most others find themselves with ageing population. This implies a buoyant markets for new products and services and an enviable supply of labour pool.
- Despite its promise of becoming the third largest economy by 2050, the per capita income is and will continue to be the lowest in the BRICs. This has implications for products and services and the product portfolio for luxury brand makers – do you stay very high end with low volume ( thought even at that level numbers can be substantial) or have lower entry price products for aspirants who will ultimately graduate to high ticket items?
- India’s sectoral split of GDP mimics that of Brazil and Russia with services accounting for over 50% share despite its lowest per capita income. Unlike China that is driven by its manufacturing base and dominated by heavy asset deployment, India is fuelled by low capital entry. This encourages entrepreneurship with promise of upward mobility to a large number of aspirants seeking brand badges to signal their arrival and success.
- India offers a large consumer base and is dependent on its domestic market unlike the other three BRICs. India has had a Calvinistic past with ‘pay now consume later’ mindset resulting in a savings rate that is the envy of the world. Now as the society goes through a transition with hedonism and instant gratification becoming the norm and the affluent outdoing themselves in spends on weddings, travel, private jets and yachts, luxury brands will be added to the long list of must have.
- Its Gini coefficient is the lowest indicating the highest income inequality. There are more people with more money than they know how to spend and more people waiting to get there.
- India is unique – its feudal past, a society divided by caste, its colonial legacy of English speakers across the length and breadth of the country albeit speaking Hinglish, a judicial system in place, a well run bureaucracy and a feudalistic democracy where it is said that unless there is a Gandhi at the helm of the Congress party, it becomes dysfunctional.
- Popular culture is a good barometer of consumer Zeitgeist and the values manifest themselves in the rituals, symbols and icons. While the latter two change with shifts and disruptions, rituals are longer lasting. Indian weddings, rites of passage, birth and death and other social practices like hospitality set Indians apart. They accept a hierarchical society with different rules for the haves and have-nots. Fatalism and karmaand kismet spur them on and also rein them in. Divine intervention is sought for everything. The biggest trait is flexibility and adaptability, Things do not have sharp corners – everything and everybody can be accommodated. – time is circular and uncertainty is opportunity. If things are not possible one way then there are other ways you must try- try and try again. Since they do not look at life in binaries, success can take on different meanings. Everything is possible except a ‘no’.
2) Why have some companies (e.g. Apple) failed to make an impact in India? What are the learnings?
The Smartphone market is small in India. Apple has a minuscule share but punches more than its weight in profits. The Smart phone price point makes it a high end low volume product. The Internet penetration in India is already at a 100 million. I think in this case it is the first mover advantage playing out for Microsoft. Products and services that highlight the income divide are embraced by the affluent – Apple has the potential of becoming the must have of the uber rich in India.
3) What are the differences between developing marketing strategies in developed markets vs. developing markets (India)?
Marketing strategies need to be different in D and D&E markets because of the socio economic profile of the consumers, social practices, infrastructure and low penetration markets. Here are a few examples;
Price value is a critical part of the package. In the D markets, manufacturers will encourage consumers to buy larger packs that offer savings compared to smaller pack sizes ( cost per unit in larger packs is cheaper than in smaller packs in D markets). In developing markets, single serve packs – the ubiquitous sachets – offer a huge advantage – they are actually cheaper per unit when compared with larger pack sizes. They offer smaller outlays of cash and do not take up space in homes in urban, semi urban or rural areas where bathing areas may be out in the open or shared. So a cheaper price is not about a choice of pack size but whether the consumer will buy the product at all. It is critical to keep the entry price low to move first time buyers or infrequent users.
For very long, ITC has been selling single cigarettes through ‘paan waala’ shops that are ‘a hole in the wall’ or just temporary mobile structures manned by a single man. The clientele is unlikely to be able to afford a whole pack and the vendors came up with this interesting way to make money. At the end of the day, he is likely to make more on one pack if he sells one stick at a time.
The products really need to be tailored to the needs of the consumer. In a classic case of an auto manufacturer launching a passenger car from Europe – the car failed to take off. Consumer research showed that the air conditioning was more effective in the front which did not sit well with Indian consumers normally in chauffeured cars. In addition, the low slung car made it difficult for women in 6 yard long saris to get in and out of the car. And one feature that is the most used was virtually non- existent – the horn. Needless to say the manufacturer had to go back to the drawing board.
4) What advice would you give to a luxury brand intending to use Bollywood endorsements?
It is said that there are few things that appeal more to Indian consumers than Bollywood. They have reigned on the emotions of the populace and set off trends in fashion, music, colloquialism among others. However, they have been icons for mass market brands. Even Aishwarya Rai – A list, or Shah Rukh Khan have been used as brand ambassadors for local popular and some premium brands, with only a couple of foreign brands in their portfolio; Longines and L’Oreal for Rai and Tag Heuer for SRK. They do not enjoy the appeal that Nicole Kidman, Scarlett Johansson, or Angelina Jolie enjoy in D markets. The top notch brands need to look at foreign names more than Bollywood at this point in time. Even brands like Taj, Oberoi or any of the foreign hotel chains have not used Bollywood endorsements. One exception has been De Beers – they have launched a brand of everyday jewellery called Nakshatra that uses Rai to model and endorse. The brand name plays on Indians’ faith in stars and astrology.
5) Is there a notion of “Indian luxury” (e.g. French/Italian luxury)? “Made in India”. Blessing or curse for Indian luxury brands? Can Indian luxury brands (e.g. Hidesign, Taj) compete globally?
Unless the ‘Made in India’ brand can stand for quality, it will be difficult to have Indian luxury brands to compete globally. Our luxury is our heritage that has been harnessed by the Taj hotels, the Oberoi and other hotel chains using forts, palaces as upmarket hotels. Taj in New York or London seems like an anachronism – it is like having a French Chateaux in Rajasthan. French and Italian luxury stands for design, quality and image building. It would be difficult to compete with the top brands on design and the product manufacturing rigour as yet for an Indian brand. In apparel, a couple of Indian designers seem to be moving on to a global stage but there appeal is largely based on their engagement with Bollywood and the wedding extravaganzas that are catering to local taste. However, there is certainly a potential for the handicraft and workmanship to be scaled up and branded as haute couture. Branded jewellery is yet to take off as any jeweller can copy a foreign brand or any of the large domestic ones. Consumers paying for that level of quality and process are very few and far between. In India more is less at the moment but the market will begin to stratify in terms of quality perception.