A Never-Before World

Rama Bijapurkar is one of the leading experts on consumer behaviour and market strategy in India. A regular contributor to the national dailies and a visiting faculty at IIMs, Rama Bijapurkar continues on her quest to demystify the enigmatic Indian market with her new book ‘A Never-Before World’. Her new book cuts through the labyrinth that is India and turns the spotlight on the various unheralded and camouflaged facets of consumer India.

The Indian economy is inching closer to $2 trillion mark in absolute terms, which makes it the 10th largest economy in the world and the 3rd largest in terms of Purchasing Power Parity (PPP). Worldwide, multinational companies (MNCs) are making a beeline to India with their wares, consumed with the idea of partaking in the burgeoning Indian consumer market. So far, so good. Problems arise when these MNCs try to clone the success templates from the business back home to emerging markets such as India. The copy-paste formula works to a certain extent but it certainly doesn’t help launch the business into the stratosphere.

Author advocates ‘Think local, Act local‘ approach to succeed in a dichotomy-ridden country like India. Global brands such as L’oreal, McDonalds’, 3M, etc. savored success because they customized their brand portfolio to suit the demands of Indian consumer. Another significant aspect for global corporations to consider is that India and the other emerging economies are high volume, low margin plays unlike their developed counterparts which exhibit moderate volume, high margin trends. MNCs hankering after moderate volumes, high margins in India run the risk of limiting themselves to a narrow niche of the great Indian socio-economic pyramid.

Take the example of the luxury ice-cream market. Indian audience is okay with the idea of luxury cars but the idea of a luxury ice-cream just doesn’t stick! Thus, unless the uber-premium FMCG brands such as Haagen-Dazs and others open up to the wider Indian audience by stepping out of luxury malls and by introducing a range of Indianized (marked down) offerings, their chances of striking a bonanza in the Indian market would remain abysmal, at least in the near future.

What worked in global markets won’t work in the emerging economies. Indian market is unique and a non-standard one. It teems with heterogeneity whichever way one looks. Indianizing the product portfolio is the key to success for most FMCG & consumer durable companies. A long tail awaits on the periphery of the Indian consumer story – ignored & discounted.

India faces so many conundrums at so many levels. We have a billion plus population and not enough wherewithal to provide basic amenities to all. A whopping population of 600 million is below the age of twenty-five but then a major chunk of it lives in poverty conditions. Author cites a study conducted by IRS-MRUC which reveals that the bottom 40% of the Indian households have virtually zero consumer durables and only a paltry 0.5% households possess the highest number of consumer durables and FMCG products and have the presence of higher education, too. Rama Bijapurkar puts right several fallacies related to Indian consumer market:

The myth of Indian middle class. Rama demystifies the often-talked-up factoid about the gigantic Indian middle class, estimated to be 250 million in the year 2015 according to McKinsey. She explains that the segment that drives the Indian consumption story is not the middle class, but the top 20 percent of Indian households by income – the upper class. In a way, India’s upper class is its middle class – the 50 million odd households, the top quintile in the per capita income pyramid.

Urban dwellers have higher intensity of consumption and sophistication. Author disagrees. Half of rich India lives in rural India. In words of the author, rural India shows urban-like consumption behavior. The urban-rural consumer behaviour divide is blurring thanks to the typically slow yet useful improvements in infrastructure and connectivity.

On the flip side, however, rural India is also home to the most poor in India. You have the frightening statistic of 90 million households residing in extreme poverty conditions in rural India when the total households in urban areas are estimated to be 79 million. Not just that, the wedge between the rich and the poor within urban India is scary. For example, the urban top 10 per cent spenders eclipse the bottom 10 per cent of urban India by almost 10:1.

Charade of Indian affluent class. Author makes yet another startling revelation that the richest 1% of Indian households by income are laggards by global standards. As a matter of fact, the per day per capita income of India’s richest sits around $13 which incidentally is the US poverty threshold per person per day. More surprisingly, the poorest of the poor in the US, the bottom 5% are richer than 95% of all Indians1.


Chimera of Growth. For the uninitiated, it may come as a bit of a shock that it took India over 60 years to reach $1 trillion in GDP but only 7-8 years for the next trillion $ milestone (assuming $2 trillion mark shall be overcome in 2015 as we are $1.87 trillion as of now). Rama Bijapurkar warns, however, against any unwarranted optimism on the future growth trends. She refers to an array of grey areas which might make the consumption journey thus far even bumpier in the future. Wage inflation, increasingly withdrawn subsidies, food & fuel inflation, decreasing rates of growth of discretionary income could all upset the apple cart.

Finally, ‘A Never-Before World’ is a logical extension of Bijapurkar’s previous bestseller ‘We are like that only‘. However, in both its depth and breadth, ‘A Never-Before World’ proves to be a more evolved version of the two. Author utilizes her consulting and teaching experience to good measure. Her personal anecdotes lend depth to her opinions and her professional experience proves instructive. The reader gains striking insights into the true Indian consumption story which stands in stark contrast to the ones often bandied around by several media outlets. Nonetheless amidst all the positives, there is one unfavorable aspect about the book, too. The amount of data can inundate and drown the reader into confusion and utter bamboozlement. Those with the inability to digest data may find the book cumbersome. In short, it is a book meant for the discerning reader.

Reference

1 Tim Warsall, The Correct US Poverty rate is around and about zero, Forbes.com, 21 Sept 2013, Web.  5th March, 2014