RAMA B I JA P U R K A R The sequel to the bestselling

We Are Like That Only

A NEVER-BEFORE

WORLD T R AC K I N G T H E E VO L U T I O N OF CONSUMER INDIA

PORTFOLIO

A NEVER-BEFORE WORLD Rama Bijapurkar is one of India’s most respected thought leaders on market strategy and India’s consumer economy. A keen commentator on social and cultural change in post-liberalization India, she has her own market strategy consulting practice and works with an impressive list of Indian and global companies. She has also served as an independent director on the boards of several of India’s blue-chip companies. Rama writes extensively in the media and is a dominant voice on issues relating to India’s business, consumers and polity. Her book We Are Like That Only: Understanding the Logic of Consumer India (Portfolio) has been widely acclaimed. The international edition Winning in the Indian Market: Understanding the Transformation of Consumer India (Wiley) is also available in Chinese. She is also the author of Customer in the Boardroom? Crafting Consumer-based Business Strategy (Sage). Visit the author at www.bijapurkar.com

RAMA B I JA P U R K A R

A NEVER-BEFORE

WORLD T R AC K I N G T H E E VO L U T I O N OF CONSUMER INDIA

PORTFOLIO USA Canada UK Ireland Australia New Zealand India South Africa China Portfolio is part of the Penguin Random House group of companies whose addresses can be found at global.penguinrandomhouse.com Published by Penguin Random House India Pvt. Ltd No: 04-010 to 04-012, 4th Floor, Capital Tower -1, M G Road, Gurugram -122002, Haryana, India

First published in Portfolio by Penguin Books India 2013 This paperback edition published 2014 Copyright © Rama Bijapurkar 2013, 2014 All rights reserved 10 9 8 7 6 5 4 3 2 The views and opinions expressed in this book are the author’s own and the facts are as reported by her which have been verifi ed to the extent possible, and the publishers are not in any way liable for the same. ISBN 9780143423522 Typeset in Sabon by R. Ajith Kumar, New Delhi

This book is sold subject to the condition that it shall not, by way of trade or otherwise, be lent, resold, hired out, or otherwise circulated without the publisher’s prior consent in any form of binding or cover other than that in which it is published and without a similar condition including this condition being imposed on the subsequent purchaser.

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For Ashoke, my insightful in-house consultant and most constructive critic. Thank you.

CONTENTS

Introduction An executive summary of the book

ix

PART 1 1

A NEVER-BEFORE WORLD

3

The strategic challenge of emerging markets 2

TRANSPLANT OR TRANSLATE?

22

The religion and ritual of ‘global’ strategy 3

LIMITING MINDSETS

50

Why smart MNCs struggle with their India strategy PART 2 4

MIDDLE-CLASS TRUTHS

85

The structure of income and consumption in India 5

DIVERGING, NOT CONVERGING

120

Of heterogeneity, schizophrenia and leapfrogging 6

THE THIRD TRILLION

Where consumption aspiration meets failure of public goods

141

CONTENTS

7

176

RURAL AND RURBAN

The evolution of ‘Bharat’ 8

TAKING STOCK OF URBAN INDIA

205

The nature of urbanization and urban consumer segments 9

243

IT’S HER TURN

The rise of Women India 10 GEN NEXT ANGST The coming of age of India’s liberalization children

260

11 WHAT’S NEW? Digital quotient, monster consumers, silver market, luxury

278

12 SOCIETY AND CULTURE Are we still ‘like that only’?

305

13 CONCLUSION Building a true consumer-oriented economy

329

345 347 349

Acknowledgements Bibliography Index

viii

INTRODUCTION An executive summary of the book

in insidious ways. It steals along the meandering, unmapped back alleys of progress instead of walking down the well-lit road of market evolution, like most other markets have. This has earned Consumer India the frequent, and not unjustified, complaint that its behaviour is hard to understand, harder to foresee and even harder to profit from; and that like the Indian economy, it perennially displays promise of enormous potential that does not translate into commensurate business results. However there is a definite logic that drives Consumer India’s behaviour and explains it. There is also a particular way of viewing it that brings into focus its milestones of change and helps point to its future direction. And last but not the least, there is a certain kind of business mindset and dominant logic that needs to be adopted – and equally, a mindset and dominant logic that needs to be avoided – in order to design businesses that CONSUMER INDIA EVOLVES

ix

INTRODUCTION

can convert India’s promised potential into revenue-generating demand and profit. It is this consumer logic, facilitating mindset and way of viewing Consumer India that this book is about. There are many factors that contribute to why Consumer India is the way it is. Part of the reason lies in its distinctive demand structure story; part of it lies in the supply story – because suppliers shape consumers’ minds far more than market analysts give them credit for, and relevant supply alone can translate consumer opportunity into business value; part of it lies in the good, bad and ugly results of India’s public policy over the decades; and part of it lies in the story of the process of change in Consumer India. The demand structure of Consumer India, unlike that of developed markets, is that of a large market made up of lots of people earning and spending a little bit each. This renders the business economics of ‘global’ business models impotent, designed as they are for developed-market demand structures of relatively fewer people, each earning and spending a lot. Consumer India’s heterogeneity – which is a historical feature – also shows no signs of decreasing and has, in fact, been increasing steadily. The danger of taking business decisions and designing businesses based on assumptions about the ‘average Indian consumer’ cannot be overstated. On the supply side, Consumer India has been subjected to many interesting phenomena which have raised the bar on what is perceived as good value and moulded India’s consumption choices in a unique way. Just think about what happens to consumer spending choices when phenomenal aspiration for a better life is confronted with a spectacular failure of public goods; or to consumer expectations for service when high-touch x

INTRODUCTION

and high-tech coexist in supply-side service offerings, when the price of everything has come down and quality gone up in the past two decades, thanks to the dismantling of a controlled, high-tax economy and the blossoming of the free market; or to consumer excitement and acceptance of global offerings when local options are far more innovative and value-right than in many other emerging markets. Economic, and more generally, public policy and its implementation shapes consumer markets too through the kind of education systems, occupations and living conditions it creates (or does not create) and in the ways it influences not just the amount of revenue and expenses and savings of households but also the nature of these. Consumer India has been the victim of historically poor public policy and imperfect implementation and now of ‘tough love’ economic policies aimed at containing the fiscal deficit and stubborn inflation; it has also been the beneficiary of several new welfare and inclusion schemes. All of these have affected the consumption capability and behaviour of different parts of Consumer India differently. William Shakespeare wrote: ‘There is a tide in the affairs of men / Which, taken at the flood, leads on to fortune / . . . And we must take the current when it serves / Or lose our ventures.’ The process of change in any market throws up lots of new opportunities for business. The challenge of Consumer India is to be able to understand what constitutes a flood, what an eddy and what a one-time ripple, given the many changes that are occurring simultaneously. Some changes appear less dramatic and significant than they are because they are caused by large masses of people moving with a low acceleration but in all facets of their lives, best described by women and rural consumers; other xi

INTRODUCTION

changes are more visible and obvious, brought about by a small group of people (small by Indian standards but three to five times the size of the population of a large European country) moving with a high acceleration, hurtling towards global modernity – but only in some parts of their lives. Society and culture have undergone changes of both kinds and the Internet and the rest of the digital revolution sweeping India has reinforced the old as much as it has rung in the new. Recognizing that readers of A Never-Before World will range from those very familiar with India to those who are very new to it, and from those who have read the precursor to this book (We Are Like That Only: Understanding the Logic of Consumer India) to those who have never heard of it, here is a chapter guide to what to expect in the rest of this book. The first chapter of the book describes why Consumer India is a world that businesses have never encountered before in China or Europe or America or Africa or Brazil or the ASEAN countries or anywhere else. It isn’t Indian exceptionalism that drives this assertion but an objective examination of whether such a confluence of circumstances and forces and characteristics has ever existed before in the world and impacted such a large number of people. This is useful for businesses of both domestic and foreign origin to reflect on, because they will have to decide what constitutes a reinvention of the wheel of global business knowledge, and what constitutes the inescapable development of ‘next practice’, C.K. Prahalad’s phrase to describe that which goes beyond the existing ‘best practice’. The second and third chapters document and discuss lessons learnt from the last two decades of multinational company (MNC) experiences in India about what the turn-ons and xii

INTRODUCTION

put-offs of Consumer India are. Indian readers, especially those from India Inc., will probably be familiar with the strategic and operational struggles of MNCs, and many of them may, in fact, have been actors in these as competitors or as Indian managers in MNCs, struggling to persuade the head office about why there has to be a different way to skin the India market cat. Some will probably be impatient to skip to the parts of the book which deep-dive into what is going on in Consumer India, and they must do so! However, these initial chapters do merit a reflective read sometime before the end of the book, because they point to the myriad opportunities that Consumer India harbours which lie unaddressed due to supply-side sluggishness. For those readers not as familiar with India, these chapters on the strategy and operational struggles of MNCs to woo Consumer India provide the lens through which they can better interpret the ‘so what’s of the subsequent chapters, which describe the key characteristics of Consumer India. Chapters 4 to 12 discuss in detail the ‘what’ and the ‘why’ of the many facets of Consumer India as it stands today, and what its future looks like: just how rich it is really, why it is not homogenizing as it gets richer, cautionary signals on what the future holds in terms of growth in disposable incomes, and why the third decade and third trillion dollars of GDP will not yield the same increase in across-the-board consumption as the second decade and the second trillion dollars of GDP; what’s really going on in the world of women and young people; an examination of the conventional wisdom on urbanization and its benefits for consumption, and of how sylvan rural India really is and how far behind urban India; what is happening as a result of the digital revolution, the depth of changes in society and culture, and more. xiii

INTRODUCTION

The Conclusion to the book assesses how far India is today from a true consumer-oriented economy. The good and bad news is that the journey hasn’t even begun in earnest, that large companies are not serving even a fraction of the opportunities available, and that consumers at all levels are underserved, and are ready and waiting for supply to catch up with them. Till that happens, it is the land of Lilliput – small consumers being served by small suppliers and small traders, while MNCs wait for the ugly duckling to evolve into the beautiful, familiar, developedmarket swan, and Indian companies venture overseas rather than invest in winning all of the Indian market.

xiv

PART 1

What does Consumer India look like in the third decade after liberalization, as India’s GDP approaches its third trillion? In her new book, Rama Bijapurkar, author of the bestselling We Are Like That Only, analyses the complex contours of India’s consumer economy – demand structure, supply environment, income demographics, social and cultural changes and much more – and pinpoints the existing opportunities, the unserved needs, the incorrect assumptions, the minefields of the future and the strategy imperatives needed to ride this next big wave of opportunity. For businesses and investors betting on India’s future, for policymakers and regulators shaping the new India and for all those curious about India’s progress, this is an immensely insightful and utterly realistic assessment of one of the biggest growth markets in the world.

‘A book about the India that we live in, but an India that many of us do not know sufficiently’ P. Chidambaram ‘A book with many lenses: consumer, economic, social, business strategy and of course futuristic’ Indian Express ‘Bijapurkar’s genius lies in her keen perception of how the elements of business and society must work in harmony’ Business Standard

Business

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