When I was young, people used to flock to a market popularly known as Burma Bazaar, located in North Chennai to buy electronic gizmos and gadgets made in countries like Singapore. A "Made in Singapore/ Japan " watch bought from this bazaar used to be a prized possession of localites. Trade restrictions were high at that time and India failed to figure in the list of target markets for any of the big MNCs. But, what we were observing at that time was silence before a storm.
Over the next decade or so, opening up of the economy followed by rapid expansion across sectors, and a burgeoning, tech-savvy middle class led to a retail phenomenon that was unprecedented. Malls, spanning millions of square feet of retail space, sprang up across major cities from virtually nowhere. Cinema theatres got converted into multiplexes; road side haircutting salons gave way to swanky beauty parlours; road side eateries were suddenly competing with KFCs n Dominos. And, I forgot to tell you. By this time, even Swiss watch makers like Swatch had set up stores and started selling their products in India. But, that is not the end of the story. They all came and they all saw, of course. But, did they all conquer? No. Certainly, not many.
Some realized the ground situation very soon. Some others took some time to draw their conclusions. But, all MNCs invariably began to realize a fundamental set of things. First. It is not possible to sell what you have been selling in developed markets without an iota of localization. Advertisements and promotional offers may help one sell a few but marketing mechanisms are, in themselves, not substitutes for products. Second. India is a country where spending is still considered a sin; and saving, a virtue. So, what is offered alone does not matter. What it is offered at also does matter. Third. Even though supply chain specialists would love to assume India as a network of airports; the reality is that India, and by that I mean a majority of Indians in terms of numbers, still lives in its villages and most parts of India are away from rather than near to airports or even railway stations for that matter.
India was certainly too big a potential market and too promising an investment destination to leave out. So, exit was out of question. But, how to stay put and continue to expand? Should one be satisfied with meager revenues obtained from low volume sales of highly priced products built for developed markets or should one take a deep dive and develop and deliver products that would be "Made for India"? Should one price products so highly so that margin is unaffected or should market penetration, rather than margin rationalization, be the dominant strategy? Finally, should one get their products into the countryside and try to touch the heart of India or just stay keep their products close to the airports with an eye on the time to leave, if need be?
Certainly, these were tough questions waiting to be answered.
The other day, I was travelling by bus near Ujjain, in Central India. On both sides of the road where fertile lands cultivated with wheat, the staple crop consumed across the sub-continent. The city of Ujjain itself is a good 60 km away from airport. A smart looking young man got into the bus when it halted at some intermediate bus stop. He was carrying a huge black bag, which caught the eye of passengers, especially ones like me, who were seated within the first few rows. Before we could realize, he took out a lemon from nowhere and started with what was to be a quick 5 minute demonstration on what the juicer, he was trying to sell, could do. The juicer came in two variants, the first meant for lemon and the second for bigger citrus fruits such as oranges.An interesting feature was that the orange juicer could be attached to an artificial rubber based nipple and fresh and pure orange juice could be fed directly to babies. Finally, when he announced the price, we were awestruck. Both variants of the juicer together cost just Rs. 20 ($ 0.4 approx.). Here was a guy selling a product, which had immediate use for the local populace; at such a low price; and at a place, far from the cities.Within the next few minutes the guy had successfully more than ten pieces and before I could finish counting, he was off the bus. Yes, fortune at the bottom of the pyramid is for real. And, value innovation is certainly the path to it.
Over the next decade or so, opening up of the economy followed by rapid expansion across sectors, and a burgeoning, tech-savvy middle class led to a retail phenomenon that was unprecedented. Malls, spanning millions of square feet of retail space, sprang up across major cities from virtually nowhere. Cinema theatres got converted into multiplexes; road side haircutting salons gave way to swanky beauty parlours; road side eateries were suddenly competing with KFCs n Dominos. And, I forgot to tell you. By this time, even Swiss watch makers like Swatch had set up stores and started selling their products in India. But, that is not the end of the story. They all came and they all saw, of course. But, did they all conquer? No. Certainly, not many.
Some realized the ground situation very soon. Some others took some time to draw their conclusions. But, all MNCs invariably began to realize a fundamental set of things. First. It is not possible to sell what you have been selling in developed markets without an iota of localization. Advertisements and promotional offers may help one sell a few but marketing mechanisms are, in themselves, not substitutes for products. Second. India is a country where spending is still considered a sin; and saving, a virtue. So, what is offered alone does not matter. What it is offered at also does matter. Third. Even though supply chain specialists would love to assume India as a network of airports; the reality is that India, and by that I mean a majority of Indians in terms of numbers, still lives in its villages and most parts of India are away from rather than near to airports or even railway stations for that matter.
India was certainly too big a potential market and too promising an investment destination to leave out. So, exit was out of question. But, how to stay put and continue to expand? Should one be satisfied with meager revenues obtained from low volume sales of highly priced products built for developed markets or should one take a deep dive and develop and deliver products that would be "Made for India"? Should one price products so highly so that margin is unaffected or should market penetration, rather than margin rationalization, be the dominant strategy? Finally, should one get their products into the countryside and try to touch the heart of India or just stay keep their products close to the airports with an eye on the time to leave, if need be?
Certainly, these were tough questions waiting to be answered.
The other day, I was travelling by bus near Ujjain, in Central India. On both sides of the road where fertile lands cultivated with wheat, the staple crop consumed across the sub-continent. The city of Ujjain itself is a good 60 km away from airport. A smart looking young man got into the bus when it halted at some intermediate bus stop. He was carrying a huge black bag, which caught the eye of passengers, especially ones like me, who were seated within the first few rows. Before we could realize, he took out a lemon from nowhere and started with what was to be a quick 5 minute demonstration on what the juicer, he was trying to sell, could do. The juicer came in two variants, the first meant for lemon and the second for bigger citrus fruits such as oranges.An interesting feature was that the orange juicer could be attached to an artificial rubber based nipple and fresh and pure orange juice could be fed directly to babies. Finally, when he announced the price, we were awestruck. Both variants of the juicer together cost just Rs. 20 ($ 0.4 approx.). Here was a guy selling a product, which had immediate use for the local populace; at such a low price; and at a place, far from the cities.Within the next few minutes the guy had successfully more than ten pieces and before I could finish counting, he was off the bus. Yes, fortune at the bottom of the pyramid is for real. And, value innovation is certainly the path to it.
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