The Indian Consumer Market Begins to Undergo Structural Change
By Shusuke WATANABE, Hiroko KIHARA, Wataru KADOBAYASHI and Muskan SONI
Nomura Research Institute
India's consumer market is undergoing
continuous change. The number of middle- and high-income households (with
minimum annual income of around 180,000 Indian rupees) is increasing rapidly,
not only in metropolitan cities with populations in excess of four million, but
also in cities with populations of only one million.
Even looking from an Asia-wide view, the
scale of the middle- and high-income Indian markets as well as its growth
potential is large as compared to the same in ASEAN countries. Thus, targeting
only high-income households limits the overall scale of this market. However,
taking an approach in which only low-income households are targeted by business
providing solutions to social problems is more like an investment in the future
rather than a generally adopted business strategy. Such an approach would take
a long time to ensure a sufficiently large business scale and profitability.
Thus, gaining access to the middle- and high-income markets that are already
large in scale and have a high growth potential is essential for establishing a
company's business in India's consumer market.
In this paper, home appliances is used as a
representative consumer market. The following key points are required to access
the middle-and high-income markets: ①
ability to develop low-cost, high-performance products in which lifestyle
characteristics are taken into consideration, ② ability to enable local procurement and
production, and ③
establishing strength in logistics, sales and distribution channels to ensure
maximum penetration spreading over wide areas including rural India.
In order to break into the low-income
market, it is essential to clearly narrow down the target consumers. If a
company's sole purpose for entering this market is to generate profits, then it
should target the "Next-MoP" (future middle of the economic pyramid)
market that will grow rapidly as a result of the expansion of urban
infrastructure.
For developing business not only in the
Indian middle- and high-income markets but also in the Next-MoP market, the
strategies for all these three markets should be integrated. In addition,
consideration should also be given to positioning India as an export base for
serving demand from South Asia, the Middle East and Africa.
