Devangshu Dutta
January 22, 2007
Fresh out of a meeting with a large international retailer this morning, I would like to share something that I mentioned to them: that the Indian market is not as large as it seemed to most people 2-3-5 years ago (whatever base figures they may be using to calculate potential market size); neither is it as small as it seems today to brands that entered the market 10-15 years ago.
There are significantly different dynamics at play, which make the Indian market totally different from the growth curve you might have been accustomed to in the history of the US, Europe, or even more recently, China.
However, some fundamental realities remain common on the consumer side:
Given choices, consumers will choose
Given better environments, consumers generally will migrate to them
Given lower prices for comparable products, consumers will compare, and choose not to spend beyond what is necessary
A better merchandise mix will win out over a narrow / poor mix
The realities of real-estate costs are the same for everyone–whether the retailer is domestic or international. Domestic retailers may have an advantage in being able to move quicker on closing deals but foreign retailers may have deeper pockets to play with.
Politics remain the same as well–China opened its markets to investment by foreign retailers after allowing its domestic retailers to grow in scale; Eastern European countries may raise the occasional stink about the lack of competition when two foreign retailers decide to swap assets; even in their home markets, Wal-Mart and Tesco face determined opposition. In India we’re seeing just another version being played out.
All this, while everyone is mostly fighting for the top-tier consumer. There is a wider market out there, my friends, a very different one that needs to be understood well, together with its implications for your business model.
