Though we live in a highly digitalized and globalised world; there are still huge differences in culture between different product markets. This is one of the main reasons why huge international corporations despite have big markets in the western world, fail to click with Indian consumers.
Here, in today’s article, we show you how you can gain not just a foothold but taste success in the competitive (but highly profitable) Indian consumer market.
Challenges Faced by International Companies in the Indian Consumer Market
Some international companies find it challenging to enter the Indian consumer market because they appear alien to the local customers. In categories like automobiles, global brands are seen as signs of social status and their foreignness can be played to the brand’s advantage.
On the other hand, when it comes to direct consumer categories like food, perishables, household commodities, foreign status doesn’t click with Indian consumers.
This is why you see major international consumer brands modify or alter their products and advertising to appeal to the Indian consumer. Consider the case of Pillsbury. The reputed brand has introduced “idli cake mixes,” “cooker cake mixes,” to attract Indian homemakers.
Another challenge faced by international brands is their product range. Commodities that are generally taken for granted in the west, though not completely new in India, don’t have the same kind of penetration here.
For example, flossing is not a commonly practised habit here, though it’s most common in western nations. Another example is the conditioner. Though the majority of Indians use shampoo, not all use conditioners.
Companies new to India have to alter/modify their product range to appeal and satisfy the specific needs of Indian consumers. Additionally, the vertical stretch of many product categories in India is radically different from what’s available in the west. A major reason for this stretch is the huge population in India and the large disparities in income levels, compared to a uniform middle class in Europe or the US.
Giant international corporations like Unilever, Cadbury, Coca Cola, Pepsi Co, L’Oreal and several others have made large, profitable investments in the Indian consumer market. On the other hand, similarly sized corporations like Sara Lee, Mary Kay, and Henkel have withdrawn completely or reduced their product range in the country.
Is the Indian Consumer Market Profitable?
A big yes! The number of middle-class consumers and their spending per capita has increased by leaps and bounds in the last two decades. This has led to the rapid growth of several Indian consumer companies like Arun (ice-creams with speciality ice-cream parlours Ibaco), Tata (jewellery, watches, apparel, accessories), Café Coffee Day (coffee shops), Aditya Birla Fashions (Lifestyle, Louis Philippe, Max) and dozens more.
To enter the Indian consumer market successfully and enjoy high profitability, multinational companies need to get two crucial factors working in their favour. Let’s take a closer look at each of these two factors.
- Make in India with the help of third-party CMOs
Very often, new companies entering the Indian market do so by exporting finished goods from their home country or the nearest cheap Asian factory (like China, Thailand). The reasons behind this decision are many – to reduce capital investments in India, to protect intellectual property rights, to provide a consistent brand quality and more.
However, with the various import duties, taxes, levies, slow and unreliable supply chains, it becomes difficult to conquer a significant size of the Indian market via this approach.
The best way to overcome all these problems is to manufacture in India. The Indian Prime Minister, Mr.Narendra Modi has launched an ambitious and innovative effort to encourage foreign players to manufacture in India via the “Make in India” scheme.
If you have the capital, you can set up a factory in India. However, if you don’t have the capital or not inclined to invest large sums in the country at the outset, you can contact a reputed CMO (third-party contract manufacturer) in India, who can produce goods to international standards.
Locally sourced ingredients, reduced import duties and shipping costs, low-cost local labour and manufacturing up to international standards are some of the perks of working with CMOs. A good example of this is Amway, which initially used third-party CMOs in the country. Once the company gained sufficient presence and sales volumes in India, Amway invested in a massive 50-acre production facility in Tamil Nadu, a southern state of India.
Here are three benefits of using CMOs:
- Use CMOs to help you gain a better understanding of the market dynamics
- Setup low-cost manufacturing units in India once you reach target initial sales volumes
- Export products made in India to other neighbouring consumer dense markets like Bangladesh, Sri Lanka, Maldives, and
- Use Ecommerce to Help You Establish a Foothold across the Length and Breadth of the Country
It’s true that you cannot gain sufficient market presence without a robust network of distributors across the country. To give you an example, consider Hindustan Unilever that has a massive network of over 7000 distributors spread across all Indian states.
By using a handful of distributors, you cannot get the sales needle to dip in your favour. This is where establishing your online sales channel plays a crucial role. By using online selling, you can reach to the large national consumer market of India, spread across cities, towns, and villages.
With super-fast internet connectivity and maximum smartphone penetration, millions of Indians are shopping online for all goods – from luxury brands to regular day-to-day commodities. And, when it comes to e-commerce, you can either partner with popular online marketplaces in India like Amazon India, Flipkart, Snapdeal or sell via your dedicated site.
By using e-commerce, you overall the risks associated with your entry into the Indian market. Whether you are looking to sell to a niche market or pulling in customers from other competitor brands, e-commerce is an excellent tool for you.
By using the two strategies listed here, you can easily gain entry into the Indian consumer market with due diligence and preparation. Need a local partner, who works with you keeping your best interests in mind? Look no further than Vedantar.