The purchasing power of the Indian consumer
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India is one of the fastest growing consumer markets in the world, but what do these numbers mean for your business? What percentage of the Indian population is actually your target audience? And how big is the customer base for your products or services?
The size of your potential customer base in India and their purchasing power depends entirely on the industry you operate in and the type of products you offer, but there are a few general assumptions we can make:
- On the one hand, we see that the vast majority of the almost 1.4 billion Indians are young and poor and do not have enough purchasing power to buy high-end, European products. Genexis, the European market leader in fiber optic modems, also discovered this. Their modems were far too advanced for the Indian consumer, so they built a special model for the Indian market.
- On the other hand, the Indian middle class is expanding rapidly, which increases the demand for better products. The Indian middle class often sees foreign products as being of better quality and that offers opportunities for international companies, as the Dutch clothing brand Scotch & Soda noticed. They opened 8 stores in India in 3 years and now also serve the fast-growing middle class online via their e-commerce platform.
This schematic representation of the Indian market will give you a better understanding of what to expect and how best to scale your product or service:
The top segment of the Indian market
In some sectors in India, there is no market for the top segment, but for other sectors, such as fashion and electronics, there is a large sales market. These consumers are often located in and around the largest cities, such as Delhi, Mumbai and Bangalore, but they cannot all be classified under the same customer profile. In India, having a specific, regional strategy is important for successful sales. This means that within this segment, you must in principle assume a small, exclusive group of consumers. Many companies think they can circumvent the regional approach by focusing entirely on e-commerce. A smart move if you look at the rapid digital development of India. However, as an entrepreneur, you must take into account the strict regulations in this area; it is currently still not possible for foreign companies to sell directly online to Indian consumers.
The Indian middle segment
Many European companies have the idea that they can also offer their high-tech, European products in the growing middle segment. But once they have made their market entry, they will find that the Indian middle class still has a much lower purchasing power than elsewhere. Initially, it is therefore smart to keep this segment out of the calculations for a while and in the long term, after you have started in the higher segment, to think about how you can adapt your product to better match the wishes and price level of the Indian middle segment. If you focus on the middle segment in addition to the high segment, you could triple your sales market in a short time.
