How the Middle Classes are changing the way India sees brands

Incredible India, the land of opportunity

I am writing this post at the start of a week long trip to India. A place I love, and a place that sadly, I have not visited for at least eight years... and boy, a lot has changed in that time.

The last time I was here, was with a private institutional investor. I remember him and others like him telling me that India will be a power-house economy of the future, and that there was opportunity everywhere for those that were prepared to work hard and take it.

Big brands are moving in

Eight years on, I can clearly see the wisdom of his words. With a population second in size only to China, big brands have moved in and are capitalising on the rise and new found wealth of the middle classes. Where as before, there were the usual array of high end brands (Louis Vuitton, Mont Blanc etc), in places like the Taj Palace Hotel (the number one hotel in India I am told), that served the Indian rich, the famous and visiting dignitaries, there were few high street brands to been seen on an average stroll down main street. Now however, there are brands a-plenty. Pizza Express is buzzing, with queues around the block, Adidas and Nike are doing great business dressing the young and upcoming professionals and other brands are building their presence here.

Mind boggling numbers

The market in India is vast, yet there are still a very small percentage of people who can afford to own products from the likes of the brands I mention above. However, do the maths, if there are 2% of the population that can afford to shop for high end brands, that means that the potential market is 24.7million, making the market for branded goods in India approximately the same size as the total population of of Australia - the 51st most populous nation on the planet.

In addition to this staggering statistic is the realisation that 31% of the total population is under the age of 15. 31% - equating to 363million people rising to 373million by 2020. It is also estimated that over 40% of the Indian population will live in cities by 2030 - and cities generate prosperity, which in-turn generates disposable income, which in-turn generates opportunity for businesses.

What this all amounts to is a massive opportunity for brands, both home grown and foreign to capitalise on the rise of the middle classes in India.

Delhi and Mumbai are the big hitters

Currently, Delhi and Mumbai, India’s two single-largest retail markets, are the most attractive cities for international brands launching operations in the country.

Nearly 80% of international brands that launched operations in India preferred Delhi as their entry option. Mumbai followed close behind, with nearly 70% also preferring the metropolis as their entry option

The India entry strategy for most global retailers continues to be guided by the economic and demographic dynamics of leading metropolitan cities. For luxury, Delhi and Mumbai account for 80-90% of the business. For premium brands too, these two remain large markets as the cities have aspirational consumers and they are far from saturated.

What are businesses doing here doing to future proof themselves in preparation for the predicted surge?

I am seeing brands driving energy and investment into what some call ‘youth’, into SME’s and into reaching the un-touched. Innovations like State Bank of India’s ‘In Touch’ brand that recently launched to a huge fanfare here, are aimed at tech savvy young people who want more from their bank than more traditional customers of the past.

I believe we will see other brands following a similar path, branching out into greater segmented and personalised services that will appeal to the intelligent, well educated, young Indian consumer of the future.

How will brands ensure they win in the future? The answers are really simple, to innovate, to iterate, to listen and to get out of the boardroom and speak to real people. Winning in branding is not about isolated decision making, guessing what the world wants and ‘throwing it out there’. Winning is all about connecting in the most profound way with your customers, knowing them intimately and sprinkling some magic over an idea to make it unmissable. Tech isn’t the answer, it is only part of the answer.