From: nikhil.kamath
Consumption patterns in India are complex and constantly evolving, presenting both challenges and opportunities for brands. Insights from various industry experts shed light on the current landscape and future directions for building successful consumer brands [00:00:06].
Current Consumption Landscape
Despite positive reported numbers, there’s a perceived drop in consumption in recent months across sectors like travel, fashion, and e-commerce [00:50:01]. This contrasts with expectations for a year leading up to an election [00:01:13]. Several factors contribute to this shift:
- Calendar Misalignment The Diwali festival falling a month later this year compared to the marketing calendar can cause a mismatch in reported consumption figures [00:47:11].
- Inflation and Interest Rates Inflation is seen as a significant factor [00:49:00], with rising interest rates potentially hitting consumption [00:37:38]. Recent FMCG data in August showed an 11% decline compared to the previous month [00:47:46].
- Post-COVID Fatigue After an acceleration in online adoption and consumption during COVID-19, a “fatigue factor” seems to have set in as the market stabilizes [00:49:57].
- Formalization of the Economy The increasing formalization of the Indian economy, which adds an 18% GST component, is a significant hit for a segment of the population [00:49:04].
Shifting Consumer Spending
Consumer budgets are being reallocated [00:49:00]. For example:
- Experiences over Products Money is shifting from traditional products like fashion to experiences such as travel, dining out, and live shows [00:50:40]. Live concerts, in particular, are growing rapidly [00:50:47].
- Health and Wellness There’s a noticeable shift towards healthier eating and wellness products [00:51:34]. Brands like MyFitness peanut butter are seeing rapid growth as consumers seek healthier options [00:51:13].
Demographic and Consumption Segmentation
India’s market can be segmented into distinct consumer groups based on income and lifestyle, which significantly influences brand development [00:52:26]:
- India 1: Comprises approximately 30 million households, contributing to 60% of India’s value-added consumption [00:52:38]. This group behaves like consumers in Singapore (highest income bracket, 60 lakh+ household income) and Poland (20-25 lakh household income) [00:53:00]. They spend on lifestyle food, going out, and premium products [00:58:36]. They are digitally aware and active online users [00:58:07], and increasingly conscious of product ingredients and ethical sourcing [02:06:28].
- India 2: Represents roughly 70-80 million people, analogous to Mexico in terms of per capita consumption [00:53:13]. This segment includes service providers like drivers, maids, and helpers [00:54:10]. India 2 is growing as people from India 3 migrate to it [00:55:11].
- India 3: Consists of farm laborers and those relying on government aid [00:54:19].
While India 1 is not growing as fast in numbers (maybe 1% per year), their consumption is significantly increasing due to discretionary income and a willingness to spend more on various items [00:57:07]. This group of 100-120 million people (or 30 million households) is crucial for brands seeking higher margins [01:00:11].
Evolving Brand Building Strategies
Traditional marketing approaches are being supplemented by new methods, especially for brands targeting the digital-first consumer [00:37:32].
Digital First Approach
Online influence on brand building is significant, with nearly 50% of brand influence happening online [01:00:59].
- Low Friction Distribution: For categories like fashion and beauty, delivery fees of ₹140-₹150 can reach 23,000-26,000 PIN codes across India [00:09:42]. This reduces the need for large physical distribution networks in initial stages [00:35:35].
- Data-Driven Product Development: Brands can leverage search data from platforms like Google, Amazon, and Flipkart to identify unmet needs and launch new products [00:31:31]. This data is inexpensive and readily available through third-party software [00:32:02].
- “Shark in a Pond” Strategy: For new brands, it’s advisable to be a “shark in a small pond” by focusing on a specific niche rather than competing broadly [00:39:09]. This allows for deeper penetration and differentiation [01:36:17].
Community-Led Brand Building
Community engagement is emerging as a key factor in brand development [01:16:34].
- Content Builds Community, Community Brings Culture, Culture Changes Buying: This philosophy suggests that content fosters communities, which then shape culture and influence purchasing decisions [01:18:01].
- Authenticity is Key: Consumers, especially Gen Z, are receptive to advertising if it’s authentic and transparent [01:12:15]. Lack of authenticity, common with some Bollywood celebrity endorsements, can lead to distrust and “cancel culture” [01:32:16].
- Micro-Influencers: For problem-solving products or building new categories, working with thousands of micro-influencers can be more effective than relying on a few macro-influencers [03:14:14]. Consumers are more influenced by friends and family, then by lesser-known followers, and finally by celebrities [03:15:40].
- Engagement over Popularity: It’s not just about an influencer’s follower count, but their ability to engage their audience and have a strong community around them that creates organic content and fan pages [02:53:01].
ECG Content Strategy for Influencers
A recommended content strategy for influencers to grow their audience involves three types of content [00:42:14]:
- Evergreen (5 pieces): Content that remains relevant over time, keeping the audience engaged [00:42:25].
- Controversial (3 pieces): Content designed to reach masses and attract new audiences through polarizing topics [00:42:35].
- Growth (2 pieces): Content focused on growing the core community, often by helping them or aligning with the creator’s mission [00:42:53]. Additionally, respecting and aligning with platform algorithms (e.g., Instagram pushing short content, LinkedIn focusing on “fun workplace”) is crucial for visibility [00:43:34]. The most important metric is shares and saves, not just likes or views [00:45:20].
The Role of Culture in Branding
Foreign vs. Indian Brands
Historically, Indian consumers have shown a preference for foreign-sounding brand names and models with fair skin, especially in Western wear [01:30:26]. This is partly due to a belief system that associates foreign products with higher quality or premium status [01:31:01]. However, this trend is slowly changing as consumers become more receptive to Indian brands that evoke pride and cultural connection [01:33:36]. For instance, brands like Patanjali, driven by a strong Indian identity and community-led marketing, have achieved significant success [01:34:45].
Luxury and Signaling Value
The concept of “signaling value” drives many luxury purchases [01:11:53]. People buy things to convey a message to their peers or a specific community [01:12:06].
- Conspicuous Consumption: Many individuals save up for expensive items like cars, watches, or sneakers to “show off” and fit in with trending social norms [01:07:35]. Buy Now Pay Later (BNPL) schemes are fueling this trend [01:08:50].
- “Quiet Luxury”: This trend, where expensive items don’t outwardly appear costly, is less prevalent in India compared to more evolved markets [01:10:28]. It appeals to those who have “arrived in life” and no longer need to prove their wealth [01:10:59].
- Manipulation in Marketing: High-end brands often employ strategies that leverage consumer ego and vanity, even to the point of appearing arrogant, to create desirability and exclusivity [01:04:08]. Mass brands also use similar tactics by selling an “ideal image” of who the consumer could become [01:06:11].
- Stories over Facts: Brand names need to have a compelling story or meaning behind them that resonates with consumers, as people remember stories more than facts [01:33:02]. Creating a meaning for a meaningless word can be effective, as seen with “Blanco” perfume [01:57:04].
Naming and Packaging
- Brand Naming: Choosing a brand name that is unique, easily searchable for SEO, and potentially without a pre-existing meaning can help avoid fighting against established concepts [01:56:29]. However, it should sound interesting or be able to acquire a story [01:56:05].
- Category Codes: Packaging design often adheres to specific “category codes” (e.g., red and white for toothpaste) that consumers are accustomed to [02:01:42]. Deviating too much from these can make products difficult to sell [02:01:51].
Emerging Niches and Opportunities
India’s diverse and evolving market creates opportunities in micro-niches:
- Pets: The pet care market is rapidly growing, especially among “DINKWAD” (Double Income No Kids With A Dog) households who spend significantly on their pets [01:54:02]. Pet accessories and grooming offer high-margin opportunities [03:08:14].
- Home Goods: Categories like cutlery, crockery, and home decor, where new designs can easily enter the market, present opportunities [03:07:05].
- At leisure: The athleisure market still has significant space for growth, especially for brands that can offer good fit tailored to Indian body types [03:11:02].
- Men’s Beauty: The men’s beauty market, particularly products addressing specific concerns like under-eye circles or blemishes, is an untapped opportunity. Packaging these as “problem-solution” products rather than “makeup” can overcome stigma [03:12:29].
- Seniors: There’s a growing demographic of seniors with disposable income who want to enjoy life and are an underserved consumer group [03:16:19].
- Gamers and Gamblers: These large communities lack specific brands catering to their lifestyle and needs [02:15:05].
- X-Free Life: A segment of consumers demanding products free from specific ingredients (e.g., gluten-free) reflects a growing preference for niche diets and lifestyles [02:11:20].
- Children’s Products: Despite a large birth rate, there are few large, established brands in children’s clothes, accessories, and furniture, presenting a huge opportunity [02:16:24].
Identifying Opportunities:
- Underpriced Attention: Find where your ideal customer spends time and identify channels where attention is underpriced [01:49:05].
- Pre/Post Product Market: Instead of competing directly in a crowded category, consider launching a “pre-product” (e.g., before shampoo) or “post-product” (e.g., after shampoo) to capture existing customers [01:50:08].
- Unorganized to Organized: Look for highly unorganized categories that are starting to formalize, like atta (flour) or toilet cleaners [01:52:49].
Challenges and Learnings in Brand Development
- Brand Quality and Product-Market Fit: Product quality is paramount, especially in the 0-20 crore revenue stage [01:25:40]. Compromising quality for speed of launch can lead to long-term negative consequences [03:18:02].
- Scaling is Difficult: While easy to start, scaling a brand in India is challenging [01:11:06]. Scaling requires efficiency in performance marketing, sourcing, and design [01:14:10].
- Avoid Head-to-Head Competition with FMCG Giants: Companies like Unilever or ITC will aggressively defend their market share and may pursue legal action against competitors [02:12:12]. It’s better to find a niche and innovate rather than directly compete [02:13:32].
- Importance of Brand Name and Logo: A key reason for brand failure can be an unsuitable name or logo that doesn’t resonate with consumers or align with category codes [03:17:18].
- Returns Management: In e-commerce, particularly fashion, high return rates (30-35%) due to fit or customer behavior can significantly impact business economics. Ensuring good fit and clear communication can reduce this [02:28:40].
- Operational Hygiene: For solo founders or small teams, maintaining a monthly checklist of operational details (e.g., correct tax categories on platforms) is crucial to avoid costly mistakes [03:19:04].
- Focus on Product Quality, Content, and Community: Prioritize these over performance marketing [01:25:28].
- Distribution Mix: Aim for an 80% e-commerce platform (e.g., Amazon, Myntra) and 20% Direct-to-Consumer (D2C) mix for reach and data [01:25:54].
- Lean Inventory for Fashion: In online fashion, high stock turns (7-8x minimum) are crucial for managing working capital [02:17:47]. Online platforms also favor “width” (more SKUs/options) over “depth” (more inventory per SKU) due to algorithmic weighting [02:18:12].
- Growth Hacking: Identify what each platform values (e.g., Myntra values new styles, Amazon values customer reviews) to gain visibility without excessive ad spending [01:39:37].
- Leverage Data and AI: Use data science and machine learning for demand forecasting and dynamic pricing to improve accuracy and profitability [02:20:45].
- Talent Acquisition: Hire individuals with specific skills in growth hacking, content creation, or platform expertise [01:45:49].