The $10 Trillion Prize: Captivating the Newly Affluent in China and India
By Michael J. Silverstein, Abheek Singhi, Carol Liao & David Michael
Harvard Business Review Press
Price: Rs 995
If someone were to tell you that India and China are huge consumer markets that will register exponential growth in the future, your obvious reaction would be: so, what's new? But can you actually figure out the amount of consumer spend likely in these two economies? What is on offer is staggering. Aggregate consumer spends could triple in the current decade to $10 trillion annually by 2020. So say Boston Consulting Group's Michael J. Silverstein, Abheek Singhi, Carol Liao and David Michael in The $10 Trillion Prize: Captivating the Newly Affluent in China and India. They term the opportunity a 'once-in-a-lifetime' prize waiting to be won. If you are a businessman looking to expand globally, you cannot but vie for a share of the pie.
Real-life success stories from both countries fill the canvas. Take Rakesh Kumar Sahu of Lucknow, who started as a snack-seller with a handcart but now owns a two-room flat. Or Zhou Zhanghong of Shanghai, who left home at 18 to work at a printing factory in Nanjing. She went on to start her own gift company which now has revenues of $3 million. The book also cites the likes of the 'super-rich' Nandan Nilekani, former CEO of Infosys, as well as the 'left-behind' Bharat Kumar Patel, a cotton farmer from Mehsana, Gujarat, who has Bt cotton to thank for a better, more prosperous existence.
It is estimated that middle class households in China will double to 202 million by 2020. In India, the corresponding figure will be 117 million. But even those who climb out of poverty by 2020, but fail to make the middle class grade, the 'left-behinds', could be lucrative for companies. Their numbers are 200 million in China and 280 million in India, and they will spend $160 billion and $75 billion more respectively than what they are currently doing over the next 10 years.
"Consumers in China and India have high aspirations, are optimistic about their future, and are eager to enjoy their first taste of affluence. Their attitudes are in sharp contrast to those of the recession-humbled consumers in the Western world," the authors say. "The newly affluent consumers in China and India are creating an unparalleled opportunity for growth, which has the potential to lift the global economy out of the gloom that settled during the depths of the Great Recession - what we call the boomerang effect," they add.
So, what are the lessons for companies? While the authors provide several specific market-penetration strategies for each class and segment of consumers, there are some broad prescriptions as well. One has to be mindful of the paisa vasool (Hindi for value-for-money) motto, they say. "Companies must provide a unique value proposition: products that square the circle by being affordable and of high quality. Done right, this strategy can simultaneously deliver gains in market share in China, India and the rest of the world." Companies should also strive for 'local, local' customisation, whereby products are tailored for the local customer alone.
The purpose of the book, the authors say, is to educate leaders seeking a better understanding of consumers in India and China. There is a note of caution too at the end: "China and India are not sure bets. They are fraught with risks and dangers (corruption, asset bubbles, political and social disharmony, pollution, natural disaster and political and economic conflict). Companies must navigate these markets with their eyes open."