There’s no question that the Indian market is optimal for foreign entrepreneurial expansion and growth:
India’s rising middle class continues to demand for improved quality and accessibility of products and services in all sectors -- including: infrastructure, electronics, water quality, and even air travel. And this demand is making foreign products attractive to India’s major markets. Yet, entering into India’s market as a foreign company does not always guarantee success.
According to Yale Insights, obstacles foreign companies and startups face stem from cultural norms, complexity of demographic, and regulation. These obstacles hinder their ability to successfully market themselves in a land of opportunity.
While it’s proven to be difficult to enter into India’s complex market for many -- including billion-dollar companies like Henkel, Mary Kay, and Sara Lee, there are three ways to avoid these challenges: leverage India’s robust supply chain, create your own subsidiary, and utilize the growing e-commerce industry.
1. Leverage India’s Supply Chain
According to Harvard Business Review (HBR), it’s important to utilize third party contract manufacturers (CMOs), as import duties, taxes, transportation costs, and slow supply chains can decrease a foreign company’s market size.
By using CMOs, foreign companies can produce consumer goods using low cost, local labor and use locally-sourced ingredients. Thus, causing India’s import duties and shipping costs to decrease, where only necessary foreign materials and/or intellectual property can be shipped from overseas. CMOs provide foreign companies the ability to streamline the manufacturing of their product with minimal capital deployment -- and India encourages it.
In 2014, Prime Minister Narendra Modi and his administration launched a campaign program encouraging companies from all over the world to “Make [their products] in India.” And major companies have already invested in Indian facilities, including a $160 million dollar investment from Mars International in Pune and a 50-acre investment Amway in Tamil Nadu.
CMOs reduce costs, build revenue, and promote growth.
2. Creating Your Own Subsidiary
The advantage to creating your own subsidiary in India is that it establishes trust between you and your customers. Indian customers are attracted to companies who display a long-term commitment to India, and this is a transparent and readily accessible way to do so.
On top of building the foundation of trust, you will be more in-tune with India’s market trends, new opportunity for sales, and are able to adapt your India market- entry strategy according to its market conditions in a timely manner. And most importantly, creating a subsidiary allows you to actively engage with market development and can help company growth in the future.
The first-hand experience you get from owning a subsidiary allows you to gradually develop your own company distribution system, providing you a strong, transparent, and direct pipeline to India’s complex market and its millions of consumers. However, it is important to note that creating, establishing, and building one’s own distribution system takes around two to three years before a foreign company’s structure and business process is fully implemented-- yet, the results are priceless.
3. Utilizing India’s e-commerce boom
According to HBR, “130 million Indians will make an online purchase in 2016. That exceeds the entire population of Japan and is up 76% percent from the previous year. This impressive growth will continue in the next five years,” and that has proven true.
Flipkart, Snapdeal, both Indian e-commerce platform companies, alongside the Indian subsidiary of Amazon, known as Amazon India -- and all have boasted massive growth, year over year. This is because India’s expansive footprint and distribution of wealth lends itself well to this type of consumption for two main reasons:
While mom-and-pop retailers have ruled the Indian market and consumer for years, “rising aspirations across the country” means Indian consumers, many of which are gaining disposable income, are looking for a “wider range of products that are not easily stocked by the local shop,” states HBR.
Further, Indian’s are gaining access to the internet, smartphones, and an incredible rate. In 2017, over 400 million smartphones were distributed across India -- that’s more than the entire population of the United States! And moreover, this number is set to double quickly -- Statista estimates 829 million Indian smartphone users by the year 2022.
Simply put, the Indian consumer’s taste for goods is expanding alongside their income, creating undeniable demand for more products that American companies can provide with massive reach, instantly, at much lower cost than ever before. Reaching into the e-commerce market is a sure-fire way to begin reaching Indian consumers immediately, and bolster your company.