Where capital and growth can best be generated, capital will always flock.
"Where consumer demand grows, it makes sense to build a supply chain."
This sentence by Wharton management professor Saikat Chodou is also accurately reflected in the Indian market. At present, India already has 40,000 emerging companies and nearly 40 unicorn companies. Among the many investments, only 10% came from India, and 90% of the funds came from the United States, China, Japan and Singapore. It is also worthy of the name of the third largest emerging enterprise ecosystem after the United States and China.
From apparel retail to mobile phone manufacturing, from e-commerce to cultural entertainment, multinational companies and capital giants have come to the Indian market to race, what kind of charm does India have? In the process of Nuggets India, what confusions and problems do companies have?
01 Xiaomi's feast is over in India?
If you ask which industry in China has achieved the most dazzling results in India, it must be smartphones.
In 2019, India becomes the world's second largest smartphone market after China, while domestic mobile phone brands such as Xiaomi, OPPO, vivo, Realme, etc. account for more than 60% of the Indian smartphone market, with more than 450 million users.
This all began when the Modi government took office in 2014 to implement the "Made in India" national strategy. The Indian government has given great policy concessions to attract foreign investment. Millet represented by vivo, OPPO, Gionee, Lenovo, OnePlus and other domestic mobile phone brand manufacturers, without exception, built large factories in India's horse race. Compared with the fiercely competitive and shrinking demand in the domestic market, the Indian market has become a new engine for Chinese mobile phone manufacturers.
According to data from the fourth quarter of 2019, Xiaomi's share in the Indian market continues to be the first with a 29% market share, followed by Samsung, vivo, Realme, OPPO and Apple. It is worth noting here that Apple has achieved its best performance in India, with a year-on-year growth rate of more than 200%.
Over the years, Apple has struggled to capture India 's market share, but its high price has discouraged many Indian consumers. Disappointing performance in the fast-growing Indian market has been one of the reasons why Apple 's performance has been weak. It seems that Apple's multiple price reduction strategies in the Indian market have achieved remarkable results.
As India still has a large number of poor people, the Indian smartphone market is very price sensitive. IDC data shows that the average selling price of mobile phones in June 2019 was $ 159.
On the other hand, Xiaomi's entry into the Indian market soon won the craze of Indian consumers-Xiaomi's mobile phone "glitters" like an iPhone, but the price is only 1/3 of it.
However, the new crown epidemic, which began in early 2020, put the good momentum on the brakes.
When the epidemic spread globally, India also had to implement a 21-day national blockade that began on March 25, and then extended to May 3. Subsequently, Samsung, OPPO, vivo, Xiaomi, Hon Hai and other mobile phone manufacturers closed their factories in India, and all offline mobile phone stores in India were also closed.
According to market research agency Counterpoint Research, India 's blockade will cause shipments in the Indian mobile phone market to fall by nearly 60%, and the Indian smartphone industry is expected to lose approximately $ 2 billion in revenue.
To make matters worse, due to the inversion of the tariff structure, the GTS tax rate for mobile phones has increased from 12% to 18% from April 1, which means that the profit margin of smartphone manufacturers in the Indian market will be greatly compressed.
Manu Jain, general manager of Xiaomi India, said that due to the increase in goods and services tax, all smartphone manufacturers will be forced to increase prices. For the price-sensitive Indian market, this may reduce demand and weaken the mobile phone industry's "Made in India" plan.
Counterpoint Research deputy director Tarun Pathak believes that when the new crown epidemic brings great uncertainty to the entire electronics industry supply chain, the price increase means that some users will become second-hand mobile phone users, or even turn to the gray market.
The global shipments of smartphones have become saturated, while India still maintains strong growth, so the Indian market has always been regarded as the key to the success of any smartphone company.
When sales in the Indian market stalled and economic life gradually recovered after China's domestic epidemic was under control, these domestic mobile phone manufacturers had to put sales hope back into the country.
However, the outlook for the Indian market does not seem pessimistic.
Pankaj Mohindroo, chairman of the Indian Mobile Data and Electronics Association (ICEA), said a few days ago that the prolonged closure of India will obviously increase the losses of mobile phone manufacturers, but it is not a bad thing in the long run.
Mohindroo said: "Everything is now in an uncertain period, but what is certain is that after the closure of the city, people understand the importance of smartphones because they see that only a smartphone can survive a business. Our Education is also turning online, and many people learn through smartphones. "
He also said: "People are now finally realizing the huge value of it (mobile phones). Therefore, we don't think the demand will drop. Feature phones will still have a good market, because people who don't have smartphones will start buying now. "
According to Mohindroo, Chinese companies have a considerable share of the Indian market and will eventually be able to cope with the challenges they face. For Indian companies or smaller manufacturers, the challenge is very severe.
02 Uniqlo's "second battlefield"
Speaking of Indian clothing, many people may have the impression of exoticism. However, in the past decade, India's demand for modern clothing has grown rapidly, and international fast fashion brands have finally begun to taste a little sweetness in the Indian market.
Although it is not too early for international fast-fashion brands to enter the Indian market, it is only a matter of recent years that good development momentum has emerged.
Among the three largest apparel companies in the world, ZARA, owned by Inditex, seized the opportunity to enter the Indian market in 2010. At that time, India's fast fashion market was immature, but Indians had long lost interest in some fashion brands that had been operating in the Indian market for nearly 20 years. As soon as Zara appeared, it showed amazing sales. Zara's opening of stores in the Indian market is not fast, and it has only been profitable after operating in India for seven years.
In 2015, H & M entered India. At this time, the Indian market has quietly changed. H & M entered the Indian market for six months and achieved profitability. In the four years of entering the Indian market, H & M's annual sales have exceeded 11 billion rupees, becoming the fastest-growing fast fashion brand in India. At the same time, India has become one of the strongest growth points in the H & M global market.
After 10 years of thinking, Uniqlo finally began to enter the Indian market. The Japanese retailer's first store opened in New Delhi in October 2019. When it opened for business on the first day, nearly 400 people queued for shopping. A month later, Uniqlo opened a second store in India.
This made the CEO of Uniqlo's parent company, Liu Jingzheng, ten years of deliberate thoughts, and said, "In order to seize India's diversified and growing potential consumers, the company is ready to make unlimited investments in the Indian market.
What made fast fashion brands start to value the Indian market?
In the past, due to the particularity of India 's economy and society, Indian natives preferred cheaper, comfortable clothing, and would not choose too fashionable clothing. The changes in lifestyles and the increase in disposable income have spawned brand-conscious middle-class consumers, local brands have brought contemporary international fashion into Indian stores, and well-known international brands are doing business in India. These factors ultimately promoted Indian people 's Perception and pursuit.
On the other hand, money in the Chinese market is getting worse and worse.
Forever 21, founded by the Korean couple Zhang Dongwen, entered the Chinese market in 2008. Since the end of 2018, it has closed stores in Tianjin, Hangzhou, Beijing and Chongqing. In 2014, New Look, one of the British fashion retail giants, entered the Chinese market in the form of direct sales; after entering 2017, New Look's performance turned from profit to loss, and the debt-ridden New Look had to slow down its expansion plan in the Chinese market. In October 2018, New Look announced its formal exit from the Chinese market.
In recent years, quite a few brands have broken out of the Chinese market. With the changing consumer habits of Chinese consumers and the overall impact of e-commerce on physical businesses, including fast fashion, the Chinese market has already passed the stage where anyone can share a slice of the cake.
With a population of more than 1.3 billion consumers, it is not surprising that the Indian market has become a must-have for these fast fashion companies.
However, it is still too early to conclude whether the Indian market is a piece of sweet meat. According to the "Indian Business Fashion Report 2018", although the demand for modern clothing is growing, traditional Indian clothing still accounts for 70% of women's clothing sales in 2017 and is expected to drop to 65% within 5 years. For these fashion brands, the Indian market is not a good bite.
At the same time, e-commerce giants are also in a fierce collision with traditional business models in India. Under the wheel of the times, no one can escape. The same is true for the Indian market.
Only by recognizing the times, keeping up with the market and embracing change can we be invincible.
03 Amazons are still on thin ice
In 2019, India surpassed the United Kingdom and France to become the fifth country in the global GDP ranking. With the rapid economic growth, India's Internet industry has also begun.
From a global perspective, the two countries with the best development in the Internet industry—China and the United States—have one thing in common, that is, a large population base.
In recent years, the Internet penetration rate in India has exceeded 40%. According to public data, the number of Internet users in India was 355 million in 2016, second only to China, and by September 2018, the number of Internet users in India had grown to 560 million. According to the prediction of the World Bank, India's demographic dividend will continue. It is estimated that by 2025, the number of mainstream Internet users between the ages of 14 and 48 will reach 800 million.
Although the percentage of 40% seems to be low compared to the 76% penetration rate in the United States, considering the large population of India, this still represents 500 million consumers.
In addition, compared with other major markets such as China and the United States, India's population is relatively young. In terms of specific structure, 85% of people under the age of 54 in India, 65% of people under the age of 35, and the proportion of people aged 0-24 far exceed China.
Indian millennials are mostly well-educated and have strong purchasing power. This generation will be the main driving force of digital consumption. Consumer brands are also well aware of this truth, and use the Indian millennials as the main population for traffic capture.
With a population of 1.3 billion and a purchasing power of 9.7 trillion US dollars, India is bound to be an ideal market for emerging economies such as e-commerce, social media, and digital content.
Tik Tok's overseas version of Tik Tok and social platform Facebook, both owned by ByteDance, have the world's largest user base in India. Against the background of the Chinese market, major streaming vendors have diverted to India, including streaming giants such as YouTube, Amazon, Netflix, Disney and local platform Jio. Currently, there are more than 30 global streaming media gathered in India.
However, the Indian market is not like no one.
In 2015, the social media giant Facebook launched a program called Free Basics in India. This program recommends some applications to users for free by working with some network service providers. However, India banned the project in 2016 because it violated India 's network neutrality rules, which require network service providers to treat all online content equally.
However, the good news finally came. On April 22, according to the British "Financial Times", Reliance Jio and Facebook, a subsidiary of Reliance Industries, announced that Facebook will invest $ 5.7 billion in Reliance Jio and own Reliance Jio 9.99 % Equity, making it the largest minority shareholder of this Indian telecommunications operator. With attractive service prices, Reliance Jio has become the most popular mobile operator in India, with approximately 370 million users.
With 300 million Facebook users and 400 million WhatsApp users in India, what does the world's largest social media giant want? The obvious answer is the next billion users.
Jio has a large number of entertainment applications to attract users, including online movies Jio Cinema, live TV Jio TV and online music Jio Saavn, what Jio lacks is Facebook's social media genes. It is said that before Facebook, Google also tried to acquire a stake in Reliance Jio.
Although the "next billion users" are right in front of us, the differences in concepts and culture cannot be ignored, and the e-commerce platform represented by Amazon and the chain retailer represented by Wal-Mart have a headache.
With a market share of less than 1% in China, Amazon sees India as the biggest opportunity after the saturated US market.
But Indian retail shop owners did not agree. In New Delhi 's largest wholesale market, former competitors have united unprecedentedly against this giant "intruder". They claim that these intruders are engaged in predatory pricing, which violates the government's policy to protect local businesses. According to media reports, as many as 700 protests against Amazon and Wal-Mart.
"Amazon is the second East India company." Praveen Kandelval, secretary-general of the Federation of Indian Merchants, said at the Madrid protests. "The motivation of these big companies is not to do business, but to monopolize."
After Walmart announced the acquisition of Flipkart, Indian shop owners accused Amazon and Flipkart of circumventing the rules through predatory pricing and large discounts. Due to too much resistance, companies such as Wal-Mart and Carrefour almost gave up their plans to open stores of the same name in the country.
In 2019, the government introduced regulations to tighten the sales of goods on e-commerce platforms, which forced Amazon to withdraw thousands of products from its platform and reorganize most of its local businesses.
It seems that Indians still need time to accept online shopping. The data shows that the sales of ubiquitous traditional couple shops in India are still growing. According to data from consulting firm Technopak Advisors, although e-commerce and large retail chain stores have seized market share since 2014, and the total retail share of these stores has declined, the Indian consumer market has expanded so fast that The absolute consumption value of the husband and wife shop still increased by nearly 60%. Modern retail chain stores account for only 10% of the Indian retail market.
Large retailers and e-commerce companies have found that it is almost impossible to compete with this traditional business model in India. Morgan Stanley's data shows that by 2026, India's e-commerce sales are expected to reach 160 billion US dollars. Compared with China 's daily sales of major platforms in the Double 11 event in 2019, which reached 500 billion yuan, the Indian market, which has a roughly equivalent population, is indeed a virgin land to be reclaimed.
04 Flying pigs in the sky, money can not sleep
Why is India?
Li Hui (pseudonym), a private entrepreneur who made an investment in Myanmar ten years ago, told Yidian Finance that in 2011 Myanmar's anti-China was serious, infrastructure was poor, government corruption was serious, many central enterprise projects were stopped, and private entrepreneurs were even more It has long been withdrawn from Myanmar. Now he has withdrawn to the country and contracted 300 acres of blueberry cultivation in Dehong, near Myanmar in Yunnan Province.
Li Hui said that although Myanmar's low labor cost is an advantage, but comprehensive consideration, the final cost of the enterprise is actually more. "Now everyone has changed a game. Many manufacturing companies in the mainland moved to Dehong, Yunnan to build factories, and then hired Burmese to reduce costs."
Compared to other countries in Southeast Asia, India seems to have more advantages.
With a strong economic growth, a young population structure, low labor costs, a favorable policy environment, an education-oriented talent training system, and a huge internal consumer market, India is the most attractive market among emerging markets in terms of comprehensive consideration.
Especially since 2014, the slogans of "Made in India", "Indian entrepreneurship, the rise of India" and "Digital India" proposed by the Modi government have greatly promoted the entrepreneurial boom in India.
In the face of huge opportunities, various venture capital forces gathered in India, hoping to share market dividends: international VC represented by Tiger, Sequoia, DST, and the speed of light, Chinese giants represented by Tencent and Ali, and Kalaari capital The Indian VC represented by India, and Chinese startups represented by ByteDance and UC together constitute the territory of the Indian venture capital market.
In the wave of investment boom that emerged around 2014, due to the relatively blind investment decisions at that time, the entry of funds did not spur the birth and growth of unicorns. In the context of the gradual decline of China Mobile's Internet growth dividend, gold rushing to India has once again become a common choice for all capitals.
There is a saying in the investment circle: Everyone is betting on the future of India, whether there will be the next Alibaba, JD.com, Alipay, Tencent, and Vipshop.
Among them, Chinese capital is particularly active in India. According to IT Orange statistics, behind the 20 Indian unicorns, more than 10 have investors from China, of which Alibaba and Tencent are the most shot institutions. Alibaba's cumulative investment exceeded US $ 3 billion, and Tencent's investment exceeded US $ 2 billion.
India and China have a similar urban-rural dual structure and a considerable population. These opportunities give Chinese capital a unique advantage with reference to the history of China 's Internet development, copying China 's mature model and seizing the Indian market gap.
Therefore, for Chinese investors, the difficulty for Chinese investors to understand Indian projects is far less than the difficulty for American investors to understand Chinese entrepreneurial projects more than a decade ago. To a certain extent, this means that Chinese investors who are familiar with the Chinese Internet industry model can better and faster identify potential projects in India.
But the status quo that cannot be ignored is that YouTube, Google, and Facebook-based products WhatsApp are still popular applications in the Indian application market. American Internet company products are still the channel overlords. Chinese Internet companies need to work harder to go to India.
05 Conclusion
The Indian market is such a love and hate, no one can ignore this huge market, but nowhere to start this gold mine.
But remember that old saying, where growth and profit are best, capital will always flock.
Entrepreneurs who have grown up in China's reform and opening up have seen the imprint of China's development from India's development, but we don't know whether India will also experience the setbacks that Chinese entrepreneurs have experienced, nor do we know whether India can successfully break through.
The competition of various capitals in the Indian market has just begun. In the end, is this a paradise for entrepreneurs or their "desperate land"? Just waiting for the epidemic to pass, the more fierce melee in the Indian market will finally come to the fore.
