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Friday, January 20, 2017

India "missing middle class" fact of the day

I have blogged earlier here, here, and here highlighting the point that India's consuming class may be far smaller than anticipated. The big story about India's middle class may be that it is "missing". 

The latest exhibit is this article in Livemint which questions whether Amazon went wrong with its $5bn bet on India's massive middle class making India its second largest market,
Amazon’s expansion was fueled by an unprecedented spending spree - it has already pumped in more than $2 billion and has promised to invest $3 billion more. However, most or all of Amazon India’s gains in 2016 came at the expense of Flipkart and Snapdeal and not from an expanding market, raising questions about its massive capital commitment to India and whether it is generating enough bang for its buck. E-commerce sales in India were just around $14-14.5 billion in 2016, little changed from 2015... unless the online retail market bounces back, Amazon may take much longer to realize its stated objective of making India its second-biggest market in the world after the US over the next few years. Already, analysts’ estimates of a $60-100 billion e-commerce market in India by 2020 are looking fanciful.
I had also written about the difficulty of Amazon being able to make $3 bn worth investments. I had argued that the only way to spend this money was to capture market through deep-discounting. 

But this standard market capture strategy successfully adopted by e-commerce and aggregator firms across the world too may not work in India. India's extremely price sensitive consumers are most likely to exit the market if firms try to raise prices once they achieve market dominance. 

1 comment:

Anonymous said...

Your point made the cover of the Asian edition of the Economist. I found your blog while searching for it. I intend to stick around and read more.

https://www.economist.com/news/briefing/21734382-multinational-businesses-relying-indian-consumers-face-disappointment-indias-missing-middle