The new target of Indian firms: The poor

By siliconindia   |   Wednesday, 21 October 2009, 15:01 IST   |    4 Comments
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The new target of Indian firms: The poor
Mumbai: Indian engineers, whose best-known role is to help Western companies expand or cut costs, are now turning their attention to the purchasing potential of the nation's own 1.1-billion population. Long dependent on hand-me-down technology from developed nations, Indian firms are turning into cutting-edge innovators as they target one of the world's last untapped markets: The poor. According to the Wall Street Journal, the trend that surfaced when Tata Motors' $2,200 Nano, hit Indian roads in July, has resulted in a slew of new products for people with little money who aspire to a taste of a better life. For the farmer who wants to save for the future, one Indian entrepreneur has developed what is, in effect, a $200 portable bank branch. For the village housewife, a wood-burning stove has been reinvented to make more heat and less smoke for $23. For the slum family struggling to get clean water, there is a $43 water purification system. For the villager who wants to give his child a cold glass of milk, there is a tiny $70 refrigerator that can run on batteries. And for rural health clinics, whose patients can't spend more than $5 on a visit, there are heart monitors and baby warmers redesigned to cost 10 percent of what they do elsewhere. "There was a large potential market that all the players have not been able to reach," says G. Sunderraman, a Vice President at Mumbai's Godrej and Boyce Manufacturing firm, which developed the inexpensive refrigerator dubbed the 'Little Cool.' "Now economic factors are making these areas more and more attractive." The strong demand for cheap cellphones in recent years revealed the untapped markets in India's villages and slums. Thanks to $20 cellphones and two-cent-a-minute call rates, Indian cellphone companies are signing up more than five million new subscribers a month, most of them consumers no one would have considered serving five years ago. "The biggest threat for U.S. multinationals is not existing competitors," says Vijay Govindarajan, Professor at Dartmouth's Tuck School of Business and Chief Innovation Consultant to GE. "It is going to be emerging-market competitors." What is happening today is much different than the so-called 'sachet revolution' of the 1980s when Unilever and other consumer-goods companies realized they could sell hundreds of millions of dollars and more of their shampoo, detergent, toothpaste and snacks just by selling them in tiny packets. Western companies as well as most large Indian companies have long ignored poor markets because any potential profits seemed too slim. It was too expensive to create a distribution system that could serve the consumer who shops from closet-size kiosks or weekly country markets. The growing awareness of this new market has sparked startups as well as new business divisions in established Indian companies. Everyone from small local players, looking to go national than global with their low-price inventions, to the country's biggest conglomerate, the Tata Group, are in the race. They are trying to figure out what the poor want and how much they are willing to pay for it. Then the companies are going back to their research teams and crafting new products and unprecedented price points. A startup company, First Energy, which was launched with the help of BP PLC, had to reinvent the wood-burning stove to come up with a product that had the convenience and the price to crack the same market. Hoping to help village women who spend hours a day looking for wood and keeping a fire going to cook for their families, the Pune based company adopted the gasifier technology used in power plants to make a stove that would burn more efficiently and with less smoke. Engineers from the Indian Institute of Science in Bangalore designed a stove with a perforated chamber that uses a small fan to get just the right amount of air to keep a fire burning at a high temperature, meaning less smoke and quicker cooking. It has sold around 400,000 of the $23 stoves across India.

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