Indian aspirers the next big number

Date:   Saturday , June 28, 2008

Who doesn’t like the aura of ‘big numbers?’ We love talking about their huge impact and their making of great case studies. Big numbers are what headline stories are made of and critical decisions are based on. The impact of these numbers on the macro intent is usually very significant.

Big numbers – in the current Indian electronics context

Wireless
Let us take an example of a big number in the electronic products arena today, the biggest by far. According to the GSM Association, the second billionth GSM user was added to the ever-increasing multitude of mobile users in the second quarter of 2006 – a short two and a half years after the first billion! And today we are rapidly approaching the third billion at an unprecedented speed. The India story of big numbers is even more spectacular. The country recorded the highest ever increase in the wireless subscribers base for a month in June 2007, when 7.34 million new users were added as per the Telecom Regulatory Authority of India (TRAI). This took the total wireless subscribers in India to a whopping 185 million, and the teledensity of the country to about 20%, in June 2007.

So, what is driving the bulk of these mobile phone buys in India? Without a question: Voice, the killer application. Hundreds of millions of people around the country will be making their very first voice calls using mobile connectivity – not with fixed wireline phones. And not unexpectedly – as is the case with the impact of big numbers – mobile connectivity is creating a significant economic advantage to the lives of millions of people in India. Studies have shown the high correlation of incremental mobile penetration to the growth in a country’s GDP. No wonder then that this is a story of pride for the country – and the focus ought to be on the majority. The bulk of these mobile phone subscribers today are first-time users who are moving from a world of the ‘unconnected’ to that of the ‘connected’. Voice is currently the only feature they care for.

The color TV
The other popular medium in India which exhibits the ‘big bang’ number characteristics is the Color TV; one of the most important sources of information and entertainment through mass connectivity. The number of color TV shipments in India is expected to reach 15.9 million units by 2007 (per iSuppli, June 2007). With the number of entertainment, sports, and news channels growing rapidly, the color TV penetration in Indian families is seeing a rapid rise. The bulk of these color TVs (15.5 million by 2007) will be CRTs – driven by high awareness and reliability.

Masked behind the analog transmission and bulk shipments of CRT TVs is a new trend. The transition to digital terrestrial broadcast will happen in Delhi by 2010, and will cover the entire country by 2015. This will create a new demand for digital products. Estimates by iSuppli show that by 2011 about 28% of the total TVs sold will either be HDTVs (High Definition TV) or HD-ready, translating to 5.2 million TV units.

CRT TV shipments, which constitute the bulk of the shipments today, will slow down beginning 2008, while LCD TV’s will see a rapid growth. Their growth rates have a message embedded in them – and it is in sharp contrast to the situation today. The growth rates (2006-11 CAGR) of CRT and LCD TVs will be 5.1% and 81.4% respectively (iSuppli). If we classify the color TV market by faceplate types, we see a clear trend emerging towards migration to flat screen TVs – and to its sub-segment of slim TVs and ultra slim TVs. We will also see more interactive service preferences of consumers, based on IPTV, in contrast to the primarily unidirectional content transmission of today.

Cinema
This article cannot be complete without a mention to the era of Indian cinemas. Cinemas give us a similar experience with big numbers. India produces more than 1000 films a year – and has the world’s biggest box office. A vast majority of these continue to be analog screens that need physical transportation of the reels. We will see a massive shift in viewer experience very soon.

The cinema industry in India is now witnessing a significant change towards digitization. This is completely changing the viewing experience of cinema lovers. The clarity of digital cinema far surpasses its analog counterpart – and the quality of the 100th repeat screening is as good as that of the opening night, unlike what it used to be with the celluloid film which developed scratches after a few runs. This is leading the consumers to show a clear preference for digital screens.

The Indian consumer
Examples can extend to many other forms of media, equipments, and sectors as well. But the underlying theme remains the same. India is a very large consumption market for electronics, and one that is expected to grow to U.S. $58 bn by 2010 (as per ISA, F&S report). The buying preferences of a bulk of the Indian consumers are basic – as stated in the categories above. They are, therefore, usually referred to as “entry level consumers”, “low end consumers”, etc. It is a correct stratification of their no-frills need. This is where the big numbers are.

Lifting the veil – the next wave has arrived
But our excitement with the big numbers brings with it an associated risk. It masks some key attributes and important future trends that get dwarfed beside today’s big
numbers.

Wireless
Let us take a look again at the India wireless market. Yes, there will be hundreds of millions of people in India who will be making their very first voice calls using mobile connectivity. But the story extends further. A vast majority of Indians will make not only their first voice calls, but will have their very first Internet connection using a mobile phone! This will be driven by applications such as social networking, e-education, telemedicine, etc.

Wireless will also drive the size of the India mobile music industry. This is set to become the largest in the world: U.S. $800 million by 2009-10 (as per Cellular Operators Association of India - COAI). Already the size of the India mobile music industry is larger than the regular music industry. Just the sales of ringtones today is estimated to be at U.S. $100 million (and is expected to double over the next 12-18 months).

The mobile gaming market is another case in point. According to COAI, this is likely to grow by 66% in the next 5 years to reach U.S. $336 million by 2009. Similarly, innovative services (from movie tickets and gas cylinder buys to financial transactions) based on SMS are growing rapidly. Newspapers, Radio, and TV channels today get as many as 40,000-45,000 SMS messages each day!

The birth of the ‘aspirers’
Not much is known about this new category of consumers in India. They are the ’aspirers’. They are the ones that are driving the trend towards the feature-rich electronic equipments and value-added service models described above. They are less price-sensitive and more quality and experience focused. However, their numbers remain miniscule yet, compared to the standard stereotyped large mass of Indian consumers whose preferences get categorized as low end and entry level.

54% of the Indian population, i.e., 555 million, is below 25 years of age. 45% of the Indian population is even less than 19 years of age. A large subset of them will increasingly constitute to the bulk of these aspirers of the future. It would be naïve not to focus on their needs.

The ’aspirers’ are (already) born and will soon increase in numbers. The time has arrived when we need to look beyond the current big numbers because today’s ‘aspirers’ are the next ‘big number’.