For every sector, there are great opportunities to sell in India, but only 20% of companies understand how to seize them
“If you can believe the news, the growth expectations for India are huge, and it is easy to sell in India. In every market, India is the largest, and there will be a lot of profits to be made in the next ten years. But if you, as a foreign company, move into India, you soon find out that those figures do not apply to you. At least, if you don’t start with the right sales strategy,” says Klaus Maier, founder and Managing Director of Maier+Vidorno . “When you understand India and the Indian market, a world of opportunities opens up for you.”
Klaus has lived and worked in New Delhi for almost twenty-five years. First as a representative of Europe’s largest transport and distribution company, Stinnes AG. For the past twenty years as the founder and Managing Director of Maier+Vidorno (M+V) , a leading agency that helps foreign companies sell in India. “I see most international companies fall into the same trap; the big statistics dazzle them, and expect endless opportunities from the Indian market. They come to this country purely to sell the products they export already and think they can make a quick profit. From experience, I can tell you that 80 per cent of these companies don’t make it, and leave within a few years”.
Dare to adapt your product to India
According to Klaus, a foreign company almost always enters India in the highest market segment simply because most of their products are of higher quality and therefore a higher price. “That high segment often represents only 15 to 20 per cent of the entire market. So you read, for example, that your total market is around 5 billion US dollars, but that exclusive, expensive segment is only 5 million. So if a company has not researched their market properly, that difference sets sky-high and, above all, unattainable targets”.
Successful companies all have one thing in common: a long-term plan for at least the next five years, with goals based on realistic expectations. “Companies often discover over time that there is a huge and growing middle segment just below the top end with many more potential customers. However, international products do not match the needs of those consumers. If you have a long-term plan, which already includes the feasibility of starting production in India, you can eventually adapt your product so that you can serve a much larger part of the market in India. Also, you will reduce the production costs of your high-end product”.
One distributor in India is never enough, compare India with Europe
Maintaining your traditional sales strategy in India does not work. But the lessons of your distribution system in Europe can be put to good use in India. “Starting with just one distributor or sales partner is one of the most common mistakes foreign companies make in India. In terms of size, structure and diversity, you can compare India with Europe. Language and culture differ by state, and you have to adapt to that. An Italian distributor doesn’t stand a chance in Norway either. So if you only have one distributor in India, he probably only has a good network in one state, and sales are limited to that state. You need at least four distributors in India.”
According to Klaus, most companies take about five years to learn these lessons on their own. “That’s five wasted years. As a company, you can bypass that with the right long-term strategy.” Those who take India seriously don’t start with a distributor but choose a dedicated local manager in India. “Of course, it is important to find the right manager who understands your product and the market. We often see that European companies allow themselves to be captivated too easily. Finding the right partner is just like dating, you have to make a lot of appointments, meet a lot of people and then you learn fast enough who you have the most from”. Together with this manager, you can map out the market, set up your logistics network, and organise your after-sales service – one of the essential elements of sales in India.
Efficiency and quality are the strengths of foreign players in India
In the coming years, Klaus sees excellent opportunities for high-tech companies developing medical equipment, for example, or products in the renewable energy sector. “In India, there is not only a need for these kinds of products, but the country itself also cannot yet produce them. So it’s a gap in the market. But this should not deter other companies that sell products that India already produces. There’s plenty of possibilities for them to succeed, too.”
And that success, according to Klaus, lies in the fact that most foreign products are more efficient than the versions produced in India. “An example. The tractor industry in India is one of the world’s largest, but there is still a world to be won. Most tractors produced in India have about 40 horsepower, so they’re not that strong. On the other hand, the ploughs needed require a much stronger engine—a mismatch, where there is a great opportunity for an international producer. The example proves that if you know the figures of the market and know what they mean for you as a company, you can succeed in India”.
To sell in India, you need to go online
The same applies to the thriving Indian e-commerce sector. Predicted profits are high, and the corona crisis seems to be accelerating the industry. “Five years ago, everybody paid cash at the door. Now we see that rapidly shifting to online banking. The number of people with an internet connection continues to increase, and COVID-19 is encouraging people to make payments online. But you have to look at these figures in the right perspective because where is this growth? Mostly in the countryside. Then you shouldn’t have high expectations, because your high-end product will never reach those customers”.
For city dwellers, an e-commerce platform is essential. “Indians like to go to the mall in their spare time, but they don’t buy anything in those shops. They mainly want to experience the product there and then buy it online at home on an e-commerce platform, where they can keep the different options side by side. A successful e-commerce platform does not function in India without physical shops and vice versa.
The Indian government also benefits from more international investors.
Finally, Klaus expects that legislation will change a lot in the coming years and will facilitate sales for global companies in India. “The Indian government is still facing a significant challenge: creating jobs for the country’s large group of unemployed young people. For this, it needs foreign investors. India has been very protectionist over the last decade, and the government is keeping the market tight to protect local entrepreneurs from international takeovers.
Because of the corona crisis, we see the interest of international companies in India growing. They want to spread their opportunities, and next to China, India is the smartest move. I, therefore, expect that the Indian government will review the rules for exports to India and relax the strict labour laws somewhat. That will bring not only us, the international entrepreneurs but also India itself many new opportunities”.
Our partner IndiaConnected interviewed Klaus Maier. We translated the article from Dutch.