TOKYO -- Japanese consumer goods makers are eager to take advantage of the increasing number of middle-income earners in India. But they face a variety of difficulties, such as inadequate logistics infrastructure and a lack of large retailers to sell their products to.
Naoyuki Maekawa of the Japan External Trade Organization, an expert on the Indian market, recently spoke with The Nikkei about business conditions in the country.
Q: How is the consumption environment in India?
A: The number of middle-income households earning $5,000 to $15,000 a year is increasing. This growth of the lower-middle class is forecast to increase some 2.3 times from 2009 to 713 million in 2020.
But the consumer goods market is not expanding as fast. The number of people with income for leisure spending are limited. People in rural areas account for 70% of the population. They rarely visit supermarkets and similar retailers.
Q: What is the standard of living like for lower-middle class Indians?
A: They have started purchasing durable consumer goods. Many buy motorcycles and TVs before refrigerators and air conditions.
Q: How do Indians view Japanese consumable goods and food?
A: Japanese products are considered safe but are yet to be widely accepted. They generally cost more than European and U.S. products. Nestle of Switzerland dominates the instant noodle market, while Procter & Gamble of the U.S. has overwhelming market share for detergents.
Middle-class Indians are conservative consumers. They are willing to spend on their children, and Yakult of Japan is expanding operations by promoting its fermented lactic drinks, priced at around 10 rupees (18 cents) each, as suitable for youngsters.
Q: There are logistics problems.
A: Powerful wholesalers provide goods without taking consumer needs into account. Infrastructure has yet to be sufficiently developed, so goods are often delivered late. If the retail market is fully opened to foreign companies, increasing competition will improve wholesale mechanisms and goods are more likely to be delivered on time.
Q: What do Japanese companies heading into India need to do?
A: They shouldn't consider India an Asian market. Indians are more familiar with European products than Japanese and Chinese. Consumers are interested in the Uniqlo casual wear chain possibly because Fast Retailing operates it in Europe and the U.S. Strategies that work in China and Southeast Asia are unlikely to succeed in India.
Interviewed by Nikkei staff writer Miho Gatayama