The top tiers of the population pyramid have been thoroughly advertised to by multinationals. Now, the lower part of the consumer pyramid in India is in the crosshairs for brands seeking new audiences. These segments consist of poorer, hard-to-reach populations–many of which speak minority languages.
Companies like Amazon and Netflix are setting their sights on rural India in particular for their next phase of customer acquisition. Thanks to a fast-growing economy and plenty of potential for rising consumer ambitions, there’s a lot of great opportunity if the offer is right. By 2030, it’s believed consumer spending will quadruple in that segment to $6 trillion.
But many people in this audience are hard to reach in terms of geography and language. These untapped markets tend to be located outside urban areas, or in smaller towns and cities.
According to the 2011 census, it appears only about a third of the country’s population currently lives in urban areas, and they also speak minority languages. In India, this usually means a language other than Hindi or Urdu–and despite a language’s minority status, it can still number a population in the tens of millions.
Challenges for foreign advertisers
Regulatory and censorship rules mean Amazon Prime isn’t really finding a home in the Chinese market. This leaves India as the brand’s largest non-domestic market. Amazon’s strategy seems to be to use its Prime Video streaming service to attract customers to the brand, then convert them to its eCommerce services.
But there may be a problem with this end goal. Recent regulatory changes in India are making it much harder for foreign marketplaces to operate in the country, which has challenged Amazon’s eCommerce retail model.
India’s political attitude tends towards protecting domestic operators at the expense of foreign brands like Amazon and Netflix. It’s unclear what the environment will be like for media and streaming businesses like these in the future, but what is clear is that India has recently become a tougher market for foreign eCommerce brands.
There are also many positives that continue to attract Amazon to the Indian market. Internet access is growing, broadband is relatively cheap, and smartphone ownership is affordable for many. India is on a trajectory to become the world’s third-largest economy, with a huge internal level of domestic private consumption led by a growing middle class.
Despite the environmental challenges, there are still a lot of potential new Amazon customers who have never been online and have yet to try online shopping. It’s also clear that local-language internet and video content attracts large audiences. Amazon’s service aims, in particular, to engage rural audiences in their own languages. The eCommerce platform has identified that 80% of new customers come from outside India’s major cities.
India’s vast online audience is of particular interest to companies like Amazon. However, North American eCommerce brands need to consider the expectations of rural consumers who not only speak minority languages, but also live in remote areas that are hard to reach.
Consumers are interested in a wider range of products than is available to them locally, and there are often barriers to travelling to places where these products are available. Rural areas can be very remote and transport infrastructure doesn’t always make travel easy.
Even if people can reach larger towns, not all brands are available in India’s urban areas because of the challenges of organizing an effective supply chain.
If Amazon’s strategy of attracting frustrated online shoppers using low-profit media services works, India’s market appears to be worth the fight. But it remains a big “if.” Amazon’s strategy is a costly one. This type of over-the-top media isn’t profitable and it’s expensive to create original content or buy digital rights for existing content.
Local competition
Amazon has plenty of competition from local providers, such as Hotstar and SonyLIV, both of which offer local language content. These paid channels are also in competition with free online content, particularly via YouTube.
Although users value content in their own language, the frugal Indian consumer won’t necessarily want to pay for it. Services such as Amazon Prime and Netflix seem relatively expensive when you consider the amount of content they offer compared to cheaper cable operators.
It’s worth noting that Amazon has had to make significant adaptations to accommodate the needs of its Indian audience. They changed their shopping app so that it works on the cheaper handsets commonly used by Indian consumers, and made it easier to continue shopping even if the internet connection breaks down. Amazon has also connected to a network of local distributors where customers can pick up their orders.
RELATED: Cracking the eCommerce ‘Last Mile’ Conundrum in Emerging Markets
Amazon makes a point of offering product descriptions that better serve Indian consumers. Not only does it provide content in its target Indian languages, it has also added more videos to accommodate the needs of less literate users.
The eCommerce giant has also anticipated the needs of the novice online shopper (and India has many) by using its contact network to teach customers how to use the online store.
Logistics and order fulfilment remain key challenges in this market. There are a host of problems to overcome in India, including customer preference for cash-on-delivery and a lack of formalized addresses. Yet despite these challenges, Amazon still appears committed to success in this market.
At the start of 2019, Amazon Prime had some 10 million subscribers in India. Over the next 3 years, it hopes to increase this tenfold. This seems an ambitious goal. But with India’s eCommerce market expected to increase in value to $100 billion in the same timeframe, Amazon can’t afford not to pursue aggressive engagement in the Indian market.
