Decoding Bharat - Further Reflections

Why 'Bharat' is a misleading term, how aspiration drives consumer behaviour, and a different framing of the Indian consumer

I've been trying to visualise the underserved non-Tier 1 consumer (one iteration of this was in my first post - Decoding Bharat). A couple of months on and a lot of conversations later, I have realised that the nomenclature 'Bharat' is a little problematic. It paints the wrong picture for a casual reader, and leads to a vacuous and potentially detrimental understanding of the consumer, the market, and it's potential.

You see, nomenclature (like acronyms and frameworks) exists for a reason. All of these techniques help to summarise concepts and provide a starting point to dive deeper into any concept. Some nomenclature also helps you to visualise the concept in your mind better. So while 'Bharat', is in some sense, an accepted term to denote a consumer who is different from the readers of this newsletter, there are important nuances to understand and internalise.

The Bharat consumer is very heterogenous. This is in stark contrast to the Tier 1 consumer who is more likely than not working with a salaried income, uses English as an almost primary language, has a credit card, and lives in an upmarket location in an Indian metro. I'll attempt to add some (more) nuance to the characterisation of the Bharat consumer as it stands today.

(Side note: The homogeneity of the Tier 1 customer base is also what makes things easier for entrepreneurs - what has worked in general in the West in terms of tech products can be extrapolated to having a valid market in Tier 1 India - the latest example is artisanal coffee.)

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Bharat != Hindi

The first dissonance in perception vs reality is in the language - Bharat evokes a Hindi connotation, and by extension a Bharat consumer is someone who speaks in Hindi. Here's the first problem. There's almost an instant blindness to the fact that native Hindi speakers are only ~40% of the population according to the latest census, and the remaining ~60% is spread across Bengali (8%), Marathi, Telugu, Tamil, Gujarati++. The 40% Hindi speakers are also not homogenous in terms of language. Anyone who has spent enough time in North India knows that the version of Hindi spoken across North India varies widely according to the region (and this local Hindi is almost always secondary to the actual spoken dialects).

So while Bharat is actually intended to categorise the large number of non-English speaking consumers in the country, it unfortunately sometimes restricts the narrative to a Hindi speaking consumer¹.

Bharat != lower income

The second dissonance is that of income. When you hear Bharat, you're automatically thinking of someone who speaks Hindi, lives in Meerut and has a lower income range compared to someone who speaks English, and lives in Delhi. But this is not strictly true. As I'd talked about in Decoding Bharat, the conclusions about income range are made from data which is likely incomplete (either underreported or just plain incorrect, because the rural economy is by and large informal). Somebody who has Hindi as his primary language and lives in Meerut might well be significantly more well off economically than the average English speaking marketing manager in an MNC in Delhi. Bharat is not automatically lower income - this is important to understand and internalise.

Bharat != Villages

The third dissonance is around where this consumer lives. Bharat feels like ‘village’ but it’s actually a large % of Indias population which lives outside the 4 metros but not in villages - in large and bustling Tier 2, 3, 4 cities like Bhopal, Vadodara, Coimbatore, and Vishakhapatnam, which are centres of industry and commerce in their own right.

If we put all this together - when we hear Bharat, we visualise someone speaking and thinking in Hindi, with a low income, and probably lives in a village with farming as his primary source of income.

But what we should be visualising instead is completely different.

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The India 2 Consumer - by the numbers

Purely by numbers, a large part of India’s population lives in Tier 2/3/4 towns (23%), speaks the local language (~90% don’t have any level of proficiency in English), and is young (around 65% of India's population is below the age of 35, with 35% in the 15-35 bucket). This paints the picture of a young an aspirational population, which thinks and speaks an Indic language, and lives in towns which are urbanising at a fast pace, and have their own version of ‘big city life’.

This is the median non Tier 1 consumer, who founders and builders should be visualising and building for.

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India 2 and Aspiration

Now let's ask another question - if you were to visit the town centre of a Tier 2 town like Coimbatore, who would you see?

You'll see young people and, more importantly, the trappings of aspiration all around you - from smaller malls, to local versions of fast food and coffee joints, to air conditioned supermarkets.

This is all to serve an audience which has now seen what is possible, and wants more.

This is in stark contrast to people growing up in the 80s and the early 90s, when the level of what an average individual could aspire to was very different - a steady job, a two wheeler (and a bike), a TV and a fridge. This has changed dramatically over the last 10 years.

Today, aspiration drives a lot of India 2’s consumer behaviour.

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Sidebar: Why were our aspirations different in the 80s and 90s? I think it was because we didn't have 2 things.

One is success stories - people from middle class families didn't become wildly rich. Our role models were restricted to the occasional distant IAS relative who had a government bungalow and a car with a driver. Today, our role models and their paths to success are many, from entrepreneurship to content creation to trading. (Of course the government job nexus refuses to go away completely, but all in good time).

The second thing that was missing was the internet - the democratisation of content creation and consumption has made these varied success stories extremely visible and part of the vocabulary of a young and aspirational middle India. For the first time, there are now visible alternate paths to success, and young people are willing to experiment and take risks to improve their quality of life.

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Aspiration and faux-premiumisation

Let's put ourselves in the shoes of a 25 year old from a middle income family in a Tier 2 town. He speaks Tamil, and spends a lot of his time on Instagram and Youtube, and as a consequence is exposed constantly to the 'good' life - flashy cars, new hairstyles, fast food and coffee, bluetooth earphones, sneakers++.

And he wants all of it.

But he can't really afford the actual fancy stuff. So what gives?

(There’s a story to be written here about the outpouring of demand for retail credit - across personal loans, consumer durable loans, and assorted other products - but thats for another time)

This has led to the rise of a trend I like to call faux-premiumisation.

Observers of the consumer retail space would be familiar with the term 'premiumisation' where increasing aspirations and disposable income leads to an increase in the consumption of branded goods vs unbranded goods. The consumer preference goes upwards. By and large, this trend has been talked about only in the context of the Tier 1 user.

Faux-premiumisation on the other hand enables the India-2 consumer to get a 'premium-like' experience at an affordable price point. The consumer preference doesn’t really go upward, it goes sideways. It gives consumers a taste of the ‘big city life’ and what it entails - supermarkets, malls, fast food, large electronic showrooms, but in an accessible manner.

A few anecdotal examples where enterprising entrepreneurs have tapped into this aspirational demand

• Electronics - The white coloured bluetooth earphones are familiar to all of us - the ultimate flex of an Apple Airpod. But if you go to Palika Bazaar (an electronics marketplace in Delhi), you'll be able to pick up working knockoffs of the Airpod for 300 INR. In a triumph of jugaad and tapping into consumer demand, mobile phone shops there will also now replace the back cover of your android phone with a case with an Apple logo. (Readers familiar with Delhi will be able to appreciate that Palika Bazaar is majorly frequented by an India 2 consumer.)

• Food - Fast food has long been an aspirational status symbol for India 2. The consumer wants to graduate from his local samosa thela to the Dominos that is shown on TV. Dominos and McDonalds have done this by altering their price points, but entrepreneurs in small towns in India now also created their own version of Kentucky Fried Chicken, with 'Kentucky' replaced with whatever local area the store is in. More often than not, the branding, colours and food will follow the KFC model closely, giving the fast food experience (which includes different food, comfortable seating, modern and clean interiors, and most importantly - air conditioning) at a much lower price point.

• Modern Retail - A couple of years ago when I was at home in a Tier 3 town in Kerala, my parents walked in harried after a particularly tedious shopping experience in a newly opened supermarket. The reason? The supermarket’s aisles were packed to the rafters with consumers. My parents were expecting that it wouldn’t be crowded - assuming the premium feel would have kept away the value conscious family shopper (remember this is a Tier 3 town). The exact opposite happened. Over the next 2 years, the supermarket chain has opened 3 more stores in our town, and each of them does brisk business. (Ok, this is not strictly faux-premiumisation like the previous two examples, but still adds to the point of aspiration driving a lot of India 2’ consumer behaviour.)

Sidebar: The best consumer insights are ‘obvious in hindsight’ - once you hear an insight, you will wonder why you didn’t think of it yourself. The rise of local unbranded fast food restaurants at its core is because of something simple - the air conditioner. For something as commoditised as food, the addition of an air conditioner allows entrepreneurs to charge a premium for an average quality product (Kannur Fried Chicken is not really KFC), while giving consumers the illusion of better quality, simply because it is more ‘modern’.

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So where does all this lead?

Some more nuance

(yes I know you’re getting tired of that word, but <shrug>)

What seems to emerge is that an interesting axes of segmentation for the India-2 user is 'aspiration'. Aspiration in some way also correlates to youth (if you are young and inexperienced you probably have more hopes and dreams that haven't been crushed by the relentless grind). So ignoring everything else, we can think of splitting the India 2 user into the young and aspirational, and everyone else. This framing helps because aspirational India 2 adopts digital products faster, is willing to experiment, and will even pay (digitally) if value is provided. It helps founders get answers on potential GTM, product, and monetisation.

Putting this all together - the Indian consumer could be looked at as 3 distinct segments.

• India 1 - English first (have definitely watched Friends), very similar to the West, high income. Target market for traditional e-commerce, quick commerce, basically anything that has worked in the West.

• India 2.1 - Young (18-35), aspirational, Indic language first, middle income. Target market for new models of e-commerce (unbranded electronics and apparel), micro payment based services (Pocket FM), aspirational premium goods and services, and (grossly generalising here) probably anything that has worked in China.

• India 2.2 - Older, middle income, slow to adopt digital. Target market for agri tech (?)

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As always, bouquets 🌸 and brickbats 👹 welcome in the comments! (the brickbats are what led me to revise my understanding from the first post, so please do keep them coming!)

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Bonus - Understanding India 2

To get a true picture of India 2, the best way is to

a) actually be from one of these Tier 2 cities, which gives you an inbuilt appreciation of the mechanics, not to mention a network of extended family, WhatsApp groups, and family functions which keep you rooted to reality.

b) failing which you can spend time in India 2 yourself while keeping your eyes open (really tough to do)

c) failing which you can jump to (my personal favourite) creating an account on content platforms (ShareChat/FB/Insta/YT), aggressively consume content, and stalk users who you will think of as 'cringe' at first glance, but later realise that they are just 'being their own version of cool', and that really is the key insight.

1. This is still a step forward. If you're a keen observer of politics and media (which I think is another good place to find analogies for the non Tier 1 Indian consumer), you'll know that there is an unsaid English tax that is imposed on a large part of our country. If you have a voice in English mainstream media or English social media, you are by default important. Speaking English is still by and large a rich, urban, and upper caste phenomenon. The North Indian Hindi speaking belt has it slightly better than the rest of the Indic language speaking country, by virtue of sending a large % of our country's political leaders to the Parliament every 5 years. Beyond Hindi, the space given to Indic language speaking India at a national level is minuscule, which is also possibly why native Indian language speakers are so passionate about protecting their local language and associated cultural artefacts.