Economists say that Purchase Power Parity is a good measure to understand the actual buying power of a currency. Simply put if you are coming from USA to India and you have 1 USD, you will get Rs 40 on exchange rate but with this 40 rupees you can buy in India what you could buy with 2 USD in the US. Conversely, what this means is that the actual purchasing power of the USD if you travel from India to USA is only Rs 20. If you look at the Big Mac Index (which compares the rate of the Big Mac across countries and gives an index like PPP) it appears that the 1 $ can buy in the US stuff worth Rs 29. So I guess the range is around Rs 20 to 30 and therefore it is fair to say that the rupee is still undervalued and should continue to strengthen.
This was just the background. The purpose of this post is to comment on PPP and the Indian opportunity really, so let’s get to that. While shopping in the US to do a mental check if some thing is expensive or not, I always use the PPP conversion to understand the true price, as otherwise things appear to be expensive. For e.g. when I see a shirt for 30 $ in a US store, the first instinct is to see it as Rs. 1,200 (40 X30) but then when I apply PPP, I can see that its price is only Rs. 600 and hence I may choose to buy it. It works in most areas such as food, clothing, packaged goods etc. and US actually seems like a fairly inexpensive place to shop in PPP terms.
What really struck me last week was how some things have become so expensive in India. Typically, the PPP concept does not seem to work well when we look at goods and services that are domestically produced and not traded globally.
I am leaving for the US today for a short business trip. While I was making my hotel reservations and flight reservations, I was also making an estimate of expected expenses for this 5 day trip. Flight tickets Rs 45,000, 4 Star Hotel (90 $ per day X 5 days= 450 $ = 18000). Cost of travel and stay = Rs. 63,000. Lying next to this estimate was the travel voucher of my recent trip to Bombay for 5 days. Here was the breakup Flight tickets Rs 10,000, 4 Star Hotel (250 $ per day X 5 days= 1250 $ = 50000). Cost of travel and stay = Rs 60,000. WHOA! A business trip in India for 5 days costs the same including air fare as it costs to the US. Look at the hotel rates. For a comparable room the rates are 90 $ vs. 250 $. When you apply PPP the 250 $ is actually 500 $ (assuming the US $ can buy stuff worth Rs 20/- in India). 90$ vs. 500$ !! More than 5 times more expensive than USA. Look at cars. A Toyota Corolla in India costs 11,00,000 which is 27,500 $. In PPP terms it is 55,000 $. I am told that in USA the car costs around 17,000 $, at least 3 times more expensive in India. You can see this happening in Housing Purchase (Not in rental though), office Rental and many other areas that require strong domestic production and domestic supply.
As the Indian economy flies I think while the US $ exchange rate will come closer and closer to the actual buying rate, what will also happen in the short term is that items that are only locally manufactured and not traded globally will be more and more expensive when compared globally. And this is why India is the most exciting destination and the most promising economy in the world. The sectors like Infrastructure, Hospitality and all other sectors that require domestic production will need and get capital influx. Why ? Because this is where we are 5 times over priced. This is where there is most money to be made. This is where the most action is - and is this action that makes this country an intoxicating opportunity. People say is the action in India now going to slow down? I say, the migratory Halcyon bird has only just left the cold Antarctic Shore !
Wednesday, February 20, 2008
Thursday, February 14, 2008
Man Oh Man
About a decade ago, most marketing people would discuss how the Indian woman is changing and how we can leverage the understanding of this change to drive differentiated brand positions. I used to work in a marketing team that used to target women and I remember discussions around how attitudes and needs are changing dramatically for the Indian woman across demographics and geographies. Today, I think the change has happened and now the movement seems to be a bit more linear and no so dramatic.
Then there has been a lot of research money spent on understanding the huge change happening in kids, teens, tweens etc. All these consumer groups have been under the scanner over the last decade.
The Indian Man has been conspicuous by his absence in the discussions around change in this period though. While this may not be true for brands that go after the male in a very sharp manner, generally speaking this is the trend that I have observed.
But things are changing suddenly and very fast – suddenly the Indian man is all over the psyche of the Marketing folks and every one wants a slice of this change pie in the Indian Man.
Lets, face it. The 35-year-old urban male is where a lot of the consumption action is. While the woman controls and influences most of the household and family consumption, the socio economic and cultural environment in India being what it is, the Individual consumption of the CWE (Chief Wage Earner) multiplied by his size makes for the single largest consuming group when you segment the market by age and gender. This means that if there had been a change in this animal in the past, the marketers would have been quick to spot trends and jump in them – but – nothing seems to have happened, in the post liberalization era even. Of course, the size of spending and income levels have changed but attitudes, wants, roles, cultural codes and functional and emotional needs from products and brands have not really evolved beyond what they used to be.
But why is every one excited all of a sudden – why is the Indian Man changing and what is the change.
Very broadly, the buckets in which life of this group can be slotted are 1.Work 2.Family and 3. Self. Historically, work and self have been the key priorities for this group and family has been some one that they need to provide for, receive and give love and quite often a source of fulfilling the self actualization needs of the self. The weight ages of each of these buckets have not changed over several years and hence the man has not changed.
Suddenly the family bucket has changed – today its not some thing that you just need to provide for and love and be loved. Today the expectation of the environment is to be involved to be immersed and to love doing it. Kids expect and need that involvement, wives need it. The guys who do it are no longer pansies and “joru kaa ghulaams”, but they are the real men. Its no longer un macho to cry, its great to be able to express your feelings openly and freely. Its stupid now to walk into the sun with a broken heart and a smile on your face. There are three big implications for brands and markwting people due to the change - The bottomline ...
1. Since the rules are changing there is a strong need for anchors where the man can park himself and justify to himself that its okay to make this transition. I suspect this is an area that brands could play a role.
2. The weight of the expectation from others for him to make the change just like every one else seems to be doing is huge. The rules by which he could be cool earlier are almost signs of immaturity and foolishness. The new rules and the pressure of this expectation is huge. This is where I think there is an opportunity for new products and new business ideas to be born.
3. The sacrifice that he has to make on the third bucket, i.e. the Self-bucket, in order to manage the other two buckets is also huge. Considering that the Indian male has been fairly selfish and spoilt for all these years – this change is creating a big emotional void and a feeling of incompleteness. Again an insight that can lead to opportunity unlocking.
Folks, this time our guys cant get away. This time its not just for show, but for real…it’s a big change for our big guys…and it has all the qualitative research agencies and brand managers excited. Excited like hell because the monolith has finally woken, its finally standing and is finally moving. Every one wants to get under in a great position to fire that silver bullet on the soft underbelly, lest the beast sits down again and only the hard skin is visible to chip away on. God knows the next time the buggers get up again may be after 20 years!
Then there has been a lot of research money spent on understanding the huge change happening in kids, teens, tweens etc. All these consumer groups have been under the scanner over the last decade.
The Indian Man has been conspicuous by his absence in the discussions around change in this period though. While this may not be true for brands that go after the male in a very sharp manner, generally speaking this is the trend that I have observed.
But things are changing suddenly and very fast – suddenly the Indian man is all over the psyche of the Marketing folks and every one wants a slice of this change pie in the Indian Man.
Lets, face it. The 35-year-old urban male is where a lot of the consumption action is. While the woman controls and influences most of the household and family consumption, the socio economic and cultural environment in India being what it is, the Individual consumption of the CWE (Chief Wage Earner) multiplied by his size makes for the single largest consuming group when you segment the market by age and gender. This means that if there had been a change in this animal in the past, the marketers would have been quick to spot trends and jump in them – but – nothing seems to have happened, in the post liberalization era even. Of course, the size of spending and income levels have changed but attitudes, wants, roles, cultural codes and functional and emotional needs from products and brands have not really evolved beyond what they used to be.
But why is every one excited all of a sudden – why is the Indian Man changing and what is the change.
Very broadly, the buckets in which life of this group can be slotted are 1.Work 2.Family and 3. Self. Historically, work and self have been the key priorities for this group and family has been some one that they need to provide for, receive and give love and quite often a source of fulfilling the self actualization needs of the self. The weight ages of each of these buckets have not changed over several years and hence the man has not changed.
Suddenly the family bucket has changed – today its not some thing that you just need to provide for and love and be loved. Today the expectation of the environment is to be involved to be immersed and to love doing it. Kids expect and need that involvement, wives need it. The guys who do it are no longer pansies and “joru kaa ghulaams”, but they are the real men. Its no longer un macho to cry, its great to be able to express your feelings openly and freely. Its stupid now to walk into the sun with a broken heart and a smile on your face. There are three big implications for brands and markwting people due to the change - The bottomline ...
1. Since the rules are changing there is a strong need for anchors where the man can park himself and justify to himself that its okay to make this transition. I suspect this is an area that brands could play a role.
2. The weight of the expectation from others for him to make the change just like every one else seems to be doing is huge. The rules by which he could be cool earlier are almost signs of immaturity and foolishness. The new rules and the pressure of this expectation is huge. This is where I think there is an opportunity for new products and new business ideas to be born.
3. The sacrifice that he has to make on the third bucket, i.e. the Self-bucket, in order to manage the other two buckets is also huge. Considering that the Indian male has been fairly selfish and spoilt for all these years – this change is creating a big emotional void and a feeling of incompleteness. Again an insight that can lead to opportunity unlocking.
Folks, this time our guys cant get away. This time its not just for show, but for real…it’s a big change for our big guys…and it has all the qualitative research agencies and brand managers excited. Excited like hell because the monolith has finally woken, its finally standing and is finally moving. Every one wants to get under in a great position to fire that silver bullet on the soft underbelly, lest the beast sits down again and only the hard skin is visible to chip away on. God knows the next time the buggers get up again may be after 20 years!
Sunday, February 03, 2008
Writing on the net !
My friend Sudhir Syal (techie, writer, journalist and great guy- all rolled into one), holds a very dim view of writing on the internet and on blogs in general. He is right to a large extent.
I am reproducing a comment that he made on this blog once. "I think in life, it's very important to try and be a perfectionist. To perfect an art, to set the benchmark high and to aim for quality. If there is one thing, I hate about the internet, it's the fact that it gives undue attention to talentless pretenders. Pretenders who get away with being ordinary, they can't write, can't communicate, can't command respect on their achievments alone. Why, because on the internet, quality is no longer important. Quality has no value. You scratch 5 peoples backs, they will scratch yours. And it's a vicious cycle, cause none of those 5 have any connotation or intention of ever producing something that's truly quality. And why would they, quality as someone put it is difficult to create and even more difficult to consume. I mean wouldn't it be easier, for you to put sum random photo, talk about some random event and scribble 3 lines in ordinary English? It would. It would be even more easier for 3 ordinary people to come over and put 3 ordinary comments."
But then, 5 minutes back i read this. Fantastic stuff. If you like writing that is delicate and subtle, you will like this. Anil P who mainly writes a very well known Photo Blog (here) is one of my favourite Indian bloggers and a friend as well. Actually he is "the favourite". His style of writing is very unlike mine, 'poetry in prose' is probably a good way to define it. I do not aspire to write like Anil, but I surely aspire to write with the quality that he writes with, albeit in my style (What ever that may be :-))
Mr Syal, you may say that the exception proves the rule and you will still be right - but I say for every 100 average writers, if the Internet can give us one Anil P, its a deal, my friend!
I am reproducing a comment that he made on this blog once. "I think in life, it's very important to try and be a perfectionist. To perfect an art, to set the benchmark high and to aim for quality. If there is one thing, I hate about the internet, it's the fact that it gives undue attention to talentless pretenders. Pretenders who get away with being ordinary, they can't write, can't communicate, can't command respect on their achievments alone. Why, because on the internet, quality is no longer important. Quality has no value. You scratch 5 peoples backs, they will scratch yours. And it's a vicious cycle, cause none of those 5 have any connotation or intention of ever producing something that's truly quality. And why would they, quality as someone put it is difficult to create and even more difficult to consume. I mean wouldn't it be easier, for you to put sum random photo, talk about some random event and scribble 3 lines in ordinary English? It would. It would be even more easier for 3 ordinary people to come over and put 3 ordinary comments."
But then, 5 minutes back i read this. Fantastic stuff. If you like writing that is delicate and subtle, you will like this. Anil P who mainly writes a very well known Photo Blog (here) is one of my favourite Indian bloggers and a friend as well. Actually he is "the favourite". His style of writing is very unlike mine, 'poetry in prose' is probably a good way to define it. I do not aspire to write like Anil, but I surely aspire to write with the quality that he writes with, albeit in my style (What ever that may be :-))
Mr Syal, you may say that the exception proves the rule and you will still be right - but I say for every 100 average writers, if the Internet can give us one Anil P, its a deal, my friend!
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