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How consumers are wooed is going to change in 2017. And a few spaces will have a advantage.
In 2015, there was more talk in India about raising capital than about building businesses with differentiated models. Most startups raised money framing their business model on a global equivalent, and then burned that money in a quest to show massive growth. 2016 curbed that enthusiasm. And now, slowly, the realization is setting in that copycat models aren’t ideal in India. In fact, in order to truly succeed long term, business models have to be designed for the Indian market.
Here’s my big prediction: 2017 is going to help shape the era of #MadeForIndia.* The hangover from 2016 will have a positive impact on the culture and priorities that drive most entrepreneurs – and their success will not solely be dependent on boatloads of VC money.
In the consumer technology space, this is going to change how consumers are wooed. The time of massive discounts and unwarranted marketing spend will subside. The new year will see consumers being acquired through innovation in product, pricing, convenience (beyond cash-on-delivery or free delivery), and service. If 2015 was the year of capital invested, 2017 is going to be the year of customer experience.
A few spaces will have an advantage. This is where I think businesses will flourish in the consumer-based technology industry in 2017. With a slight twist to my regular predictions, this year it’s not going to be just about how much money these verticals raise but if companies in these areas are able to scale. Let’s see if we can identify that at the end of the year.
1. Fresh foods
Shopping for unbranded products is always a hurdle. Without brands, no one takes responsibility for the quality of any product. And in the perishable food space, that’s dangerous. Choose any meat, fish or vegetable. There is no way of telling how old it is (or how freshness is maintained), where it was grown, what pesticides were used, or how it was transported from one middle man to another. There is no way of identifying quality, nutritional value, or even the right price. Every consumer suddenly has to be an expert on raw food in order to grocery shop. And that’s why, for the majority of Indians, the quality/freshness/nutritional value/supply chain of a tomato is judged solely on its redness and how it feels when you poke it.
Poking a tomato is fine in the West where all produce is branded, either by an external producer or the supermarket’s private label. Brands give consumers comfort that they don’t have to evaluate the product they are buying and instead can trust the brand. That brand promises quality and consistency. Beyond that, if consumers want to poke away in order to choose one tomato against another, that’s fine. But in India, the poke is going to determine little of anything.
Look how we buy our meats and vegetables. Look at where we go to buy them. And this is the food consumers buy most often. You need tomatoes, onions, meat, or fish every other day. This is a core part of life for every consumer. And yet, vendors are chosen purely on the basis of tradition, proximity, or advice.
But this can change with good, strong brands. Especially in a country where there aren’t any competing brands. The real competition is the local fish vendor. And a prevailing mindset. I’m ready to bet we can take them both on.
Building trust in a brand takes time and effort, but when trust is built, it creates a massive opportunity. And this is the opportunity available with perishable food. There is an entire generation of people in India that cares less about tradition and more about quality, nutrition, price and convenience – the millennials. Consumers at that age group are just beginning to form their grocery habits either because they are living on their own for the first time, wanting home cooked food, or having children. And this is the target market for many of the new online brands.
Several companies across food groups have been working hard to build a proof of concept over the past few years. In 2017, I think we’ll see these companies mature, with solid sourcing, refrigerated supply chains, brand promises, and business models designed for customer convenience.
Many of them will have breakout years in 2017 and on the back of their success we’ll see a lot more companies start up.
2. Subscription businesses
“Competing on products was last century’s competition; now you need to be able to compete on business models”
Nowhere does Mr. Osterwalder’s quote ring truer than in India today. And the one model that’ll lead the charge in 2017 is the subscription. Subscription models offer a compelling consumer proposition. It the ultimate convenience to be able to automate regular purchases, whether it’s:
1. To take advantage of a recurring delivery service (like getting basic toiletries or groceries every fortnight)
2. In lieu of ownership (like Furlenco or Flyrobe)
3. An on demand access to a service (like Hotstar or Saavn).
Disclaimer: Lightbox has an investment in Furlenco
Several companies have launched subscription businesses over the past couple of years, and there’s starting to be an acceptance of shopping in this manner. The tipping point for this model in 2017 will be billing.
These businesses are only as convenient as their billing systems. Billing is the most complicated function for subscription businesses and also at its core. We’ve seen this first hand at Furlenco.
There are two parts to it. First, the technology. As these businesses grow, their pricing plans become more varied, and much more complex. Companies need to keep fiddling with which price points work best; they add introductory discounts; they give referral discounts, promo codes, festival offers, and so on. Second, in India, there’s the added complication of saving billing information and the need for repeated follow ups.
But, as these businesses are growing, this know-how is quickly developing. At the same time, the regulatory hurdles are also decreasing as companies can set up standing instructions allowing for recurring billing to customers without repeated permissions. All of this will help more businesses come up.
And why not! As a model, the economics of a subscription-based, recurring revenue business are so compelling that it’s hard to ignore. All businesses should be subscription based businesses if they can.
3. Original video content
I’ve been talking about content having a break out year since I started writing this column three years ago. So I feel a little like a broken record, but here I am again predicting great things for content. This time, I have a really good feeling about this. A lot of the pieces that need to fall in place are coming together.
The combination of internet connectivity (especially with the promise of Jio), a better understanding of device characteristics, the content delivery networks, and great quality content will help on-demand video take off next year.
As streaming takes off, it will fuel the demand for original content. For Netflix, Amazon, iTunes, or even Hotstar and Jio to truly succeed they will need a constant stream of shows. And that content will need to be for local audiences. There is no way they’ll be able to do it on their own. And that’s a huge opportunity for companies that can support them. In fact, I suspect, even user generated content companies could potentially have a great 2017.
This is contrary to most other markets for Amazon or Netflix. Their strategy demands they control the content but I think in India, because of the need to localize both language and storylines, they’ll need help, especially in the short to medium term.
I’m still not sure how much funding will come this way, but I can see revenue streams much more clearly and they don’t need to rely on advertising – which is a boon. We have so much talent in our country and that talent has never had as much opportunity as will be available in 2017. I’m really looking forward to getting entertained!
To be fair, my big prediction last year was that private markets would raise more money than the public markets. IPOs raised about INR 25,000 crores (US$3.6 billion). The published number for private placement in technology companies is approximately INR 19,000 crores (US$2.8 billion). So what do I know.
Like many good stories, it all started over a beer after a game of Rugby.
2014 was one of the most prolific years we’ve had in terms of the number of startups, fundings, valuations, and user growth in India. In 2015, we should see the fruits of that labor in several spaces – look out for many fledgling companies to mature and grow at a pace we couldn’t have imagined just a few years ago, or even just a year ago.
Here’s a prediction: tech companies will raise more private money than IPOs. And a lot of that money will go towards (re)educating consumers, giving them access to debt for anything they want, and providing them a whole lot of video.
In this investment we are doing our small part in affecting the consumption patterns of our society. Harvard University sociobiologist Edward O. Wilson claims the earth can support 10 billion people – a number others predict may be hit by 2100.
We spend a lot of time thinking about the changing nature of ownership. It’s amazing how much “stuff” most of us collect over time. And how little we actually use in everyday life. It makes you start questioning consuming and purchasing habits in general.
Creativity involves a certain amount of rebellion. The best thing a brand can do is to drive a product’s strategy through a market efficiently by provoking conversation and creating desire. Your fans represent the character, vibrancy and future of your brand.
The commoditization of hardware is forcing a range of product-oriented businesses to revamp their business model to remain relevant. instead of selling the product, companies are offering the benefit to customers in other ways.
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