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A while back, I wrote a blog on the attractiveness of BRIC’s and especially of India for western retailers. In that I noted that as late as 1820, China and India together accounted for 50+% of the world GDP. By the 1970’s that had fallen to < 10% due to industrialization and technological advances in the West. The pendulum has been swinging back and by 2050 based on purchasing power parity, China and India were expected to be 2 of the top 3 economies in the world. The growth prospects were even brighter for Retail especially in India, considering that only 5% of India’s retail sector was organized and that Indian middle class was forecasted to command the highest share (~1/4th) of global middle-class spending by 2030.

That analysis, however, largely looked at these countries as big consumer markets waiting to be tapped. While that is indeed the case, we also know that conversation has shifted dramatically in recent years. Digital transformation and technology driven innovation has risen to the top of the agenda for leading retailers vs. just selling more of what they have. So, are BRIC’s such as China and India still relevant in the digital age? Do these countries have much to offer Retailers other than their big consumer base and a cheaper manufacturing/sourcing/labor source? My POV - not only should western retailers look at India and China as source of growth … but equally, and perhaps more importantly, as source of digital innovation. The type of digital innovation happening in those economies is different and there is a lot that western companies need to participate in, adapt to, and learn from.

First thing to recognize is that contrary to common perception of these countries (especially of India) as third world economies, when it comes to digital metrics/innovation – they are not always behind. In some cases they may even be ahead.

  • Just in terms of raw numbers, consumer use of digital is high and growing. China and India are #1 and #2 markets in number of Internet users (that is of course due to large populations but still in a country with largely rural agrarian economy). Social network penetration is high. With ~200 million users, India is Facebook’s biggest market.

  • Huge population as I said, plays a role but that is not the entire story. Part of the reason is also demographic. Almost half of India’s population is less than 25 years of age and increasingly educated and tech-savvy. But even older generation is quick to adopt newer technologies. My parents in India cut their landline 10 years back while I still maintain mine here in the US. They are the reason I try to be current on Facebook and Whatsapp and not the other way around.

  • Because legacy infrastructure didn’t exist, many of these economies have been quick to jump straight to the next big thing. Cell phone ownership is near ubiquitous in India with > 1 billion mobile subscribers. Mobile banking rates in both China and India are ahead of all the G7 nations.

Lesson – Set aside your in-grained assumptions, biases, and way of doing things when treading waters in these markets!

Secondly, these countries possess a vast digitally savvy talent pool and increasingly a vibrant entrepreneurial climate.

  • China now receives three times more VC investment than all countries of Europe put together. India is also right behind US, China, and Europe in terms of venture capital investment. Innovation culture is developing in key metro areas; Beijing, Shanghai, Mumbai, and Bangalore are in top 20 cities globally in terms of venture capital investments.

  • It should come as no surprise to anyone that both countries, India in particular, possess a huge pool of talented computer engineers. While often thought of as exporting “lower wage” programmers/analysts to the US, Indian engineers turned business people have been gaining prominence in global corporations. They now lead many major tech companies most notably the top roles at Google and Microsoft. Many of the Indian/Chinese origin senior leaders at US companies are now turning their attention back to their home countries – increasingly starting companies, investing in them, serving as advisors or taking seats on boards. The net result is a huge influx of money, ideas, as well as entrepreneurial talent and culture.

Lesson – Tap into and participate in entrepreneurial activity in these markets; Silicon Valley is not the only place to set your “innovation centers”!

Lastly, and more importantly it’s a myth that innovation in these economies is of the copy-cat variety. While there is some truth to that, there is tons of new innovation that cannot be ignored.

  • Logistics challenges in delivery and payments that these country’s ecommerce giants face is daunting and create an impetus for new innovation. Many startups have emerged just to solve the problem of mapping addresses for delivering packages when the address is vague as is often the case (often just a person’s name, town, and a nearby landmark). India has authorized creation of new stripped-down banks called “payment banks” whose sole mission is to facilitate transactions digitally, primarily through mobile phones., a Chinese online retailer is testing drones for rural package delivery.

  • New business models are emerging. Bangalore-based ‘missed call’ marketing platform Zipdial (acquired by Twitter), assigns companies a special phone number which customers can call to engage in brands’ marketing campaigns and hang up before they are charged for the call (capitalizing on a very “Indian” tactic of saving money by giving someone a “missed” call). Wechat in China is not just a messaging app, it’s offering a complete set of services in the platform so people are not jumping from app to app while western retailers are still focusing on getting their app on people’s phone.

  • Domestic companies in these economies have less legacy IT and so it is easier for them to leapfrog to newer architecture and to digitize processes and customer experience from scratch. Western retailers need to look out for more competition from these local players as they are able to move faster and more aggressively. Could they soon come on-shore to compete on your home turf?

Lesson – Watch out for disruptive ideas originating in China and India that can benefit or threaten your business!

In summary, the point simply is that western retailers need to look at India and China not just as destinations for their products (though that story is alive and well) but increasingly as source for digital inspiration and transformation.
Amit Agrawal (Twitter: @AM_agrawal and Linkedin: is VP of Strategy for Consumer Industries, at SAP Industry Cloud.