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A must-read for those wanting to tap the markets of India and China, The $10 Trillion Prize: Captivating the Newly Affluent in China and India is a portrait of the world’s biggest buyers of cars, mobile phones, appliances and other products and services. Who these consumers are, what they buy, their aspirations, how to fulfil those needs, with all that backed up with facts, figures, strategies and research, the book makes for a comprehensive study on the two markets.

In the initial chapters, authors Michael J. Silverstein and co-authors Abheek Singhi, Carol Liao and David Michael give an account of the various kinds of consumers, including the middle-class, millionaires and the poor. With stories of real people and families from the two countries, the authors then go on to profile preferences, appetites and aspirations of these people. In the concluding chapters, the book suggests ideas for business leaders who are entering these markets and trying to position their companies there.

While Silverstein is one of the founders of the Boston Consulting Group (BCG), an international strategy and general management consulting firm; Singhi heads the India practice of BCG; Liao heads the China consumer practice; and Michael leads the global advantage practice. In an email interview, Singhi gives us a glimpse into the life of the Indian and Chinese consumer as well as a perspective of what the next decade will be like for these countries and those doing business here. Edited excerpts:

What made you write a book that clubs China and India as a market?

Market matters: Abheek Singhi.
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Market matters: Abheek Singhi.

We felt that no book had truly focused on the vital force that will transform these countries and their economies in the decade ahead—namely, the new consumers. Or shown how companies can capitalize on these new opportunities.

No one has written clearly about these consumers’ hopes, dreams, and ambitions. No one has closed the loop on income growth, education, jobs, and the net expansion of markets for food, apparel, housing, transportation, healthcare, education and financial services. This book aimed to fill such gaps.

Highlight some similarities and differences that you came across while discovering this portrait of the Indian and the Chinese consumer.

First, consumers in both countries have a sense of energy, ambition and optimism that is infectious. More than 80% of Chinese and Indian consumers feel that their lives will be better off in the next 10 years. They believe that their children will have a better life than theirs. The number in the US is 25%. Second, people in both countries believe in education as an investment for the future. The importance that parents, across all income classes, provide to education is very similar. Third, while we are familiar with the diversity in India—the diversity in China is also high—with many regional variations in tastes and preferences.

At the same time, there are differences. First, from a consumer income and spends perspective, China is about seven years ahead of India on an average. The difference is more at the premium end (10 years or so) and lesser at mass levels (four to five years). Second, the difference in family structure results in different behaviours. In China, given the high proportion of working women, the family has typically 1.8 working adults earning and spending for a family of slightly more than three. There are four grandparents spending on an only grandchild. In India, it is usually 1.3 working adults earning and the spends are spread over a family size of more than five. Put simply, the Chinese family has more discretionary spends available.

The luxury market in China is significantly bigger than in India. What is keeping Indians from wanting the “fabulous life"?

The luxury market is larger in China, first, because the number of upper income households in China is more than 2.5 times that of India. Second, even for the same household, the discretionary spends are higher in China due to lesser children. We came across several consumers in our research where youngsters who were at their first job would spend three months of their salary to buy a bag or watch since all the other expenses were borne by the parents. Third, the number of working women is high in China.

That being said, there is also the supply side dynamic that has driven the Chinese market. Many Indians who can afford luxury prefer to buy overseas due to lack of options in India today. Our book profiles an affluent Indian consumer who actually goes to Dubai to purchase luxury goods. If the supply side obstacles get addressed, the Indian luxury market could become significant in the next decade. As an example, the sales of BMW in China in 2001 is similar to their sales in India in 2011-12, and LVMH (LVMH Moët Hennessy Louis Vuitton SA) today has the same number of stores in India as they had in China 10 years back.

Apart from the millionaires and the middle class, you talk about the “left-behinds". Are they potential consumers in the coming years?

Today the numbers of left-behinds or below the poverty line are nearly 450 million in India and 210 million in China. Over the next 10 years, 280 million Indians and 200 million Chinese will move out of poverty and emerge as part of the consuming class. But even those who are left behind over the next 10 years should not be discounted as consumers. We are careful to distinguish between two types of lower classes: the truly poor, who are often penniless and without hope, and the aspirant poor with real prospects for income improvement—the next billion. They have jobs and varying levels of education, but below-average incomes.

A few companies are beginning to engage these consumers by actively developing customized products and services. These companies aim at entry-level price points and acceptable quality.

Keeping in view the chapter, “The Power of The Purse", is the rise of the female consumer a myth in India?

According to a BCG study, in the US, women control 73% of the spends, in China 52%, while the Indian women control 44% of the spend. Compared to most other markets, the female consumer in India is still at an early stage. However, this is changing. Women are already the major buyer and influencer in categories like food, clothing, housing, haircare but still low in categories like durables, car, and other financial products. In summary, the rise of the female consumer in India will happen but would take some more time.

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