Indian Consumer Mindset and the Rise of Local Startups

Several high-profile companies have tried to enter the Indian market but have struggled to make a significant impact, including well-capitalized companies like Uber. One of the reasons for the struggle of these companies is a misjudgment of the Indian consumer mindset. The Indian consumer only spends on a few things:

• Family expenses (such as marriage, housing, and cars)
• Children’s education
• Health
• Smartphones
• Gold

In a country where the average per capita income is less than $2,500, Indian families spend between $20,000 to $150,000 on a single wedding and are known to give extravagant gifts such as cars, bikes, gold, furniture, and piles of new clothes. India also holds more than 10% of the world’s gold, worth close to $1 trillion.

Unlike Western countries, where education up to high school is paid for through taxes, urban Indians prefer to send their children to private schools. This applies even to those who have menial jobs. In rural areas, public schools are the only option for most, but the education quality is inadequate.

Healthcare in India is also largely privatized. While the country has some excellent public sector hospitals like AIIMS Delhi, they are few and far between. Most urban residents opt for private healthcare.

Despite low incomes, Indians are still cautious about their spending on daily use items otherwise, seeking cheaper options for things like tickets, clothing (unless for weddings), groceries, and haircuts.

This frugal mindset is why Western made software and products are unlikely to succeed in India. Western companies spend a lot of time and resources on customer experience, including weeks or months on small details like font and button placement. However, the average Indian consumer is not looking for that level of refinement, as demonstrated by the popularity of simple but functional Indian and Chinese apps, rather on value. They are still ok with using WhatsApp to conduct business, which is one of the simplest interface.

Many startups that have built everything in India and for India are starting to see success and many more are happening every day. It’s not just Paytm or PhonePe or Ola, rather numerous small ones that mostly build and sell in India, while raising capital in globally. It may look like that the scene is quite messy, but that is how progress is and it is super exciting.