The inferior goods trap?

Hudson News and Books, the staple of every American airport, recently opened branches in Indian metro stations

Hudson News, familiar to anyone who’s been through an American airport, recently opened branches in Indian metro stations

I say this a lot to my friends in media, who seem not to have realized it: Indian-native media brands have to be careful not fall into the inferior goods trap when it comes to the way they handle foreign competition.

Here’s what I mean.  Almost every foreign media brand has in recent years thought about an India play.  Many have held off, perhaps because they don’t know how to target an amorphous and price-sensitive consumer, perhaps because they’re uncertain about the still-complex regulatory regime, perhaps because revenue expectations are still not quite high enough, perhaps because they’d rather tie up with local players.  And maybe this last is a trend towards greater conglomeration.  (Look at the Times of India-Gawker deal as an example.)

But, as someone who previously worked at a business magazine, I increasingly felt that our print product faced serious competition from Forbes India and Fortune India, as well as local brands.  Indian brands traditionally point to a few things to explain why Indians prefer them:  1) the fact that their products are customized to the Indian market.  2) the fact that their products are almost always cheaper.

The average Indian biz mag retails for about Rs. 25 to 35 on the newsstand, while both Forbes and Fortune retail for a far heftier Rs. 125.  That’s out of reach for a lot of people, except as a very occasional purchase.  Fair enough.

But what about in the digital space?  The cost of access is often much lower, and foreign brands have a long history of developing strong digital offerings.  I promise you that the average Indian businessman and MBA student has accessed – at least once – articles from the Economist, the Financial Times and the Wall Street Journal – online.

Traditionally, Indians have shown a strong and enduring preference for homegrown brands, even when foreign options become available.  But in an information-dense age, can we take that loyalty for granted?  If non-Indian brands decide to make a serious attempt at this market, hire the best local writers (at salaries equivalent to or slightly higher than what these people make at Indian employers) and bring their digital expertise to bear, there is absolutely no reason they could not seriously disrupt the landscape and take a greater share.  So far, the economics of it have not made sense (the US media model is costly, and Indians historically don’t pay) but if Indians start to pay a little more, and they have richer, stronger digital offerings available to them, why wouldn’t they choose those?  (The cost of software development is lower in India also, and that arbitrage is likely to remain for at least a little while)

Traditionally, Indian media houses seem to lag their American counterparts in two key areas: 1) investment in talent and  2) investment in R&D.

Both of these things are investments in the future of your product.  There is nothing worse than reaching a point – which I could foresee – where the only thing that differentiates your product in a consumer’s eyes is its lower price.  Then, you’re stuck in the position of hoping that people stay poor, and that’s not a position that feels very good.

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