India’s vibrant culture also translates to its economic landscape, especially in the streets. The informal business sector takes up to almost 50% of the country’s GDP and employs about 90% of India’s workforce. Yet, despite its apparent success and impact, this sector is often looked down upon. The key to their success? A dynamic business strategy that adapts to their environment and the needs of their customers upon the first contact.
In one of his speeches on Josh Talks, Capt. Raghu Raman explained that there are a lot of lessons that can be learnt from what people call the ‘marginalised’ businesses.
People often look up to big companies with popular brands to pattern their business models when, in fact, the informal sector is a treasure trove for bright ideas and sustainable strategies for growth and competitiveness.
In the streets, chances are, there would be at least ten or more identical stores. They will have similar products and store designs, all within walking distance from each other—some may even be located side-by-side.
In this very tight space, a store owner or manager must attract, engage and satisfy the client from the get-go to make a sale. Otherwise, they will turn away and get to the next store for better service or price. By that point, it would be too late as that client has very little to no chance of returning. Even those customers who have bought from the store, have slim chances of coming back as a return customer.
In giving out discounts, big companies may take several weeks to analyse the amount, when to implement it, and for how long the deal would last. It would go through several stakeholders first before getting approved. There’s a chance it gets disapproved if the company thinks it’s not beneficial. However, in India’s informal business sector, a vendor can implement a 5% discount to a customer, because they asked for it. If the vendor likes your attitude or your face, you could probably get more off the price.
These marginalised businesses earn meagre profits, but the distribution of wealth within them is equitable. Say, a store sells a plate of idli for 10 Rupees. The store owner will keep 2 Rupees as profit, and the rest will go to the entire supply chain, including for those who wash the dishes, grind the dough and so on. That’s 80% of the income going to the rest of the employees. Now imagine the same plate of idli selling at a 5-star restaurant for about 400 Rupees, the bulk of that money will go directly to the establishment while a minuscule amount will go to the people who made the dish.
It’s also worth noting the fluidity by which the informal sector operates. In India, there are several festivals which means various opportunities to sell different stuff. A vendor on the streets can switch their products and strategy of sale three to four times a month to make sure they can supply the needs of the people on a given day.
The constant change is almost impossible for a formal company. It would take several months to come up with a new business strategy, a couple of years to develop new products, and five to ten years to overhaul their organisational structure. Meanwhile, the small businesses of India’s streets can make these changes more than 12 times a year, when they see opportunities arise.
Some can even change their products and strategy within the day! A snack vendor sells near a school in the morning. He then shifts to selling near a club in the evening. The vendor reacted to the change of scenery and time and attracted two very different types of customers. Nothing short of ingenious.
Another thing I’d like to point out is that the informal sector does not discriminate. Whether you’re young, old, man, woman, member of the LGBTQ, disabled, educated, illiterate and so on, there is an equal opportunity. Most of these people can only find employment in the informal business sector. Some big companies promote employing people from these marginalised groups and are not discriminating, but they are too few and far between.
Capt. Raman also shared an interesting story about his experience on the streets with some of his colleagues. There was a young boy who asked people for money. At first, no one was giving him anything, but the boy was persistent. He went directly to the one directing the group of people and kept asking him. The leader eventually gave in and tried to look for some change, but he had none. At that moment, the rest of the team immediately searched their pockets looking for some coins and gave it to the boy. Once the boy got the money, he fended off other boys and retreated to his ‘headquarters’. He even told his younger brother to go back to the team and ask for more money. If that isn’t what you call a successful strategy, I don’t know what is.
The lesson there is pin-pointing the leader and decision-maker within the group. Persist on making a deal with that person. Then, when you get the deal done, it’s your responsibility to protect that money from your competition. Lastly, share your knowledge with your successors and give them a chance to earn using your strategy. Now this example may seem far out, but what the boy did was an effective sales strategy. The risk there is, if he fails to collect from his persistence, he’ll go to bed hungry.
This story is also an important lesson we can learn from India’s streets. It’s quite usual for families to be involved in the informal business sector where the owner pulls an unemployed relative to work with him in his business. It’s a stark contrast in the corporate world where people are in a constant struggle to edge out their peers to climb their way up the corporate ladder.
The last lesson that we can learn well from India’s streets is the concept of ‘enough’. Knowing when to be content is a skill many have yet to master. Those in the corporate setting seldom overwork and fail to enjoy the fruits of their labour as they want more income, more customers, more business. But in the streets, they know that getting through the day with a profit to last until the next few days would suffice. That mentality makes a sustainable environment for the market in general.
In the end, what we thought to be a low class and insignificant industry, turns out to be better at so many things compared to the formal companies and big corporations. What we need is to learn from their dynamic, sustainable marketing strategies and carefully identify what applies to our businesses. You might be surprised by how thinking small would let you grow big when you have successfully integrated these lessons in your company.
There are several significant sales and marketing strategies to give your business a headstart in the right direction. All you need is to make sure they suit your business and would help you achieve your goals.