Differences in the way of doing business among Indian states

India is almost as large as the European Union and has more than twice as many inhabitants. No wonder, then, that there are major differences between the various Indian states in terms of language, demographics, politics and economic growth. For a successful start-up in India, it is therefore important to take these differences into account when drawing up a business plan. Because what works in Gujarat does not automatically work in West Bengal.

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The regional differences among Indian states

For a European company to succeed in India, you must be aware of the country's vast regional differences. India is a fragmented market with large, and often underestimated, regional differences in language, culture, infrastructure and wealth, all of which affect the regional business culture.

Indian states are therefore better compared to individual countries than to, say, the Dutch provinces. Indeed, India's most populous state, Uttar Pradesh, has as many inhabitants as Brazil, and the southern state of Tamil Nadu has an economy as large as that of Hungary. 

There are also large demographic differences between Indian states. For example, southern India is older, has more to spend and is more educated than the rest of the country. Northern India, on the other hand, is younger and relatively poor.

North Indians primarily speak Hindi, while South Indians prefer to communicate in English or in their regional state language, such as Kannada or Malayalam. The German wholesaler METRO, better known in the Netherlands as Makro, found out after their start in India that there are big differences between the groceries that customers in a certain region put in their shopping cart and adjusted the assortment accordingly by adding more local products. Logical really, Finns also have different preferences than Spaniards.

"METRO found out that there are big differences between the groceries that customers in different regions in India put in their shopping cart."

- Mark Alexander Friedrich, Head of International Affairs for METRO

Do not make one business plan for all of India

For a successful start in India, thorough market research is a must. Regional differences are not only obstacles, but can also work in your favor depending on your sector and product.

The southwestern states, such as Maharashtra and Karnataka, are a suitable base for technical sectors such as automotive, engineering, as well as outsourcing IT and Research & Development teams.

Northern states such as Punjab and Haryana, among others, have thriving agricultural sectors, creating opportunities for food processing and renewable energy industries.

Starting in the right regions is also essential for selling your product in India. European products almost always fall in the highest market segment in India, so it is smart to start in the regions where people have sufficient income and there is real demand for a more exclusive, expensive product.

"Approaching India as one country by working with only one distributor or partner is one of the most common mistakes European companies make in India," says Klaus Maier, CEO of Maier + Vidorno, IndiaConnected's partner in India.

"In Europe, you wouldn't ask an Italian distributor to set up your network in Norway either. An Indian partner or distributor operating in a specific state has a good network only there and will not succeed in successfully expanding sales to other states. Therefore, those who take India seriously start with about four dedicated, local managers or distributors who understand your product and the regional market well. With them, the market can be mapped and the logistics network set up, one of the biggest challenges for international companies in India. In this way, the Indian market can be conquered step by step, successfully." 

Selling successfully in India with the right strategy

For anyone looking to conquer the Indian market, IndiaConnected has put together a special guide in which we offer you insight into the steps to take to successfully start and grow your sales in India.

From preparing your first export shipment to India to setting up a solid after sales service, we guide and advise throughout your India journey.

Market entry in India: do you make the best start with a dealer, distributor or agent?

India offers a lot of interesting opportunities for European companies, but doing business in this country also involves specific challenges. For a successful market entry, having a local partner with the necessary market knowledge is a necessity. But how do you know whether to go with a dealer, distributor, agent or partner? We explain the different options for you.

What does an agent do?

An agent is your company's representative in India, but does not take ownership of the goods for the sale of your products. An agent generally receives a commission for the number of products sold or based on the contracts he or she manages to close.

In many cases, the agent does not work exclusively for a foreign client, as this can lead to permanent establishment. If you do not want your agent to also work for other companies, for example because you want to protect your intellectual property, you should set up your own entity in India where the agent will be employed. This way you will not run the risk of permanent establishment and the associated high fines.

One advantage of working with an agent, is that you always retain ownership of your product and sell it directly to the Indian customer rather than to a distributor. In addition, agents often have a good understanding of your industry and in which segment of the market your product will resonate best, as they also work for other companies within the same industry.

Working with an agent does mean that many tasks remain with the European company, such as import management, handling of insurance claims, international logistics, transfer pricing, registrations, etc. This is because the agent is only responsible for warehousing, sales, logistics inside India and billing.

What does a distributor do?

A distributor buys your goods to then sell to wholesalers, retailers or consumers in the region where they operate in India. Distributors almost always work with a portfolio of different companies in various industries.

Distributors can offer both complementary and competitive products and usually provide after-sales service. They make money by adding a margin to product prices.

Distributors often offer broader service than agents, such as after-sales, replacement service and technical support, and have good knowledge of logistics in the country. 

There are three things to keep in mind when you plan to look for a suitable distributor:

1. First, no single distributor can offer you nationwide coverage in India; the country is too large and diverse for that. Therefore, choose your first distributor in the most important location/Indian state for you. Once your business there is up and running, you can start looking at distributors in other key regions of the country to further expand your business.

2. Point two is the distributor's focus on your product. Because distributors work with multiple companies and products, you are not automatically the priority. European products often fall into the high, expensive segment in India, which means fewer of them are sold and lower revenue for the distributor. European companies therefore often run into the problem that the distributor puts very little time and effort into their product and more into products that go out the door en masse.

3. Finally, European companies should keep in mind that marketing is not necessarily a task the Indian distributor can take on. Especially if you offer a high-end or technical product that requires a lot of knowledge of your sector and product. Since distributors often operate in different sectors, it is advisable not to rely entirely on your distributor's knowledge for your marketing, but to work with experts in the field. Read more about Setting up a successful Indian marketing strategy.

What does a dealer do?

A dealer falls in between a distributor and agent. They are someone who buys a product for their company, stocks it and then sells it to the customer. They are often seen as the middleman between the distributor and the customer and act as authorized sellers of specific goods in a particular industry.

A dealer, unlike a distributor, does have the technical knowledge to properly promote and sell your product. A dealer often adds an extra, high margin to the price of your product, which can cause you to price yourself out of the market. We therefore recommend that companies look for a suitable agent or distributor for their first steps on the Indian market. 

Can I do it myself?

Starting your own business without a partner in India is also an option, although the most challenging one. It means that you have to set up your own company, logistics, warehousing and sales in India right from the start. Not to mention all the non-core business elements that you need to arrange such as permits, taxes, regulations regarding staff, etc. It is extremely difficult to do this without local knowledge of the market and doing business in India in general. 

A safe way to start your own business in India is through the business incubator. The only thing you have to do is put together your sales team in India and IndiaConnected does the rest. Your employees will be put on our payroll and the legal liability and responsibility will also rest with us. In addition, we arrange everything from back office to performance reviews and we have five physical locations where we can accommodate your team. 

The 4 most important sales trends in India right now

With the pandemic and the global economic slowdown that followed, sales organizations around the world must constantly adapt their strategies to a changed clientele and climate. Enterprise software developer Salesforce, in its The State of Sales. surveyed over 300 Indian sales professionals about the changes and trends facing sales teams in India.

Here are the 4 most important sales trends in India right now:

Sales trend 1: Data and other customer insights play an important role in the sales process in India

In India, it is always essential as a salesperson to demonstrate a deep understanding of the customer's unique needs and desires, but this is even more important in economic, uncertain times when the hand may be tightened. Salespeople in India must therefore also be excellent consultants and not only have an outstanding knowledge of their product, but also be able to quickly discover the customer's needs.

Therefore, to better understand and advise customers, most Indian salespeople gather information from a variety of sources, both public and proprietary, such as from the CRM or sales system being used, prior to customer contact. In addition, it pays to be alert to the competition. By monitoring the activities of the competition on a daily basis, it is easier to respond to offers from other parties. For example, by adjusting the price or offering extra service.

Sales trend 2: Indian consumers want to be able to find your company on all channels

Indian buyers expect sales organizations to be present on all channels where they themselves can be found, from email to social media. 57 percent of buyers prefer to approach companies through digital channels, according to the survey.

In high-performing sales organizations, customer contact is more often through an average of ten channels. In particular, online portals offer a variety of self-service options. This allows salespeople to spend more time on strategic accounts, customer acquisition and keeping current customers happy.

Many Indian sales teams are also automating repetitive tasks, such as by deploying artificial intelligence (AI), in order to have the time to serve customers across all different channels. 68 percent of salespeople surveyed who work with AI said that deploying artificial intelligence has significantly improved workflow.

Sales trend 3: All departments must work together smoothly - after all, the Indian customer expects a frictionless buying experience

Indian buyers cite their customer experience as the deciding factor - of which sales is only one part - when they do business. They are looking for convenience and consistency in their interactions with companies. But when departments such as sales, marketing and service do not work smoothly together, customers can face conflicting communications and long wait times.

It is therefore important to break down possible barriers between the different departments and ensure that everyone has insight into what steps have already been taken with the customer. By creating an open structure and having all departments work together as well as possible, the most pleasant customer experience can be created.

Sales trend 4: The role of sales operations in Indian sales organizations becomes more important

In 2020, 54 percent of Indian sales managers said sales operations is important in determining sales strategy. By now, the figure is 65 percent.

Sales operations has traditionally been seen as the department that works behind the scenes, but that is changing. The tools and sales processes that sales operations has always been concerned with should now provide greater efficiency and cost savings.

So companies that want to prioritize it should involve sales operations in setting strategy. More than eight out of 10 Indian salespeople say sales operations is a crucial contributor to the company's growth.

Is your sales team in India performing as expected?

Every sales organization worldwide is currently facing uncertainties and major changes due to the various international crises affecting everyone. Therefore, it is important to be as flexible and agile as possible in order to respond to the latest trends in order to keep getting good results.

Are you running into problems in this area in India? For example, are sales disappointing or is the service operation in India not going according to plan? IndiaConnected helps companies improve their operations in India. We understand complex and difficult situations in the Indian business context and know how to solve them. Whether it is finance, tax, compliance issues, HR or operational matters, we help you find the right solution and implement it.

Learn more about how our experienced, local expert can also improve the organizational efficiency of your Indian subsidiary.