Marketing in India

Author(s): Ralph Westfall, Harper W. Boyd and Jr.

Source: Journal of Marketing, Vol. 25, No. 2 (Oct., 1960), pp. 11-17
Published by: American Marketing Association
Stable URL: https://www.jstor.org/stable/1248605
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 Marketing in India
* RALPH WESTFALL and HARPER W. BOYD, JR.
This article describes the role of marketing in the Indian economy
and explains the activities of manufacturers, wholesalers, and retailers.
Specific weaknesses in the marketing system are pointed out, and
possibilities of improving Indian conditions with modern techniques
are discussed.

MARKETING is probably the least de- sumption is, of course, even lower-about
veloped aspect of the Indian economy.$54 per person per year-as compared with
It is considered a wasteful activity. Middle-
$1,664 for this country. About $32 of In-
men and salesmen of all types are regardeddian consumption represents cash pur-
as schemers trying to profit at the expense
chases; the rest is consumption of home-
of the public. produced items.2
Retailers' margins in India are extremely The majority of Indians are still living
low, probably about 10 per cent, and whole- in an economy that is only partially mone-
salers' margins are less than half as much. tized. In the villages, where some 85 per
Both figures are well below those in the cent of the population lives, there are still
United States; even so, marketing in India village potters and carpenters who produce
must be considered inefficient. Losses from for all members of the community in return
poor physical distribution methods are un- for a certain share of the harvest. This
doubtedly large, as are losses resulting fromshare has been fixed by tradition and is
the failure of the marketing system to in- not subject to bargaining.
tegrate consumer wants with production Indian shopping habits differ markedly
resources. The greatest waste, however, from those in the United States. In the
probably comes from the failure of market- cities the housewife makes a daily shopping
ing to furnish the force necessary to start trip to buy fruits and vegetables. There are
the economy on a period of growth. no refrigerators except in a few wealthy
homes. A certain amount of grain may be
THE MARKET
stored in earthen jars in the household.
India is only about one-third the size of Shopping for items other than food is
the United States, but has more than twice unusual and so becomes a significant under-
as many consumers-almost 400 million. taking. A day may be devoted to shopping
Virtually all of these consumers have a for a sari or other items of clothing.
very limited income. Gross national prod- Neither the vendor nor the shopper feels
uct is only about $72 per person, one of theright if the sale is made without some bar-
lowest in the world, as compared with $2,- gaining. The vendor usually quotes an ini-
343 for the United States.1 Personal con- tial price well above that at which he is
willing to sell; the buyer offers less than
he expects to pay. Both can then "give" a
* ABOUT THE AUTHORS. Both the authors are
little. In only a few of the finest shops in
professors of marketing at Northwestern University.
They have studied marketing at first hand in a numberthe largest cities is there a one-price policy.
of foreign economies in South America, Europe, and CHARACTERISTICS OF MARKETING IN INDIA
Asia, and had a previous article on marketing in
Importance of Marketing
Venezuela in the JOURNAL OF MARKETING in April,
1958. They have co-authored a number of articles Some idea of the low relative importance
and books on various marketing subjects. of marketing in the Indian economy can be
lFacts and Figures (San Francisco: Inter- 2Second Five-Year Plan: The Framework
national Industrial Development Conference,(New Delhi: Ministry of Information and
1957), pp. 5 and 8. Broadcasting, 1955), p. 12.

11

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 12 JOURNAL OF MARKETING October, 1960

gained from the employment figures tion.

in Ta-Commission agents who operate es-
ble 1. sentially as manufacturers' agents are
As would be expected, employment variesalso common. They usually represent manu-
greatly between India and the United facturers in distant markets and sell to
States. The total number employed is al- wholesalers.
most three times as large in India as in the Channels for agricultural products are
United States, but over two-thirds of the also similar to those in the United States.
employed Indians work in agriculture. The Local buyers assemble large quantities for
United States actually has more people em- shipment to wholesalers in consuming areas,
ployed in wholesaling and retailing than who in turn sell to retailers. Thus, the mid-
has India, even though the typical Indian dlemen in India are similar to those in this
merchant handles a far smaller volume country in the general processes they ac-
than his counterpart in this country. The complish; but their methods of operation
data undoubtedly understate the market- are far different, as are the marketing ac-
ing activity in both countries since many tivities of manufacturers.
farmers and factory employees spend at
least part of their time in marketing Marketing by Manufacturers
activities. Manufacturing in India is primarily a
hand process carried on in homes or in small
Channels of Distribution
establishments. There are occasional excep-
Channels of distribution are similar in tions, for example, the great Tata steel
type to those in the United States. The plant. The household utensil and the shoe-
most common channel for manufactured polish industries are fairly typical of the
products is the orthodox manufacturer- small establishments. Of eleven utensil
wholesaler-retailer-consumer. In cases manufacturers selected at random from
where production is concentrated geo- among sources used by wholesalers in Pun-
graphically but dispersed among many jab State, the largest had an annual volume
small firms, there are often two whole- of approximately $50,000. All but three had
salers, one which concentrates productionannual sales of less than $15,000. All of
from a number of producers into larger these manufacturers sold to wholesalers,
quantities near the point of production and four also sold some direct to retailers.
(local wholesaler), and one which dis- Only two had sold to as many as fifty cus-
perses products to retailers (consumer tomers during the entire previous year.
wholesaler) near the point of consump- Only one had any salesmen-that one had

TABLE 1

ESTIMATED EMPLOYMENT BY TYPE OF EMPLOYMENT IN INDIA,

1955-56, AND IN UNITED STATES, 1958a
(MILLIONS)

India United States

Type of Employment No. % No.
Agriculture & allied pursuits 109.5 72.0 5.0 8.8
Mining & factory establishments 4.0 2.6 16.8 29.6
Household enterprises & con-
struction 12.0 7.9 2.9 5.1
Communication, railway, banks,
insurance 1.6 1.1 4.1 7.2
Wholesale & retail trade & trans-
port other than railways 10.0 6.6 11.6 20.5
Professions, services, & govern-
ment administration 14.9 9.8 16.3 28.8

Total 152.0 100.0 56.7 100.0

a Second Five-Year Plan: The
casting, 1955), pp. 42 and 98.
shown are for Indian data. U.

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MARKETING IN INDIA 13

three. All sold on credit, but only two had wholesaler is a relatively large merchant.
a published price list. Two manufacturers His expenses indicate why he can operate
sold branded products and did some adver- on such a small margin:
tising, but the annual advertising expendi-
Rent $ 6 per month
ture of the two totaled only about $700.
Wages (4 employees at $12) 48 per month
In the northern region of India there Electricity 1 per month
were fifty shoe-polish manufacturers in Entertainment of customers 12 per month
1956.3 Total production was 1,250,000
Total Expenses $67 per month
pounds, of which about 400,000 pounds were
made by one producer. The other forty-nine The initiative for exchange at the whole-
firms produced an average of about 17,000 sale level comes primarily from the buyer.
pounds each which resulted in sales of about
On their last purchase, twenty-seven out of
$7,000 annually. thirty utensil wholesalers bought from
manufacturers and three from other whole-
Wholesalers Important
salers. Fourteen of the thirty visited the
Wholesalers are standard in most chan- manufacturer to make their purchase, and
nels of distribution in India. Many of the four others sent their orders by mail. In
wholesalers combine their wholesaling func-eleven cases, vendor salesmen called on the
tions with retailing or with manufacturing.wholesaler to make the sale, and in one case
A number of large companies accomplish a selling agent called on the wholesaler.
the physical distribution function of the During the preceding year, twenty-six of
wholesaler without relinquishing title, the thirty utensil wholesalers were visited
through the use of "stockists." These are by salesmen from more than one source,
retailers or wholesalers who perform a but four were not. Three wholesalers had
function similar to the public merchandisebought from only one source during the en-
warehouse. Hindustan Lever (the Indian tire preceding year, but the median number
Lever Brothers firm) often uses stockists. of sources was four.
For example, Lever arranges for the mer- Selling effort is very limited among In-
chant to stock Lever soap and vanespati dian wholesalers. The traveling salesman
(hydrogenated oil). Title to the merchan- scarcely exists; in the utensil survey none
dise remains with Lever. The dealer will of the thirty wholesalers had a traveling
sell the stock for cash, at a price set salesman.
by One wholesaler received calen-
Lever, to any customer who presents him- dars from a manufacturer and sent them
self. He deducts his charge for the service
to retailers as a promotional device. None
and forwards the balance to Lever. of the others had any promotional mate-
Among thirty household utensil whole- rials. Twenty-eight of the thirty utensil
salers in Punjab State, the median annual wholesalers gave 30-day credit, and twenty-
sales volume was approximately $4,000 in six admitted to bargaining on prices with
1957. Fourteen of the wholesalers had no their retailer customers.
employees, and only one had more than
three. Wholesale margins are low as com- Retailers

pared with those in the United States. The Retailing in India differs in many re-
utensil wholesalers have margins on variousspects from that in Western countries. Self-
items that vary from 1.5 to 4 per cent.service is not feasible because of the pil-
Wholesalers' margins on soap are 3 to 4 ferage problem. In many of the better stores
per cent. One bicycle wholesaler buys casesin large cities, the goods are kept locked
of six bicycles at $140 per case and sellsbehind glass or mesh doors which have to
them at $23.25 each for a total of $139.50. be unlocked every time a sale is made. In
The only profit is made by selling the cratestores in which sales people other than the
to a furniture company for $1.40. Thisowner wait on customers, two different em-
Boot Polish, Small-Scale Industry Analysisployees are used to prevent stealing. One
and Planning Report No. 9 (New Delhi: Min-employee writes the sales check and another
istry of Commerce and Consumer Industries, accepts the money. There are no department
1956), p. 6.
stores in the standard sense, but there are

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14 JOURNAL OF MARKETING October, 1960

a few examples in the largest cities of tailers,

what perhaps about 250,000, in Madras
State. On a similar per capita basis, there
might be called department stores in small
U.S. towns. There is not a single super- would be about 2,000,000 retailers in all of
market in all of India. India-a slightly larger number than in the
Outside of the principal shopping centers United States.
in cities of over 1,000,000 population, the
Small Retail Margins
typical retailing center is a bazaar where
many shops are clustered together. Each Indian retail margins are unusually small
shop is typically about ten feet square, so as compared with the 30 per cent and larger
that the proprietor can sit in the middle of margins common in this country. Accurate
the floor and reach his entire stock. margins cannot be measured directly be-
In the small villages, where most of thecause most retailers have no accounting
population lives, there are no retail shops. records. Data gathered from fifty-eight
Individuals buy very little. Hawkers travel utensil retailers in 1957 showed that deal-
to villages, selling frequently purchased ers specializing in earthenware utensils had
items such as utensils and cloth which they gross margins of approximately 20 per
carry on their backs and heads. They often cent; but the highest margin of any dealer
make exchanges by barter or partially by on metal utensils (aluminum, cast iron,
barter, accepting old utensils, clothes, and brass, moradabadi, bell metal, and stainless
shoes in full or partial payment. For spe- steel) was 8 per cent, and some were as low
cial occasions such as a wedding, when the as 2 per cent.4 These were margins on in-
parents may give the bride and groom some dividual sales; each dealer's margin varied
household utensils, villagers will go to from transaction to transaction, as both
neighboring towns to buy. wholesale and retail prices were subject to
There has been no census of retailers in bargaining.
India. In Madras State, however, all retail-
Retailers' Sources
ers with annual sales of more than 7,500
rupees, approximately $1,500, are required Purchasing is not easy for the retailer in
to register under the sales tax law. Madras India. Most merchants must visit the source
State had a population of 56,000,000 in either wholesaler or manufacturer, or
1951. In 1955-56, 103,000 dealers regis- order by mail to purchase new stock.
tered; of these, 58,000 had annual volumes Wholesalers have no traveling salesmen.
between approximately $1,500 and $2,000. Of sixty-eight utensil retailers questioned,
The remaining 45,000 dealers with volumesforty-two had visited the source to make
over $2,000 were distributed by size and their last purchase and twenty others had
type of business as shown in Table 2. ordered by mail.
The number of retailers with volumes of Retailers often travel considerable dis-
less than $1,500 is not known, but many tances to make their purchases. Among the
Indians believe there are more with sales
'Survey conducted by the National Council
below $1,500 than above. If this is correct, of Applied Economic Research, New Delhi, in
it means there are more than 206,000 re- which one of the authors participated.

TABLE 2
MADRAS STATE RETAILERS CLASSIFIED BY TYPE OF BUSINESS AND SALES VOLUMEa

Approximate Sales Volume

$2,000 to $5,000 to $10,000 to Over
$5,000 $10,000 $20,000 $20,000 Total
Hotels and restaurants 3,149 621 322 151 4,243
Cloth 3,467 1,099 549 653 5,768
Grocery 7,816 1,997 867 970 11,650
All others 16,138 5,872 1,736 23,746
Total $30,570 $9,589 $5,248 $45,407
a National Council of Applied Economic Research, N

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MARKETING IN INDIA 15

utensil dealers studied, purchases were Fiji, for example. On the other hand, In-
made every two to three months by most; dians have a philosophic outlook on life
the median distance to the source was be- which tends to make them less interested in
tween 100 and 125 miles, considerably far- materialistic things-at least as compared
ther than the typical wholesaler traveled to with the typical U.S. citizen. Their thinking
make his purchases. In the small town of in this respect is similar to that in Europe
Lonavla, about 70 miles from Bombay, most in the Middle Ages.5 As a result, the busi-
retailers go to Bombay to buy. One hard- nessman seeking a profit is considered un-
ware retailer goes to the city twice a month, worthy, and this is particularly true for a
a 6-hour round trip, to buy from a manu- merchant who takes an aggressive approach
facturer. Another has a monthly train to selling something which he did not make
ticket to Bombay, and has his son go al- but which will bring a profit to himself.
most every day to make small purchases Thus, the initiative for exchange typically
from a wholesaler. No salesman has ever comes from the buyer's side. At the same
called on either retailer. time Indians are great bargainers and, once
negotiations are started, will strive to make
WEAKNESSES IN INDIAN MARKETING SYSTEM a sale and secure a price advantage.
The Indian village of the past was not a
Demand Creation
market economy. Each person performed
There is little demand creation effort in his job, largely determined by his caste,
India. Although there are branches of some and shared in the village's produce on the
of the top U.S. advertising agencies in In- basis of a complete system of shares. There
dia, such as J. Walter Thompson Co., there was no market valuation of either the serv-
is little advertising. ices of the artisans or the produce of the
There are good reasons, however, for this. farmers.6 In such an economy there was no
National advertising is impossible. There place for selling. The attitudes developed
are some fifty-one dialects spoken by one over centuries of this type of economic
or more million people each. No one lan- thinking cannot be changed quickly. Since
guage is spoken by more than about 50 mil- approximately 85 per cent of all Indians
lion of the almost 400 million population. still live in villages and many are still liv-
Only about 15 per cent of the population is ing partially in a communal system, this
literate in any language. lack of understanding of a market economy
There are no communication means by is a major factor.
which the advertiser can reach any large Under the circumstances, American de-
proportion of the people. Newspapers are mand creation methods cannot be directly
confined to the major cities, where less than and immediately transplanted to India. The
20 per cent of the population lives, and asuccess of a few promotional efforts adapted
majority of them are in English. Radio to the local situation, those used by Hindu-
reaches only a small segment because there stan Lever, for example, indicates definitely
is no electricity in most of the villages, and that demand can be created.
few people can afford radios. In addition,
Indian radio is controlled by the state and Transportation
does not use commercials. Radio Ceylon Transportation difficulties are a barrier
does permit commercial messages and is to effective marketing. The transportation
beamed over much of India, but its system of India is a mixture of the ancient
audience is limited. There is no television. and modern. A bicycle made in Madras may
A more fundamental problem in using
modern demand creation methods lies in Marquis W. Childs and Douglass Cater,
Ethics in a Business Society (New York:
the character and culture of the people. On
the one hand, Indians have shown them-Harper and Brothers, 1954), p. 12.
selves to be natural merchants; in many6Walter C. Neale, "Reciprocity and Redis-
tribution in the Indian Village," in Karl
countries to which they have emigrated they
Polyanyi and others, Trade and Markets in the
have become major factors in the country's
Early Empires (Glencoe, Illinois: The Free
internal trade-Burma, South Africa, andPress, 1957), pp. 218-234.

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16 JOURNAL OF MARKETING October, 1960

lections on goods going through a town.

travel by railroad to Delhi; move to Ambala
by truck; go to Ambala Cantonment by The bul-
Indian Supreme Court has held this
lock cart; and go from the shop theretax to
on goods in transit to be illegal, but as
some consumer by hand cart or on the top late as August, 1958, Delhi widened its
of someone's head. city limits to take in a bypass road and
The railroad industry is one of India's held the octroi duties collected.10
sources of pride. It is relatively modern;
however, it operates on three different track Limited Storage Facilities
gauges, so that extra handling of goods is In the non-monetary subsistence economy
sometimes necessary. The trucking indus- in which the vast majority of Indians have
try is somewhat less well developed, but lived for centuries, there has been little
can still be considered modern. It has the
need for commercial storage facilities for
same problem of differing load limits amongfood products, particularly grains. Each
the various states as in the United States.7
family has stored its own grain in urns.
The competition between the railroads and
With the growth of a monetary economy,
trucks is intense, as it is in this country; more grain is moving in trade, and more
however, in India the railroads are owned storage facilities are needed. The first grain
and operated by the Government, while theelevator in India was completed in 1957.
bulk of the trucking industry is owned pri-
Storage facilities at all wholesale levels are
vately.
inadequate. In the city grain markets, side-
Government ownership plus pride in the walks get completely blocked by sacks of
railway system has led to artificial limita- grain piled there for lack of any other place.
tions on the development of trucking.8 Such poor storage facilities, of course, lead
Length of haul has been particularly lim- to spoilage and to seasonal shortages and
ited. It is not possible for a truck registered surpluses.
in one state to go beyond an immediately
Wide and erratic price fluctuations have
adjoining state. If the shipment is to go
plagued the lac industry for years. (Lac
further, it must be transferred to a truck is the raw material from which shellac is
registered in the second state which can go
made; it is secreted by insects that infest
to the third, and so on.
a specie of tree native to India.) A survey
More restrictive than this, however, is
among the members of the lac industry in
the effect of octroi, a tax on all goods
1957 disclosed that the vast majority be-
shipped into a city. This limits trade to lieved prices could be stabilized to some
some extent, but the greater limitation
degree with more adequate storage facili-
arises on goods passing through a city. ties.1l
A
truck going one hundred miles may pass
Some of the storage problem stems from
through perhaps six towns and octroi du-
ties. At each of these towns the trucker
the basic shortage of capital, but there are
differences in outlook that make it difficult
must wait in line for his turn to be checked
to install modern methods. When the first
and must then pay the octroi. The octroi
will be refunded at the other end of the
Indian grain elevator was officially opened
in 1957, an American was pointing out the
town if the goods go through, but the re-
fund system is so complicated and time con-
advantages to an Indian official. Among
other things he mentioned that the elevator
suming that a middleman has sprung up
would protect the grain so that rats would
to handle this for a slight additional fee.9
Some local governments hold the octroi col-
not eat it. To this the Indian replied: "We
look at that differently. We think the rats
7 "Quick Redress of Road Transport Problem also have to eat."
Needed," Motor Transport, Vol. 14 (July,
1958), p. 25. "1"Terminal Tax on Goods in Transit by
8 S. K. Patil, "Road Transport Has Come of Road," Motor Transport, Vol. 14 (August,
Age," Motor Transport, Vol. 14 (July, 1958), p. 17.
1958), p. 19. 1Export Markets for Indian Lac (New
9"Rising Taxes," Motor Transport, Vol. 14 Delhi: National Council of Applied Economic
(March, 1958), p. 11. Research, 1957), p. 39.

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MARKETING IN INDIA 17

Adulteration and Standardization dian brands is equally bad. On the other

Indians buy household utensils by the hand, in competition with large scientific
pound instead of by the unit. If they did manufacturers they are handicapped be-
not, they suspect the manufacturer would cause people are not prepared to purchase
pound the metal thinner than the buyer be- their brands, believing that invariably the
lieved it to be. Sugar is sold only in ex- foreign brands are superior."l3
tremely coarse crystals-partly because it CONCLUSIONS
is more difficult to adulterate in that form.
Almost all consumers buy grain and grind A steel mill or a fertilizer plant may be
it themselves. Flour can easily be adulter- transplanted from Pittsburgh to Jamshed-
ated with chalk dust. Even grain must be pur, India, and the machines will run the
same way and chemicals will react as ex-
sorted, virtually kernel by kernel, or sand
and other foreign matter will be slipped in pected.
to add to the weight. There is a flourishing The same is not true of marketing. Social
market for empty containers for cosmetics,customs, individual attitudes, education,
toilet goods, and medicines. Unless the la- business institutions, methods of communi-
bels are destroyed when the contents are cation, and governmental influences and
control differ markedly between India and
used, the jars, bottles, and cans will be re-
filled with substandard products and sold the United States. Modern-day marketing
as the original. In 1957 health authorities methods in this country cannot be directly
in Delhi estimated that 25 per cent of all transplanted successfully to the Indian
the food bought in that city was adulter- economy. Change must be more gradual,
ated.'2 Sawdust, husks, colored earth, and and American methods probably will never
ground seeds were found in various food- fit exactly.
stuffs, accounting for 10 to 50 per cent of There are a number of aspects of mar-
the total weight of the products. keting, however, in which improved meth-
Since there are few brands, most prod-ods would aid Indian economic development.
One of the main deterrents to effective ad-
ucts have no reputation to uphold. A manu-
facturer who tries to establish and main- vertising is being overcome. Education is
expanding the percentage of literates rap-
tain a standardized quality for his product
faces a difficult task. idly. As more people learn to read, there
"Because of severe competition, small be more newspapers and magazines
will
which can be used as advertising media.
factories where more or less scientific meth-
ods are adopted, find themselves in a per-The physical handling of goods also offers
opportunities for great improvement. Ad-
plexing situation. They cannot market their
goods in competition with manufacturers ministrative barriers hamper an already
working on crude lines because (1) theirlimited transportation system and storage
facilities are far short of needs. Standard-
cost of production is higher on account of
using better raw materials and working on ization of quality is almost unknown; but,
modern lines with machinery which neces- demand creation techniques develop, thus
as
permitting brand names to establish fran-
sitates large investments, and (2) the con-
sumers are unwilling to pay them a higher chises, standardization will undoubtedly
become more common.
price, believing that the quality of all In-
"Boot Polish, same reference as footnote
"2 The Times of India, August 28, 1957. 3, p. 15.

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