Indian used-car industry - Challenges and Opportunities

Used-car industry has flourished in India in past few years in an extraordinary way. This sister-industry of the new-car industry has came a long way from selling a few thousand cars every year to the current situation when it is selling cars almost one and a half times more than that of the new car industry.

Both these industries have grown leaps and bounds in the past years with the core reasons being multi-faceted. Right economic environment has enabled a large chunk to earn more, consume more and hence, spend more. Specific to the used-car segment, the growth has been contributed by the rising urban population, a large part of which is the young and ambitious workforce. A change in lifestyle in tier-II and tier-III cities have played its part too in taking the once a luxury, four-wheeler, to great stretch.

Apart from the factors from the consumer side, the industry has greatly benefited by the regulations and policy support from the government in last few years. The Industry has responded as enthusiastically as the consumers have by bringing a flood of new cars models spoiling its customers for choice.

The advent of foreign car makers not just raised the bar for the competition but also bestowed the population with cars which they had longed to own for long time. Not to mention, the technology and wealth they brought to India in terms of knowledge and assets.

However, last few months have not been great for the new-car industry. Fortunately, the same is not true about the used-car industry.While the new car market showed negative growth in the past few months, used-car market has been growing at a pace of 22% year by year. The current Indian used-cars market is pegged at around 2.5 million units a year. The Industry is said to be worth around Rs 52,000 crores. (Source: Crisil’s report on used car industry)

The used car market has always been dominated by traditional unorganized players in India. However, this changed a few years ago when Maruti True Value, Mahindra First Choice Wheels ltd etc set up their shops to sell used-cars in India.In few years organized sector has grabbed almost one-sixth of the market and the expansion plans make us believe that this is only going to rise further. Organized players have given a much needed stability to the used-industry and hence their entry is a welcome sign for the industry as well as for the customer.

Organized players have access to funds, technology, processes and man power to ensure that they are on track with their plans and hence there are more reasons to believe the crisil report which suggested that a quarter of the market will be under the organized sector in a couple of years from now.While the entry of OEMs like Maruti, Tata, Mahindra and Hyundai which have always been offering value for money products was a pleasant surprise, the debut from luxury car makers like BMW, Mercedes-Benz and Audi into this segment is really exciting. This will do many things in the market. It will start a culture where buying a used-car will no longer be looked down upon. Imagine someone buying a Mercedes which is pre-owned, it still is a Merc! The culture is very dominant in US where the ratio of old to new cars sold every year is as high as 3:1 while it is almost half in India at around 1.5:1.

Apart from the OEMs, entry of ventures like car nation and online format like cartrade, gaadi etc are also making the stage competitive making customer, the highest beneficiary.However, a lot needs to be done yet. The segment, especially in the organized format is especially nascent. This is clear from the steps car nation, which is promoted and run by Ex-Maruti MD Jagdish Khattar, has taken in the last few years. From a multi brand used-car retail outlet to service stations to financing, to accessorizing shop and what not. It is easy to recognize that there is a big gap between the services supplied by the existing players 

and consumer demand and hence after every step there is an opportunity that should be tapped.

Various challenges are there for the industry which needs to be faced in the coming years. The challenges are both, different as well as similar for the organized and unorganized format players. For example, the organized players have to break the market to take position which will make their presence worthwhile. The price point difference in an extremely price sensitive business like this is another threat to the organized used-car segment. However, credibility and trust due to the brand associated as well as the professionalism which they employ in their operations are most important strengths of these players.

On the other hand while the unorganized players mostly work in the personal relationship domain, they have challenges like diluting trust and hard-hit credibility and hence more professional and transparent approach is the way forward for this segment. However, due to tight focus on the costs these players are always able to make the price difference subtle for the customers. But going forward, this may not be the best strategy considering the changing customer lifestyle, attitudes and perceptions about used-car purchase.

Cheers,

Campaigns with plus-size models - Marketing gimmick or mind-set shift?

H&M's Beachwear Homepage with Jennie Runk

A recent campaign by Swedish retailer H&M became centre of attraction for fashion industry as well as consumers alike. It was for the first time that the retailer chose to represent its collection of Beachwear through Jennie Runk. There were two peculiarities in this campaign – Jennie Runk is a plus-size model and; the section is not called “Plus-size Beachwear” but only “Beachwear”, a brave digression from all such previous attempts by any other organization.

This can be a small aberration for some while for others it can be seen as a much needed refreshing change in the modelling industry where starved and wafer-thin models have managed to achieve prominence  over natural and original models with fuller and normal figures, which the industry choose to call plus-size models. Let me reiterate though, that being thin is not bad but what these models have to go through to be thin and what they end up representing by being size 0 or 00 is dangerous for themselves and for the ones who end up idolizing them.

Ralph Lauren campaign featuring Robyn Lawley

A lot of people dubbed the H&M’s move refreshing by calling it a welcome change in industry while many doubted its inherent motive as being purely a marketing tactic, not for the beachwear promotion but to come out as an ethical and moral brand, promoting what is right for the society and its consumers.

The campaign for H&M featuring plus-size model was definitely not the first time such a theme was promoted.  Ralph Lauren chose Australian model Robyn Lawley as its first ever plus-size model, but there was a difference between the two campaigns. Unlike Ralph Lauren, which went all-out announcing its “ethical” move to appoint a plus-size model to show case Ralph Lauren apparels, H&M went quiet and even refrained from mentioning the model as a plus-size model or the beachwear as plus-size beachwear. But not to forget, the same retailer came under scrutiny for its campaign where they used virtually designed body-parts and added real women’s heads to the ads to showcase its apparel line. Not so moral there!

Elle coverpage featuring plus-size model

A plus-size model leading the pack at  a runway for Mark Fest

Another welcome move came recently when three models were banned from a fashion show in Spain for being "too thin". The show in Cibeles bans models with a Body Mass index of less than 18, suggesting anything below this is an unhealthy vision to set upon young teenage girls. Vogue, first time ever in 2011had plus-sized models on its cover page while Elle, very recently in May,2013 adorned its cover page with a plus size model.

So can we assume that the plus-size modelling has arrived at the centre-stage of big brands and the above milestones represents a generic shift in the mindset of fashion and modelling industry alike? Unfortunately, No.

H&M's head-off campaign that was condemned for its 'fake' nature

A detailed observation into these milestones will suggest that more often than not these events were marketing tactics and by no means suggested an overall change in the outlook of the industry.

The H&M campaign was more of a damage control exercise for its head-off campaign disaster. The navigation through the beachwear finally leads the user to plus-size section(!). Finally, the page was taken off after few days from its website, when enough buzz was generated for the campaign. No points of guessing, the inherent motive was not to 

be all moral and put across a message, it was to be heard, known and talked about.

Vogue coverpage with three plus-size models

The vogue and elle magazines attached a slight amount of pun to the cover pages with plus-size models with taglines like “Thigs is the limit”, "booty-ful" models with "full-siz
e fannies” etc. These taglines then made rounds with further jokes and puns on the models, though earned great amount of spotlight for the magazines which was evident from the number of copies sold and inquiries, feedbacks and comments received.

Inspite of all the noise made by industry stalwarts about bringing in more original and natural models, models being fired for gaining weight is a regular phenomena and not much is being done by any party to ensure that the so called mind-set shift is actually implemented. Hence, the whole out-cry for change lacks moral intent and appears to be more of propaganda by the industry to gain mass-acceptance among society and its consumers for being a responsible industry.

Despite the public opinion condemning the use of "size 0" models, fashion gurus still give the girls the go ahead to walk at their shows. Guidelines set down last year advise the industry to go against using mega-thin girls. They claim that the brands are supposed to create an aspirational value for themselves and must also be able to suggest to consumers a better version of himself/herself when he/she acquire these brands.

There is another interesting aspect to the story. In March when H&M started to use size 12 mannequins in its store there were some critics which complained that such a move is promoting obesity among people.

With the arguments placed by the industry in favour and against of plus-size models at different occasions and sometimes by actions, it is clear that at the end of the day it’s the consumer which over-rides the decisions like these. Acceptance of the plus-size models and abandoning those who themselves undergo a torturous process and propagates the false imagination of “a perfect woman” through size 0 among consumers should be the first step in the direction.

As a new British study suggests that the cultural obsession with slim female figures could be overturned if advertising flaunted fuller-sized models, which in-turn are accepted and appreciated by the consumers. Industry must also rise above the petty marketing gimmicks to gain points for the campaign and instead place their belief in such ideology which is not just ‘right’ but also financially rewarding for them.

 Cheers,