India has the highest saving rate in the world and that probably has less to do with financial acumen of Indian poor but the sheer absence of avenues where an economically vulnerable person can get value for the money. For example my maid ended up paying 5,600/- ($87) more for a 3 door frost free refrigerator that has a 5 start BEE energy rating, then what it would have costed me.
For her it was an important purchase that reflected on her social status & allowed her to revel on the prestige & luxury that any premium white goods promise to the buyer. Her buying experience is a typical example of how this country is divided in the lines of English speaking & non-english speaking. From the price, to the financing options, service, delivery etc. everything is different & dependent on the buying behavior.
Product selection: The product was available cheaper online, but online stores does not deliver without a door number and she is living in a temporary housing where there is no door number. Being a bulky equipment, the traditional mode of delivery to workplace (homes of the person where they work) often does not work out. Also physical look & feel is important for a physical selection.
These guys are not illiterate, just that they are not educated in English medium. Hence newspapers or internet based product selection is difficult for them. However even the shopkeepers were not too keen in helping them. My maid was so much frustrated with likes of reliance digital etc. that she literally had to flash a bundle of currency to get the attention of the sales executive. Rather being courted and treated like anybody would do for someone buying a house or a car, they were shunned by the stores. Then again the deals & discounts she gets is remarkably different from what the white-collar folks can get without much effort. The store also limited her options by stating that the refrigerator came only in steel color (while white, black & red options were available online)
Financing & payment options: Most retailers have tie up with one bank or the other giving additional discounts or cash backs. White collar folks usually have multiple bank account it is free money. Even otherwise, credit cards immediately give back 0.5-1% but you need to have a card to avail this option. Also I get 30-40 days interest free loan through cards which someone paying hard currency cannot avail. Finally, in our case, we could avail a bank offer from flipkart if the payment was made through Citibank credit card saving a net of 1,500/- from the MRP. credit score based interest rates are acceptable, but it is hard for someone to build up a score if they are not in organized sector. Normally that should not matter much, but unfortunately in their case it raked up to a huge difference in the price.
The store’s best price after all discounts, haggling & negotiations was 25,000/-
The price in flipkart was 24,000/-
However the bank schemes made a lot of the difference.
1000/- was on prepaid orders was a good incentive
Additionally my credit cards reward points worth 370 bucks should be accounted for
Coupondunia gave me 644/- of cashback for online purchase (payable after 60 days)
Then I got a 40 day interest free billing holiday on my card that’s worth 250/- at 8% rate
In total the landed cost from flipkart came to 21,764/- which was 3,254/- cheaper (a significant sum for my maid)
Installation & After sales service
The whirlpool installation engineer practically forced my maid to buy a stabilizer, even though the refrigerator had an inbuilt voltage system making it redundant. Furthermore, rather than a generic 800-1,000 bucks voltage regulator, he convinced her to buy a 2,400/- stabilizer using a scare tactic etc. I have not used a stabilizer in my 6 year old refrigerator without any adverse effects, but looks like sales & service folks in Bangalore sees the economically vulnerable as cashcows that can be milked.
It reminds me of C K Prahlad’s book “fortune at the bottom of the pyramid” It talks about how the poor sections end up paying a exhorbitant price for basic commodities & service. Their limited bargaining power, ignorance of English language & lower levels of education is being used by sales persons to rob them from their savings. The products are often low quality (but not low price), packed/produced in standards that don’t justify the price, the after sales service & warranty is denied to them for the flimsiest of the reasons. The LIC insurance agents sell them policies where the returns are lower than the bank FD (even after adjusting for the term insurance premiums), the doctors use their ignorance of medical terms to empty their pockets etc.