Copyright 2016, Forbesindia.com

The Value Hunters of Aurangabad

Maharashtra’s tourism capital used to be a typical small town. It’s now making a dramatic entry on India’s consumer map


Sachin Nagori won’t forget the occasion in a hurry. It isn’t often that an unknown businessman in distant Aurangabad is chased by The New York Times or The Times of India for an interview. Or have Wilfried Aulbur, the then managing director of Mercedes Benz India, drop by at his house.

In October 2010, Nagori had pulled off a coup. He persuaded 151 businessmen to buy a premium luxury symbol: A Mercedes Benz car. By using their collective bargaining power, Nagori managed to extract a hefty 20 percent discount from the German carmaker. The bulk sale made its way into record books as the largest number of vehicles sold in a single day in a city, turning Nagori into an instant celebrity. In a small town like Aurangabad, the news spread like wild-fire, catching almost everybody’s imagination. And that included Pankaj Agrawal, another businessman in search of fame.

A first-generation entrepreneur, Agrawal owns an LG Shoppe home electronics department store and a Bajaj Auto dealership in Aurangabad. He has a large home on one of Aurangabad’s arterial roads and owns two cars. Agrawal decided a luxury car would be more befitting for his status in society. And what better than an imported sports car, the BMW M6?

By November, Agrawal had lined up some interested buyers so he too could negotiate a bulk deal. Aurangabad had no luxury car dealerships, so he approached the nearest one in Pune. He lured BMW into doing a road show and by the end of it, Agrawal was all over the national media, taking credit for masterminding the sale of 101 BMW cars in Aurangabad — though there was no contract with BMW yet.

That’s when BMW got a shocker. Close to 40 customers at its dealership in Pune called in to cancel their bookings. They wanted discounts similar to what BMW had been offering customers in Aurangabad. Senior executives at the car maker went into a huddle and decided that it made no sense to support bulk deals. “I consider the sale of 101 cars like this as the starting point of brand erosion. If I agree to the unreasonable discounts that the group asks for, the dealer will not make any profit, we will not make any profit and also anyone else who does not get the discount will heavily complain. What I sell to people is not a product, but a dream,” says Andreas Schaaf, president, BMW India. Over the next few days, the company called off negotiations. Agrawal lost face. And Aurangabad’s second tryst with fame turned into a farce.

Yet despite losing the sale, the key lesson hasn’t been lost on BMW’s German president. “Aurangabad is a good example where nobody had that city on his landscape, but it had the potential. Obviously, people have the buying power to buy premium luxury cars. And the consequence out of this whole thing is that as BMW, we have to speed up our dealer network sales,” says Schaaf. For starters, BMW has already sold 20 cars in the city and is looking at shortly setting up its service station in Aurangabad.

On the face of it, Aurangabad’s rather dramatic entry on India’s consumer map may seem a bit contrived. For all the conspicuous consumption, there’s plenty that’s remained the same, especially the deep sense of community among its residents.

Spread over a radius of about 8 kilometres, Aurangabad has a population of about 1.4 million. Traffic is minimal, the roads are barely motorable and the errant traffic sense of its residents is no different than in any other Tier II town.

It isn’t until you hit the town’s southern side that you come face-to-face with the new wealth: A stretch of sprawling bungalows dotting the streets. Jalna Road, an arterial road that connects the city, is the nerve centre. Practically everything is located in and around this stretch. The evidence of prosperity and change are clearly visible; from the four-month-old 800,000 sq ft Prozone mall, which is the largest and only mall in the city, to dealerships of automobile brands like Skoda, Nissan and Maruti Suzuki and eateries and hotels like the Taj and Lemon Tree.

In the last five years, the city has morphed well beyond its status as Maharashtra’s tourism capital into a hotbed of industrial activity, primarily led by the automobile and engineering cluster. In more recent times, the growth has been spurred by agriculture and real estate development. Cotton farming has grown in the surrounding villages. Farmers have thrived thanks to cotton prices hovering at an all time high of around Rs. 4,500 per quintal. Residential real estate prices have zoomed. Properties were valued at around Rs. 20 lakh an acre in areas like Nashik Road, Old Bombay Road and Beed Road in 2006. Prices have risen five times in the last four years.

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Back in the late ’70s and early ’80s, Aurangabad was a typical Marathwada town. People were primarily into agriculture and industry mainly comprised local units in textiles, silver and gold handicrafts, which were sold to eager tourists. The creation of the Maharashtra Industrial Development Corporation (MIDC) in the late ’80s saw the arrival of big business houses like Bajaj Auto and Garware.

Gradually, as people started making money from the industries that sprouted up, they quickly realised that they could piggyback on the industrial growth. It also helped that other big cities like Mumbai and Pune became increasingly crowded for companies. Some set up ancillary manufacturing units and others opted for dealerships. “Eventually even the software companies started coming in; the business process outsourcing companies are already here like Birla and Vodafone. They have about 2,000 to 2,500 employees and these companies always take young people who are mostly very optimistic and they want to grow fast. So you can see that the city is growing in that fashion,” says Makrand Deshpande, director, human resources at Skoda Auto India. Deshpande who studied in Aurangabad has seen the city change over the last 30 years.

The change has seeped into the surrounding villages too. Farmers have started giving up farming. Many have sold their land and moved to the town. Their kids have used their education to get better jobs in adjacent manufacturing and service industries. There’s a new builders lobby taking shape in the city. Last November, Pagariya Auto, a Maruti Suzuki dealer, sold 10 Altos in a nondescript village called Karmad. “They all came in one after the other. Cotton prices are at an all time high and the prices of land in the interior parts of Marathwada have shot up. So these people have a lot of cash and they want to spend,” says Rahul Pagariya, director, Pagariya Auto.

This explosion of new wealth is leading to a significant explosion in lifestyle. To begin with, the town had very few leisure and entertainment options. Five years ago, Cannought was the only super market and Nirala Bazaar was the only place where you could buy clothes and basic consumer durables. “People who needed a lifestyle went to Pune, which is a four-hour drive from here. So there was a lot of latent demand. And then everything changed with the opening up of Big Bazaar, which was followed by More,” says Deshpande.

Individualism, the leitmotif of consumption in big cities like Mumbai, is still missing in Aurangabad. A strong sense of community seeps through the town’s consumerist culture. There’s no better example of it than Sachin Nagori.

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Image: Vikas Khot
Straight Up
Real estate prices have risen five times in four years

Nagori, 41, is a first-generation real estate developer who couldn’t complete his education because his family was in a severe debt crisis. His father was a lecturer who thought it would be a good idea to sell some family property and set up a factory to manufacture automobile springs. The venture didn’t take off. The family was displaced. “That brought us to an extraordinarily bad shape. We had to sell our house and started living in a rented house at Rs. 800 per month,” says Nagori. For the next five years, he apprenticed at a local builder’s office, at times working for more than 18 hours a day doing small chores. At 25, he started a bricks and sand trading business and slowly over the years started developing properties. In 2005, he arrived on the city’s who’s who list with the Aurangabad Business Center, a 100,000 sq feet complex, which has become one of the city’s premium commercial properties.

The clout he wields is immense — and Nagori’s bulk buying spree isn’t an aberration. As things turn out, this town has a thing for doing things together. In August 2009, when Nagori and his close friends decided to take a holiday in Goa, they formed a group; of friends and friends of friends. Close to hundred people came on board and they chartered a Kingfisher flight to Goa. Again, early in January 2010 when a few people wanted to visit Shirdi, they formed a group. Even movie-watching is a community affair. Every time a new movie releases in town, they come in large groups with their family, friends and relatives to watch the movie.

“We still hunt in packs. The whole thing of mental construct of nuclear family is fine, but people here do things together. When special food is cooked, it does make its way to the neighbour’s home. In our minds, we are still living in mohallas. People still enjoy doing the small things together,” says Damodar Mall, director, food strategy, Future group.

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As a result, Big Bazaar, located on Jalna Road and one of the first retail outlets to set up shop, does not have the clean straight aisles of a typical Western supermarket. “The design allowed more people to talk, discuss and then decide, unlike in the West. And the customer is doing nothing but getting another pair of senses along with him,” says Mall. The idea was to make it look like a value and bargaining place. And almost on cue, customers invariably ask for discounts. Mall says he finds the highest level of bargaining in the Swiss watch counter. “It is not that the average Indian consumer is out there to splurge. The intent to extract value is still very strong,” he adds.

On October 8, five minutes away from Big Bazaar, Prozone opened its doors to the public. Spread over 8 million sq ft, it was the first and continues to be the only mall in Aurangabad developed in a joint venture between Provogue and Capital Shopping Centers Group of UK. And Vikrant Misra was in for a big surprise. Misra, a senior manager in charge of special projects has been a part of the startup team which set up Prozone. Quite a few people who visited the mall would take off their shoes before entering the premises. “These people had never visited a clean, big place like this before and frankly we were shocked and really worried to see this because we thought somebody might get hurt,” he says. In fact, in the first 10 days when the mall opened, says Misra, he spotted two Bentleys in the parking lot. “You could see that people had money here and they are coming to the mall to spend,” he adds.

Today, Prozone gets more than 20,000 footfalls in a single day. Retailers who have set shop in the premises, like Shoppers Stop, Levi’s, United Colors of Benetton, Puma and Reebok among many others, weren’t expecting anything like this. In fact, Shoppers Stop is seeing more footfalls in its Aurangabad store as compared to some of its Mumbai stores. “The mall is packed and our expectations have been vindicated by a huge margin. Seeing the demand we are now opening a bowling alley, a Sports Bar and a Satyam Cineplex in the complex,” says Misra.

This is in stark contrast to the days when Misra first came to Aurangabad in 2008 to do a feasibility study. “It was a lonely kind of place with people hardly going out and spending a lot of time either at home or watching a movie. The whole time I kept wondering: Will these people come to my mall to buy stuff and how on earth will I convince retailers to come here?” he says. That whole impression changed when Misra’s local driver took him to Jalna, about 40 km from Aurangabad. “I found a BMW or Mercedes parked in almost every house in Jalna and I was pleasantly surprised. I researched the place and found that Jalna is one of the biggest steel hubs in India. And those people had money and would go all the way to Mumbai and Pune to shop,” says Misra.

Deshpande agrees that spending habits have changed. “If you see Prozone then at one point in time there are more than 5,000 people in the mall. Anybody going to that place will not come back without spending. You spend at least Rs. 1,000 buying stuff for kids or on food,” he says. The hotel or eatery business is booming. Deshpande says that it is difficult to find a place at any decent restaurant in the evenings. “There is no place to sit. Even in pure vegetarian restaurants you have to wait for 10 minutes in the queue,” he adds.

The changing composition of Aurangabad’s society may be behind much of the new shopping and leisure pursuits. Nearly 65 percent of the urban population is under 35 years of age. And an increasing number of people are coming in from outside to settle in the city. “To reach anywhere in Aurangabad, from one end to other, it takes about 20 minutes by road. It is a simpler lifestyle clubbed with new opportunities which is drawing people. And in the bigger companies like Bajaj, Endurance or Varroc, you will find that there are at least 30 percent people from outside who have come to work and live here,” adds Deshpande.

For marketers looking to ride the consumption wave in small town India, Aurangabad could well become the test case for understanding India’s new middle class consumer.