In a new book, an investment banker explains ‘white space’ and how budding entrepreneurs can spot it

If you were to follow the growth trajectories of fashion brands such as H&M, Zara and Uniqlo in India, you will notice that they have actively been expanding their presence in Tier 2 cities across India, capitalising on the growing middle class that has rising incomes and aspirations. Among other things, a surge in digital usage in these regions during the Covid-19 pandemic enabled consumers to discover and experiment with new brands. Retailers are now looking to tap into this opportunity. What brands such as these are effectively doing is selling access to aspirers in Tier 2 cities, a clear white space.

If there is another big shift in consumption trends, it is being scripted by Gen Z, the generation born between 1997 and 2012. Ranking high on the splurge:save ratio (they contribute to about 17 per cent of India’s total consumption), this digitally native cohort is assuming centre stage in India’s consumer markets. Not only is this cohort scaling up Internet use cases, driving monthly or daily active users (popularly referred to as MAU/DAU) growth across app ecosystems, but Direct-to-Consumer (D2C) brands are also scaling led by the buying power of Gen Z customers. We will deep dive into this cohort later in our discussion when we analyse different target consumers and their willingness to pay. For now, however, it is important to note that they represent a significant white space for brands.

Yet another way of identifying a white space is to look for new form factors. It can lead you to create innovative products that address specific pain points or enhance user experiences in ways that existing products do not. Take, for instance, the fact that when Apple introduced the iPad, it identified a white space between smartphones and laptops, creating a new category of portable computing devices with a unique form factor. Companies like Fitbit and Apple, similarly, found white space in health and fitness tracking by developing wearable devices that combine convenience with advanced health monitoring features.

We have been witnessing change in form factor in the beauty industry as well, with formats such as a lip balm in a keychain for school supply or a sunscreen stick or a sunscreen spray. By rethinking the design, size and usability of products, you can tap into new market segments and set yourself apart from competitors.

Changing demographics – as in the case of targeting men for luxury skincare or cookware brands as well as capitalising on occasion-based usage, such as outdoor pollution masks or pre-bathing serums – can be yet other instances that help you identify white spaces and create new market segments.

In today’s fast-paced market, staying ahead of consumer trends is crucial for start-up success. By understanding and anticipating what consumers want, start-ups can innovate and create products that meet emerging needs. Monitoring real-time data to gather insights into consumer interests and activities is therefore, key. Sample this: carbon-plated running shoes, old-money outfits, shilajit products and Russian manicures have seen 435%, 204%, 132% and 125% growth in demand in the period from 2020 to 2024 based on trending topics in popular community platforms such as Instagram, YouTube and Reddit.

Similarly, new products inspired by societal trends such as pickleball shoes, anti-anxiety jewellery and 3D-printed fashion products are also gaining ground and offer opportunities for budding entrepreneurs.

Importantly, there are several online resources that can help you discover the latest trends and products that are in demand. Some of these include meetglimpse.com, trends.google.com and futurepedia.io (for AI products).

Speaking of emerging trends, trends from other markets take some time to make their way into India and the ensuing information asymmetry can also lead you to interesting business ideas. Think of the popular beauty trend of glass skin that originated in South Korea in recent years or the fact that portable and wearable air purifiers are currently gaining steam in China. Tracking such trends can also lead you to new business ideas.

If the idea of a tech start-up excites you and you are interested in uncovering key technological trends in the tech domain, the ABCDE framework can come in handy: A – Artificial Intelligence, B – Biotechnology, C – Crypto and Blockchain, D – Drones and Electronics and E – Energy Transmission.

Leveraging this can help you innovate and gain a competitive edge. AI-powered chatbots improving customer service or using Blockchain in financial services, cloud-based platforms for remote work and more, are all instances of entrepreneurs cashing in on technological advancements.

The consumer app ecosystem in any case has been witnessing rapid growth on the back of the Wang Trifecta – a combination of three key factors: cheap Internet bandwidth, widespread smartphone penetration and a frictionless payment system.

In looking for opportunities, it will be helpful to research and pursue an industry where the growth is at least 1.5x the country’s growth, in order to make it a lucrative prospect. As per the 2023 OECD Economic Outlook Report, India demonstrated the highest growth rate (6%), outpacing its counterparts such as China.

With a 6% base growth rate, you will do well to focus on industries where the growth is at a minimum of 9–10% so you can profit from the differential.

To get you started, below are the most promising industries for the period between 2020 and 2030, as per Invest India. These are industries that have significantly outpaced average growth rates:

• Healthcare: 22% p.a.

• FMCG and Retail: 12.2% p.a.

• Infra and Real Estate: 11.3% p.a.

• Finance and Insurance: 15.3% p.a.

Some of the other industries that may be worth your attention, as per the Industry Report on Indian Value Retail Market by Technopak Advisors (March 2024), include home décor, furniture and appliances, food and beverage, media and entertainment, beauty, fashion and personal care, electronics, wearables and robotics. The global beauty market, alone, for instance, rose by 10 per cent in 2023.

These, of course, are only some initial data points to help you get started on your research. It is important to mention here that while opportunities will continue to evolve over time, what will remain a constant source of advantage is the entrepreneur’s skill and ability to spot these opportunities and stay ahead of the curve.

Excerpted with permission from The Money Ball: Your Guide to Crafting Business Ideas and Fundraising, Sarthak Ahuja, Penguin India.

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