Friday, February 6, 2015

MNC FMCG in E-Commerce

E-commerce is the next big thing in India. By simply sticking around in the market, booking losses and building consumer habits both Flipkart and Amazon seem to have got the basics of category penetration right. It is exactly what any long term investor would do - play a game of chicken with their competitor and hope that the other folds first. Even if they don't, they hope entrenched habits will give them regular repeat purchases.

While this is good marketing sense, the learning which has happened over the past few years indicates that this makes it difficult for premium MNC brands to be a part of these e-commerce websites.

I think it is just WRONG that premium brands are available at the mandi that is Flipkart/Amazon. So let me explain why I say this and also how we need to go about the entire e-commerce strategy.

How people shop

To understand this let's look at how the e-commerce shopper shops for his/her goods online.
It typically starts at the Google search bar (If you use Bing/Yahoo I apologize for your choice). Let's say I want to buy a book. I go into Google and type in "Sandman Harback Edition"

Pretty soon (in about .48 seconds actually) Google returns with around  62400 results.

Then, it's upto me to select the link I want to go into and purchase the book.

Occasionally I might directly go into the site itself, but I know that I can get results for sure from Google and leave the choosing of the site for later. If I find multiple sites with the book I want, I use the middle mouse click to open each in a different tab and compare prices (and delivery dates - only if it's tantalizingly close to someone's birthday).

Hence, any product available on multiple sites essentially ends up being a commodity that is fighting itself on price - even if it is a brand.

We know this. That is why computer manufacturers are coming up with exclusive partnerships with e-commerce sites or publicly illegitimising the sale of their goods from certain sites altogether.

Using the right channels

Take a look at the comparison between the offline and online channels that I drew up.

A brand is a source of knowledge, reputation, experience, traceability and exclusivity. E-commerce websites thrive on variety, convenience and price - if they do not have exclusive dealerships. Hence they will attempt to leverage the brand attributes to hook the customers in while still competing on the same attributes that form their DNA. This erodes brand equity and the brand ends up being a commodity.

A recent report says FMCG may come to e-commerce in a big way - but one look at product category tells us otherwise. What are the customers buying at these sites? Herbal, ayurvedic - the esoteric products which are not easily available offline, Online is where people go to research these products buying them and the customer says "Lo and behold! Here I have the very same products I was researching available for sale! Let me buy it.".

Then where are the FMCG companies seeing online volumes from? Channel undercutting and leakages may be the answer. Distributors may be using e-commerce to get their volumes. While this is in the interest of the current sales, long term brand equity will take a hit

Why MNC brands should tread carefully

MNC brands are all about globalization which requires homogenization for which price control is important. Unless there is tight execution of channel partnership/control to prevent cross trading, leakages will happen, prices online will fall and brand equity will go for a toss.
The way forward is for MNC brands to build exclusive online dealer partners and ensure no cross channel leakages. the good news is we have done this before. A good way to look at this would be simply as a channel conflict problem without getting carried away by the "digital" tag.

Friday, December 5, 2014

Why Street dogs are a problem on our campus

Street Dogs are territorial

Street Dogs Bite

Street Dogs' Poop is unclean

Street dogs move around in packs

kkk and the church

Encouraging them will only make them worse

The author wishes to clarify that the views presented here are the personal opinions of the author. They do not reflect the opinions of the campus mentioned in the title. The author also wishes to thank the sources for their photos while reminding the readers that the author may or may not endorse the views presented on those sites but merely used the pictures as a visual aid to express his own views. 

Friday, January 24, 2014

Void's Journal, Jan 23rd 2014.
Slot V is an interesting journey. It’s all around you. You can see it. Hear it. The way people speak in this slot. Maybe it's the course content, maybe it's the accumulated learning, maybe it's the accumulated learning about how to speak about the course content; but suddenly everyone's an expert. We all seem to have read the latest McKinsey quarterly, BCG perspectives and the high browed among us even know the closing stock prices on each day. Until you decide to Google these for yourself. We all know what Kejriwal or (preferably and - what are you? An urchin?)Modi has to say and more importantly have an opinion about it, however half-baked it may be. The suits from the Summers season are gone, but sometimes you can feel the spirit of it in the air. Knowledgeable sounding verdicts, convictions of other people's judgement delivered with the power of hindsight-the “oh-so obvious”-ness of it all seeps into the atmosphere. A tweak of the interest rate here, an optimistic assumption there and soon the success of every successful proposal in the past looks inevitable, as does the doom of all those which were condemned to failure.
Rationality is assumed and then that assumption is broken. There are chants of "goal incongruence" all around you. Reports are made, borrowed and remade as are the facts in them. And then there are the PPTs. Aah.. The road to hell is indeed paved with good intentions. I am sure when the historians look, they would find the kind misguided soul who saw it fit to deliver Powerpoint presentations to his boss to earn a few brownie points. Maybe they would condemn him in the future. But this is little respite for today's MBA graduate for whom this particular monstrosity seems to be the work of the devil himself.  The NPV is negative, you see. But then, I never understood PPTs. I'm more of a listener myself, as Peter Drucker would put it. Oops, sorry. There I go quoting my MBA fundamentals again. It seems to be a bad habit I have picked up.
Back to the ramble. There are surveys and questionnaires filled up by the principle of reciprocal back scratching. Frameworks are learnt and applied with the grace and efficacy of a sieve for separating milk and water. But no matter, the bell curve of the normal grading scheme watches all. It is a kind and benevolent ruler. It understands that there isn't time. That there are trade-offs. There are always trade-offs (But never a compromise, you understand? That's a bad word-except in HR/OB courses where that is the lifeline you hang on to, in order to stay afloat in the class participation component). We all nod knowledgeably and in agreement. The best minds in the country seldom disagree.
Slot V is interesting. 

{Edit Credit : Patient Little Minnu}

Saturday, January 11, 2014

On October 31st 2013, Unilever CEO Paul Polman said that Unilever could grow as much as six times if it were to tap the market potential in rural India. Coming from the CEO of a company which makes 60% of its sales in emerging-market countries, this deserves closer inspection.
With the slowdown of emerging market economies, it becomes essential for corporates to find new markets in these countries. According to the latest available census, around 70% of the Indian population resides in 600000-odd villages, and a large portion of this market is underserved.
According to a Nielson report, a 1% increase in rural incomes could mean an approxiamately ₹10000crore increase in buying power. Hence marketers are rolling up their sleeves and throwing in their gauntlet to battle it out for this consumer space.
The challenges facing marketers are many. But they are discovering that rewards are there to be reaped, if only they change their marketing paradigms.
The Indian rural consumer has traditionally been looked at as a one-dimensional, utilitarian, agrarian consumer. This condescending view may even have been true at some point, but as our economy has opened up and our markets have evolved, so have consumer lifestyles and preferences.
The SEC (Socio-Economic Classification), the market segmenting tool used by most companies in the Indian context, has also been revised to reflect this. The new SEC does not recognise urban and rural markets separately indicating that these markets are coming of age. There are several reasons for this.
Firstly, in the age of free flow of information and communication, the most expensive activity for marketers-that of category development – has been made much easier. Through mass media, and in some cases, innovative marketing schemes, marketers have been able to change the mind-set of the rural consumer to accept the concept of a disposable income and its consumption.
Secondly, disposable incomes have increased in rural India in real terms. This aspect is perhaps the one most ignored by those who sing paeans and dirges about Indian economic liberalisation alike. All official estimates agree that poverty levels in India are declining- the latest figures put it at 22% compared to 37% earlier. This means that wealth creation post liberalisation has permeated to all strata of the economy in some form. Though the quantum of growth is different, an NCAER (National Council for Applied Economic Research) study has shown that rural income growth is keeping pace with urban income growth.
The above two factors synergise and add a third positive dimension- that of the value sensitive rural customer. Rural audiences are now willing to pay higher than the lowest price for gaining tangible and intangible benefits.
The presence of these factors in rural India, though encouraging, does not imply that marketers can blindly apply the same formulae which spelt success in the urban setting and hope to succeed in the rural landscape. In fact, ignoring the unique rural barriers may spell doom not only for the ill-advised marketer but perhaps for the category itself as competitors will tend to stay away from a market which has bred a failure story.
A low disposable income implies that rural consumers will be willing to spend more frequently on smaller SKUs than their urban counterparts. Cadbury, for example, which plans to reach 80% of rural India in the next 2-3 years is aware of this and makes sure that their products are available within the ₹5-₹10 price range that a rural child gets to spend per week.
 The smaller SKUs increase the complexity of the distribution channel for marketers. Firms are looking at innovative ways to reduce their distribution costs. HUL’s (Hindustan Unilever) Project Shakti is just one such example. By encouraging female entrepreneurs, they have gained business partners who in turn help them reduce distribution costs.
Purchase decisions in the rural setting are subjected to greater effects of influencers and buyers than in cities. This is because familial ties are stronger and pooled usage of certain items may occur. However this does not mean that personal care products do not sell in the rural setting. Talcum powder and sachets of shampoo are two cases in point illustrating either extreme of this argument.
Taking the rural customer’s needs for granted will incur a heavy price. Good marketing practice suggests that products and services be introduced only after evaluating their fit to a market and not based on success in other urban or even other rural markets. This is more valid in the rural context because cultural implications are more varied across rural. In contrast, though urban markets are individually cosmopolitan, a fair degree of homogeneity can exist across urban centres.
Marketers must also not be surprised to find new uses of their products in rural markets. The use of Horlicks as a health food for cattle in Bihar and Godrej Hair Dye as a cosmetic to improve the market value of buffalo in North India illustrate this point. Unstated consumer needs are just as likely to occur in rural markets and it is upto the marketers to sharpen their peripheral vision for capitalising on these.
However, all these challenges are outweighed by one compelling argument. In an underserved, underdeveloped market, each brand has the opportunity to define its category. Chik Shampoo and Ghadi detergent did exactly this and have acquired a sizeable customer base. Firms willing to take the risk will reap the benefits in the long run by creating a positioning which will be tough to unsettle.

By the looks of it, firms are willing to take the risk. But sustainable success can be bred only by losing the condescending attitude towards rural markets and accepting that they are a much more complex challenge than earlier envisioned.

Tuesday, November 5, 2013

I don't know why I feel this anger,
Un-passionate and bleak, it fails its purpose.
No riveting narrative in its bosom it holds,
No sorrow it exudes no reason it proclaims- this melancholy ire.

Not unfettered and wild, just ....dead defeated and mild
It fails to evoke even my own sympathy -this accursed barren excuse of an anger
It has no substance - no character befitting its traditional stature- it falls flat under the weight of its expectations
Just overbearing emptiness-and affair of contemptuous, pitiful despair.

I fail to understand it,
and this furthers feeds my disgust -my inability to comprehend,
Feeds my disgust over defeat at the hands of this unworthy opponent

It is usually I who cage my anger.
Keep her under lock and bolt.
For fear over what she may unleash if left unchained.
Now karma has come back to bite me
And I do not take lightly
To this reversal of roles- it feels my hand is forced
and my anger has caged me inside me.

Sunday, November 3, 2013

The recent killing of the Taliban leader Hakimullah Mehsud by a US drone puts the precarious position our north western neighbour finds itself in.The government has come out and openly condemned the attack and killing of the terrorist leader.
For most Indians this would be an "Ahah!" moment and would confirm their suspicions that Pakistan is breeding terrorists for the sole purpose of attacking India and that somehow the 180 million odd people all agree on this one aim in life. But they would be missing at least one crucial point- that Pakistan- irrespective of whether or not they colluded with the Taliban- has no idea how to control them. The streets of Peshawar after the incident apparently wore a deserted look for fear of backlash.And why not? The Taliban has issued a threat directly to the Pakistani people saying that they "know who their real enemy is" and that their revenge will be "unprecedented".
In the backdrop of an announcement by the Pakistani PM that Pakistan would engage in a peace dialogue with the Taliban, this killing makes the nation a snake in the grass in the eyes of the terrorist organisation. That is not a perception anybody wants to give these guys who are hiding in your own backyard and feel no qualms about killing children.Oh, and the previous line is not a sentimental outburst- these guys actually do NOT care about beating up children. Among the list of leaders being considered for the top post is Mullah Fazlullah - whose henchmen attacked Malala.
And the US -as has been its wont in the western Asia- is shrugging its shoulders. They probably expected accolades for taking out top Taliban henchmen one by one. They are trying to freedom so hard they forget about the people they are freedoming for. The more they refuse to pull out of this region, the more pregnant it becomes with problems.
And in the midst of it all is the Pakistani who is battling a 9% inflation rate and petrol price hikes, unsure of whether or not to step out , and if he does, unsure if he will step back in.

Friday, October 25, 2013

1) News article :

Apple has always known to be an innovator (or at best when it just misses the innovator train- an analyser) in the technology space. Focussing on premium products with enhanced user experience has allowed it to ward off stiff competition from Asian manufacturers. This time round they seem to have gone for a two-way market stretch. Initial reactions were mixed and only sales will tell if they achieved their goal.

With the iPhone 5S Apple has won the innovation badge for this round of the sparring with Samsung which had really taken the fight to its US competitor with the S2,S3,S4 and Galaxy series. The new fingerprint technology and the 64 bit processor have reassured the public that innovation did not die with the death of its founder. Full points for being a prospector(high Customer Centric innovation)

The 5C seems to be targeted to the Chinese market. With plastic bodies, a range of colours and a comparitively cheaper pricing, I believe Apple is testing the waters to take the fight to Samsung's own backyard of competing on cost. They seem to want to position themselves as the Analyser in the Asian market combining trademark innovation focus with a new found vigor towards cost-centric measures.

It will be interesting to see if this strategy works out.

2) Bounded rationality : A thought experiment suggests that complete rationality would in fact lead to death, since the individual would not even be able to get up from his/her bed without first considering the entire infinity of possibilities. Therefore, rationality does not seem to be the natural state of the human mind. This goes very well with the way laws are framed in our country(as a conversation with the "ordinary and reasonable person"). Natural laws also seem to suggest that entropy is preferred over order and hence it would not be erroneous to assume that tackling such entropy requires a fair degree of heuristically determined behaviour. If this is true for an individual, it must be so for an organisation as well.

3) If believing in leadership affecting the culture of a firm is difficult, one need not look very far from the tech giants with leaders well known for their quirky habits which later formed the basis of the organisations they founded or helped shape. First to come to mind of course, is Google with its "Don't be evil" Manifesto.Based on an innate apprehension that sales would kill the culture of pure technology for technology's sake, it is perhaps this motto which consistently keeps Google high on the list of most admired brands.

Then of course there is Zuckerberg's "Code wins arguments" . It tells you facebook has passionate coders, end of story. Rumor has it that Hackathons- a favourite of Zuckerberg- are the way most of the stuff at Facebook is invented.

These companies today stand for the values that their leaders stand for. Their employees are passionate technologists before all else. This is keeping in line with their founders' visions. Their economic success is just incidental to this value fit.

Contrast - Microsoft: Steve Ballmer is an exceptional salesman. Under him Microsoft launched XBox, acquired Nokia, brought out Windows 8 and completely revamped itself. However since he has taken over the share price has remain well below the $50 mark when he took over. (Partly due to changes in dividend policy). This is because it made mistakes- Vista, Zune, completely misreading the mobile market until it was forced to make an acquisition. It took ore than 10 years for them to find a balance under his leadership.

Apple- same story , different names. Headed by a visionary techie founder soon after  his death iOS6 maps happened. Even the recent iPhone 5C has not been met with the same thunderous applause that Apple had grown used to in the past decade.

All of this points to the notion that the continuation of the original story a company stood for is extremely important in its future. Tech companies which have their founding fathers at their head are thriving. But one must wonder- how do they ensure that posterity does not dilute that vision?


4) Here is an interesting read on a large scale re-branding exercise carried out by Argos. Over 96% of UK's population lives ten mins away from an Argos store is a household name in the UK. The company changed its internal culture in 2003 responding to employee needs. Then in 2010 it embarked on an ambitious marketing mix and re-branding strategy. This seems to have worked. Does this show that any re-branding or external facing change must also be predated by an internal change wherever necessary? The People Expess case study had the company jump into external growth strategy without resolving their internal problems. Argos has handled it differently and the results are starkly different.


5) One little known site making waves on the internet by acting as the photo sharer of choice for the internet's billboard Reddit is Started by Allan Schaaf in 2009, this website has redefined image sharing and commenting on the internet.

The interesting phenomenon to be observed is the way one can see a community evolving on the internet from scratch just as it would in the real world. Overtime the site's members have defined artefacts such as the mascot "imguraffe", rituals such as "giving love for cake day posts". The site itself promotes some of the artefacts by giving medals and trophies based on popularity of submitted content- forming an informal heirarchy of sorts.There are some roles people perform on the site and not all these roles are socially acceptable in the context of the imgur society e.g downvote fairies. There are also invisible aspects of culture - set of underlying beliefs and attitudes (an almost morbid fascination for cats and video games, general abhorence for airing political/religious views, a strong support of democracy and free speech and supporting talent and charities when possible). It's amazing how people who have never met each other, do not track each other(this is not the facebook model of content sharing) come together to form a strong community closest to a meritocracy. Sure, there are geographical biases based on the timezones, but the site's content management system(which the developers often tweak based on inputs form the community) does a pretty good job of giving you options in terms of what you want to see.

Then there is the spillover. There are plenty of cases of people in meeting in the real world and interacting via real world gifts and letters post the online interaction which again makes it into the content submitted.

This clearly goes to show that culture when seen in an organisational perspective is something that humans gravitate towards. The amount of money raised, the number of missing people found and stories of people bringing each other back from the brink bear testimony to that fact. Culture binds communities and it is important for an organisation to view itself primarily as a community of its clients, employees, shareholders and other stakeholders within its sphere of influence.

If this is true in such a flat community as an online sharing site, the power of imposing a culture top down to move the organisation as a cohesive unit should never be underestimated.

imgur study: