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Learning by Proxy

H1B – Language – E-Commerce | Learning by Proxy

Every Saturday, I publish this series called ‘Learning by Proxy’. It is a capsule of some of the stuff that I found interesting over the week along with some context to it. I hope you enjoy it.

Follow Up

Actions speak louder than words

The Indian government as well as the Chinese government as talking down the dispute. But…

The fresh build-up includes the new Apache attack helicopter which are “tank killers” with their Hellfire air-to-ground missiles and rockets, and Chinook heavy-lift choppers, capable of transporting howitzers and troops to forward high-altitude areas, being deployed in Ladakh. 

Source: Times of India

Politics

Penny less

The Indian government has been having as difficult a time as the people. The draconian lockdown destroyed livelihoods but at the same time, it also destroyed tax income. With a slowing global economy and cratering oil prices, the government increased taxes on petrol and diesel to ensure that not all was lost. In late April, out of Rs. 70, Rs 50 was going to the government as taxes. The oil prices have since rebounded, but taxes have not been reduced. This can result is the inflation of food products. For the first time in India, Diesel is more expensive than Petrol!

The 18th daily increase in rates since oil companies on June 7 restarted revising prices in line with costs after ending an 82-day hiatus in rate revision, has taken diesel prices to fresh highs. In 18 days, diesel price has gone up by Rs. 10.49 per litre. Petrol price had risen in the past 17 days by Rs. 8.5 a litre.

Source: Indian Express

Canadian Bliss

After having the Supreme Court throw the Executive Order, to force dreamers out, into the garbage bin, Donald Trump can celebrate a victory. He issued an order banning the issues of 4 classes of visas to the US including the often used H1B for bringing high calibre talent to work for US companies. While this makes it hard for many immigrants especially those working offshore assignments; it will probably accelerate investments in Canadian headquarters for many tech companies. Canada is hell-bent on wooing talent. One nation’s loss is another’s gain. 

The US administration on Tuesday said it was extending the 60-day ban on immigration and non-immigrant worker visas till the end of 2020. Popular work visas including the much-coveted H-1B and H-2B, and certain categories of H-4, J, and L visas shall also remain suspended until December 31, the White House said in a press note.

Source: Indian Express

Economics

Money Money Money

Stock markets have evolved a great deal over the last century and while there is a retail (individual) participation, it represents a small proportion of the trading. As of 2016, 5.5% represented the retail participation in forex markets. While the number may be higher in stock markets, it would not be exponentially so. As of June, 50% of the trades in Indonesia were retail traders. Robinhood in the US and Zerodha in India have also seen exponential growth. This also explains why markets are behaving like they are high on coke, seemingly divorced from economic reality. Markets are essentially replacing casinos! It does not end well.

When a market maker buys retail orders from a broker—called payment for order flow—it most likely handles those trades internally. As trades flow in from brokerage apps, corporate clients, and institutional traders, those orders are offset against each other. The market maker fills the orders at the best price that would have been available on an exchange and then, if all goes well, pockets the spread. It sends some of the profit to the broker.

Robinhood, for example, was paid about $45 million in March, more than twice what it got in January, for selling customer orders to professional trading companies like Citadel Securities, a sister firm to the hedge fund Citadel, and Virtu.

Source: Quartz

Space

There is huge potential for space business, it should be opened up for private investment and made easier. Having said that when something is highly regulated, almost to a fault and is loosened incredibly, you wonder if there are vested interests. Reliance has been infused with monies equivalent to India’s (actual) stimulus package. They are in the business of the Internet. Now, all assets of ISRO, satellites et al have been made available for private exploitation ostensibly to level the playing field. 

Space is expensive and it is never going to be a level playing field.

We will allow private players to benefit from Isro’s assets and give them a level-playing field to boost India’s space sector further,” she had said. Javadekar, while likening the reform to reforms brought in the power sector during the time of former prime minister Atal Bihari Vajpayee. 

Source: Times of India


Business

Language Barrier

In 2012, a thesis about India being the next China was written by some VC in America. On the back of this assumption, Billions were poured into the country. The American VCs did not know India but neither did Indian founders. 13% of India speaks English. Can you think of ONE successful consumer startup IPO in India over the past 10 years?

It took Flipkart 13 years to realise this. I suppose it is also driven by the fact that the only people that shop on Flipkart live in Tier-II cities and lower. I don’t know anyone in my circle you shops on Flipkart.

In a bid to expand its reach in Tier 2 and Tier 3 cities, e-commerce giant Flipkart, on Wednesday (June 24), announced that it has launched three new local languages onto its platform, which includes Tamil, Telugu and Kannada, besides Hindi and English.

Source: Inc42

E-Commerce Tentpole

One of the main tentpoles for the Facebook investment into Reliance was to leverage WhatsApp to dominate a whole bunch of industries. The lowest hanging fruit being e-commerce. This was further proved when Jio launched Jio Mart just days after the Facebook investment was closed – during the lockdown. If you are targeting grocery, warehousing and turn around time are key. What if you own all the major retail assets in the country? 

Reliance is making a bid to buy a majority stake in Future Group. This when Amazon has itself invested in the company. I don’t even know how this deal is even possible?!!

Note that Reliance is already India’s largest offline retailer, ending FY2020 with 28.7 million square feet of area operated. This includes the space of Jio stores. RIL’s large offline presence will get a meaningful boost with a deal with Future Group. At the end of December quarter, Future Retail had a retail area of 16.1 million square feet, whereas the measure for Future Lifestyle stood at 7.5 million square feet.

Source: LiveMint

Let the games begin – at CCI.


Technology / Science

Absorbing spit

The only people who spent a lot of time researching face masks before the pandemic were bank robbers. That has taken an about-turn since the pandemic started. Now interesting concepts are emerging. Different ways in which the face mask can be made more efficient. Concepts include:

Israeli startup Sonovia created tech—derived from research done at Israel’s Bar-Ilan University aimed at reducing disease spread in hospitals—that uses ultrasonic waves to mechanically insert nanoparticles of zinc oxide into textiles, including masks. The particles give off ions that the company says interact with the protein envelope surrounding the virus, deactivating it.

Source: Wired

Click the link, there are several other ideas in there. 

Intelligence but Artificial

If any of you have ever been subjected to a reCaptcha you would know how stupid AI can be. Countries, cops and military have been using facial recognition for a few years now. They have also been pushing the envelope of what the technology can do and the accuracy with which it can identify someone. But is it yet at a level where it can identify to convict/evidence? Image Recognition was used to convict in the USA only to later realise it made a mistake!

In January, Detroit police arrested and charged 42-year-old Robert Williams with stealing $4,000 in watches from a retail store 15 months earlier. Taken away in handcuffs in front of his two children, Williams was sent to an interrogation room where police presented him with their evidence: Facial-recognition software matched his driver’s license photo with surveillance footage from the night of the crime.

[…]

Williams spent the next 30 hours in custody before he was released on bail. With seemingly no other evidence of Williams’ involvement, police eventually dropped the charges. On Wednesday, Williams joined with the ACLU of Michigan to file a complaint against the Detroit Police Department, demanding they stop using the software in investigations.

Source: Wired

Misc

There was a huge furore about the Tabhligi Jamat and their congregation in March. The number of cases was a 4 digit numbers back then. Now, when we are adding 5 digit numbers every day. This!

Are we communal or are we communal?

Signing off…

Categories
General Thinking

Trolling – Who Benefits?

Flipkart Vs Snapdeal

There is a lot of discussion currently about the BigBillionDay campaign which Flipkart had run. Flipkart decided to make a splash about certain sale/discount/offers being available on their website on the day in order to generate shopper interest and therefore sales. Given the numbers that the company has ben publishing, we can only conclude that the campaign was a glorious success. They seem to have pulled of a $100 Million worth of sales in 10 hours, which translates to Rs. 1 Crores worth of goods sold each minute. I am not sure what you think, but I think its a big deal!

On the day of this sale, Snapdeal and Amazon were quick to jump on Flipkart’s heels to effectively try and piss on their parade. Both companies by the looks of it seem to have effectively trolled Flipkart, but who got the mileage at the end of the day?

We live in a world where marketing is about eye-balls. It does not matter how those eye-balls arrive. Look at Buzzfeed; crap journalism, but who cares?

Trolling is all about poking fun at your competitors weakness and exaggerating it. Its more like an ambush; wherever you seem to go, you come up against the same jokes. The trolls forget the basic human instinct. When somebody is getting beaten everyone likes to stand around and watch.

Have you ever been in a situation where some team is giving another a drubbing; even if you have no particular interest in the sport, you just tune in to see how the drubbing is taking place? (I have watched a lot of 8-0 football matches and almost none which ended 0-0) How many of you watched or talked about the Germany Vs Brazil match in the World Cup while not having watched all of the WC matches? Same psychology at play.

When you start trolling and poking fun, people want to see the action first hand.

We live in a digital world where every business has a web presence; 50 years ago trolling might have been useful since it was hard to check the veracity. In the digital world we live in today, any such story results in a hit to the website of the company being trolled.

It gives the trolled an additional opportunity to convert the skeptic into a follower. In the world where eye-balls are all that matter, any publicity is good publicity. Trolls are also part of the publicity.

The problem is not when people talk bad of you, but when people stop talking about you.

I, for certain believe that Snapdeal put in considerable resources to make sure that the Flipkart #BigBillionDay was a raging success.

Even Internationally in a similar vein, Samsung keeps trolling Apple all the time. Things have come to a point where I feel Samsung cannot make an ad without mentioned Apple. In fact, when the bendgate broke out; Samsung, LG and others could not hold themselves back from trolling Apple, the moment the whiff of the story came out. iPhone 6 Plus seems to be selling like gangbusters. (4 Weeks+ wait list)

iPhone6

Apple cannot seem to produce enough iDevices to meet the demand; Samsung published their expectation for last quarter yesterday; 60% down on profits does not look very pretty.

So we arrives at the question, who is helped by all of the trolling. I think if we are to go by numbers, the end results are clear.

May the Trolls rest in peace.

Categories
General Thinking

Online Retail – The Revolution?

In a commerce class in school, I was taught that the point of a business is to earn a profit. Online retail startups have certainly caused me to question this notion.

 

Money, money everywhere; not a cent to be earned!

amazon-logo-a-smile-black  VS main-qimg-6775e2918eef64f05db9bc95aa673606

I find it quite amazing that there is immense investor confidence in a business that is unable to turn a profit even with millions of users on board. The best (perhaps the only) analogy for the current online retail scenario would be the airline industry.

When airlines started flying people in the 40’s; there was a lot of excitement about growth opportunities, and the loss-making nature meant that governments owned most airlines – more as status symbols rather than viable businesses. Eventually, private companies got into the game and operating running airlines as well. At the time, it was believed that with increasing connectivity between several cities as well as an increasing number of people using airlines, it was expected to become a viable business and a profitable business. But, as time progresses, we can see that this expectation has not been met. On every occasion, other reasons have been blamed for the lack of profitability in the sector: SARS, 9/11, hijacking, disappearing planes, and so on. Nonetheless, airlines have not been able to consistently turn a profit. This has resulted in many mergers and acquisitions, amalgamations, and even bankruptcy.

The only type of airlines that have been successful are the ones which have specialised in a very specific segment (corporate/business customers) or geographical region. The sad consequence is that one of the bigger airlines always acquires the profitable operation and tries to scale it, resulting in its inevitable decline.

Online retail, by comparison, is a far more recent phenomenon. Ideally, it should be compared with retail, which is what it promises to replace. To date, the success (in turnover) of online retail has relied on discounting. Walmart also relies on discounting, and by relying on any means necessary (paying extremely low wages, providing hard terms to manufacturers, etc.), they have managed to run a business that is highly profitable.

With Flipkart securing a funding of $1 billion, followed instantly by Amazon announcing to pump $2 billion, there has been a lot of commentary about online retail and the opportunities that lie ahead.

I think the point of a business is to create value, and that value creation results in profits. A retailer makes it easier for you to explore a multitude of products, compare brands and buy them. The online retail industry provides nearly the same service offering, along with the added convenience of being able to shop from home. The only difference is that the retailer sources the goods at a lower price than the one at which it is sold to you. Unfortunately, the selling price of products on online retail platforms is lower than their purchase price.

 

US Airways Amazon

Is it not amazing how similar the profitability trends seem? Essentially, there is none.

US Airways Vs. Amazon

Different industries, same struggle.

 

Now, I understand that for certain businesses, in order to be profitable, you need to have a minimum base of customers. Social Networks are shining examples of how that works. Having said that, if you cannot make something work profitably with 20 million customers, how will ramping that number up to 100 million make any difference? Even if you do make a profit, the margins are going to be in the low single digit percentages. I find it hard to justify investing billions of dollars to generate a profit in the millions (and most likely tens of millions, and not hundreds).

 

WACC

This chart sourced from an IATA’s 2013 report shows how well the returns have worked out for the airline industry. Investor value destruction!

 

I believe the online retail industry is headed the same way, at least from the point of view of “all-under-one-roof” retailers.

Similar to the case of airlines, there is some oasis of hope. There are online retail firms, not unlike the airline industry, which specialise in a very narrow segment of product offerings. DollarShaveClub, Bonobos, NastyGal, Diapers.com, and closer home, Myntra.com, are examples of models that work well. Unfortunately, similar to the airline industry, these smaller firms, which will never have very high turnovers, are acquired by larger players, since it makes for a nice press release and helps keep investors at bay. At the time of acquisition, the larger firm tries to “integrate the business” and benefit from the “synergies”, and end up running the business to the ground. If they leave it alone, it may just work – it has shown success in its current form after all! This has happened time and again in the airline industry; it remains to be seen how it plays out in online retail.

So why the investments? Well, if we come back to Flipkart, the investors invest a large sum of money into the company because it furthers the company’s chances of an IPO. If the company is sitting on $500 million in cash in 12 months’ time and files for IPO, they will certainly be able to sell through the IPO and exit neatly. The CEO, on behalf of the investors, made clear the hopes that would be sold to IPO investors – A $100 billion valuation. So, even if they project a $20 billion valuation at the time of listing, which would be close to three times the valuation at which the funds were raised (if rumours are to be believed); as compared to $100 billion, it will still appear as though there is still more value to be unlocked. And as far the current investors are concerned, 300% in 12 months is not too bad a deal, is it?

If Amazon were to be used as a benchmark, the possibility of running an online retail business with decent profit margins seems remote. To add to that, Amazon itself has always been ready to enter into a price war with anyone who strays into its territory, since its investors seem quite satisfied even if the company posts a loss. Therefore, if profits ever exist, they will always be extremely low.

Will Flipkart be able to keep hopes up without turning a profit? Well, only time will tell!

 

Categories
General Thinking

E-Retail – The Transition Tech

E-Commerce is a huge gamut of things, but when most people talk about e-commerce, they often are referring to e-retail. E-Retail is a space where countless number of companies and individuals have invested money. If you look at the vast majority of players in the space, most of them are not wildly profitable.

Amazon recently posted a loss. Apple’s App Store for all its hullaballoo is only profitable because Apple sells all of their own software through this single platform; barring that they would just about break-even. Closer home, Flipkart is yet to post a profit.

E-retailers tend to be profitable when they are starting out, reach a peak and then as they scale the business upwards, the profitability does not seem to sustain. I think the problem is with the technology.

We all remember pagers. Pagers were the transition technology between the telephone and the mobile phone. The only achievement of pagers was prepare the mindset of people to embrace communication on the move. They were not wildly profitable and neither were they around too long.

The story of e-retail is similar. Its a transition technology which prepares the mindset of people to purchase without going to the store. It is not the optimum solution and the day an alternate solution arrives, in the form of Augmented Reality and 3D projection, the real e-retail era will begin.

Until such time, there are those who will continue to play with laptop based retail and wonder why it is so difficult?