Amazon vs Walmart in India

The war for the future of the retail trade in the world is going to be fought in India. It has happened by default, but happen it nevertheless has. The irony hasn't struck the policymakers in India as yet - they of the medieval dinosaur disposition of still not allowing foreign companies into the retail sector in India. If that makes your head reel, then this is India, true to its form.

Globally, Walmart (the old incumbent) and Amazon ( the not so new disruptor) have been itching for a gigantic fight for a long time. In the US, Walmart dominates in store and Amazon dominates online. There it is a fight between one form of retail trade and another. Not a headlong fight. In China, which would have been the logical war zone, both have failed against domestic competition - not least because the playing field is not level (actually tilted a full 90 deg). Hence India, by default, has become the battlefield.

It actually is peculiar that India is the chosen fighting arena. This is a country where foreign firms are still not allowed to open a store in India. You need domestic partners. Every rabble rousing politician has demonstrated and agitated in the past against allowing wicked foreigners into the retail trade. Most of India's retail trade continues to be the mom and pop store. 

Amazon was the first to enter. Amazon.in is now globally second (distantly) only to Amazon.com in the Amazon universe. E Commerce is still minuscule in India but given India's size , even minuscule is big. Amazon has been pouring money into India, adopting the time tested formula from the US. Their competition was Flipkart, a local E Commerce provider. Now Walmart is acquiring Flipkart. This will now become an all out battle between the two for the online market . Right now Flipkart and Amazon.in are close in India with Flipkart being the marginal leader. With the acquisition, Walmart will now be bigger online than Amazon in at least one country.

I wonder what the other global majors are thinking about all this. Carrefour and Tesco, the old European giants, are not present here at all.  OK Tesco is , via a joint venture, but you would be hard pressed to find a store. The newer European upstarts Aldi, Lidl, et al, can't point to India on a map and so, have not come. The Chinese, notably Tmall and JD seem to be interested only in slugging it out in home territory. Alibaba is of course more global in outlook, but they are  in the B2B space. So its just the Americans wanting to fight in India.

Where is the famous Ramamritham in all this. How come none of the rabble rousers are yelling their heads off against evil Americans ? The truth is that both Ramamritham and the political worthies are old foggies. Neither know how to switch on a computer, let alone how to buy anything online. Events have overtaken these dinosaurs before they have realised what's happening. The same thing happened with the Indian IT industry a couple of decades ago. The only way to beat Ramamritham is with something he does not understand.

So now the war will begin. This blogger is salivating at the prospect. You see, he is a piddling customer of both Amazon and Flipkart. "When elephants fight, it is the grass that suffers",  goes the old saying. I beg to differ. When these two elephants fight, it will be the grass that will flourish. I am looking forward to all the lovely deals and freebies !

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The ethics of medical marketing

Is it ethical to sell medicines in the same way as you sell soap ? A trivially put , but troubling question. Consider the arguments for and against.

The problem in the medical industry is that the consumer, in most cases, is absolutely ignorant and is completely reliant on a doctor's opinion. But it is not the doctor who is paying - it is the consumer. At the time of consumption, the consumer is usually also not in a frame of mind to make rational , sensible choices. He is at his most vulnerable and therefore it can be argued that freedom of choice, a basic underpinning of capitalisim is, by definition, a contradiction in terms when it comes to a medical product

The basics of the medical industry is predicated on a few facts

• New discoveries are extremely costly - be it a drug or a medical device.
• Most nations grant a patent for a new discovery which enables the inventor to enjoy a monopoly for a fairly long time
• Once the patent expires, the product is subject to the same pressures of competition, demand and supply as any other product in any other industry. 
• There is very little product differentiation that is possible - formulations being legally regulated. Consequently, distribution and selling become the primary marketing tool for companies.

The industry is also peculiar in that the consumer is forced to consume - if it were possible, the consumer would prefer not to consume any medical product at all.  Given that it is the doctor who "forces" the consumer to consume, the backlash of customer dissatisfaction is also on the doctor - at the very least a virulent negative opinion against the doctor and more likely in the US for example, a lawsuit.

If that is so, is it correct for aggressive sales practices, usually found in most industries, to flourish in the medical industry as well ?  Most of the aggression on sales is towards doctors which raises even more ethical questions - should the doctors be influenced so heavily in their decision making. Every major drug company has been caught in questionable sales practices.  GlaxoSmithKline has been accused of bribery of medical professionals in China. Eli Lilly was charged with the same thing in Brazil. Pfizer sponsored incentive trips for Bulgarian doctors - euphemism for holidaying in Greece. Glaxo again took US medical professionals for "conferences" in Hawaii. Amgen offered discounts to  doctors to shift from competing products but allowed them a way to claim full price from health insurers.  Johnson & Johnson has been fined a colossal $2.2 billion for marketing practices stretching over 10 years in the US. Is anybody still left  who hasn't been fined ?

Almost every patient who sees a doctor in India complains of over testing and over prescription. Aggressive sales practices of medical companies and hospitals have certainly contributed to this "disease". One doctor I know, quit a hospital, because he was given a target for generating revenues through tests and prescriptions, regardless of whether the patient needed it or not.

While it would be easy to condemn all sales practices, these are a fundamental and essential part of the capitalist system. We would not bat an eyelid on any of them in other industries like telecom or clothing, or whatever. Its because the industry is the medical industry that there is unease. Although die hard loony leftists will argue against this, it is undeniable that capitalism and free markets have made incredible medical advances possible. If you simply ban all selling , and therefore dampen the means of achieving the profit motive, the industry would inevitably stagnate and then decline.

So where should the line be drawn. What is the difference between educating a doctor on a new drug or the effectiveness of an existing drug  and pushing him to prescribe it. We would, of course,  encourage a "soft sell" but would frown on a "hard sell" - the difficulty is to determine what is "soft" and what is "hard". These are extremely tough issues on which there isn't an easy answer. Doesn't mean that we shouldn't grapple with, or debate about, them.

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Big Mac, but no Heinz ketchup

Corporate battles are usually hard fought, but this really is the limit. McDonald's is blacklisting Heinz because they had the temerity to appoint the ex chief of Burger King as their CEO. Sure, some rivalries are legendary - Coke vs Pepsi, P&G vs Unilever, Apple vs Microsoft, Walmart vs every other retailer, and indeed McDonald's vs anybody else who sold burgers. But isn't this a step too far ?

HJ Heinz, the makers of Heinz Ketchup were recently bought out by Warren Buffet's Berkshire Hathway. The new owners appointed Bernando Hees as the CEO. The trouble is that Bernando is the ex CEO of Burger KIng. Apparently McDonald's is finding this objectionable. So the next time you buy a Big Mac they wouldn't give you those sachets of Heinz - one if you buy in in India, two in China and a fistful in the US !  Presumably it would be somebody else's - maybe Hunt's or whatever.

Yes, corporate rivalries are taken seriously. If you work for Pepsi and are seen drinking  Coke, well, let us say your career is not going to zoom. A long time ago, this blogger was invited to a Pepsi dominated party and thoughtlessly asked for a Coke (just as a generic term for cola) . The hush that followed , the incomprehension of what I had done wrong for a minute, the dawning realisation and then the flush of embarrassment - well; 20 years on, it is still fresh ! Equally vivid is the memory of hosting a Coke delegation at work and going to extraordinary lengths to ensure that Coke was the only cola seen for miles; only to discover one bottle of Aquafina - just one - at somebody's desk.

But that is relatively unusual in these days when corporate loyalties are somewhat passe. This blogger is a die hard alumni of one of the aforesaid mentioned companies and would really hesitate to buy the rival's products. But this is not some religious zeal - just habit formed over the years.

Which is why I am surprised at McDonald's move. They are not such hated rivals of Burger King. And ketchup is a small portion of their ingredients- after all there is a lot more to burgers and fries than ketchup. And Heinz is not doing something ridiculous of going to bed with competition. All they did was appoint somebody as a CEO. Does this warrant such an extreme reaction ? McDonald's is behaving like the proverbial school bully. Grow up, you lot.

Competition need not be a war. The other guy is not some hated tyrant who ought to be exterminated. Sure, you want to beat him, but you do not have to be a Genghis Khan. Cooperation, even with competition, is not unheard of. While Apple is slugging it out in a patent war with Samsung, they quietly buy chips from .

So shame on you McDonald's for issuing this press statement - "As a result of recent management changes at Heinz, we have decided to transition our business to other suppliers over time" . Here is my own statement - As a resulted of pig headed behaviour by McDonald's I am hereby declaring that I will not have a Big Mac ever. Anybody hahaing that statement on the grounds that I am a vegetarian will be hit on the head !

PS - Actually this post has taken somewhat extra liberties with journalistic licence. Heinz has been acquired by Berkshire Hathway and 3G Capital. 3G capital are also the owners of Burger King. So there is more to it than pig headedness. But then , a post is a post is a post and a blogger has to survive ....... :)

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Flights of fancy

Of all the markets in the markets in the world, one of the most nonsensically regulated is the air travel market. Countries are still clinging on to the antiquated notion that somehow national interests are involved in the aviation sector and “national airlines”, however dinosaur like they may be, must be propped up.

This post is prompted by the news that Germany has asked Emirates to raise its business class fares for flights out of Germany. Emirates, faced with big fines, has been forced to raise its rates by some 20%.

Airlines flying in and out of Germany are policed by the unfortunately named Federal Office for Goods Transport. This august body has written to Emirates saying it was “not allowed to engage in price leadership" on routes out of Germany to non-EU countries. Apparently it was acting under a law used in cases where "public transport interests are being permanently damaged". Apparently European carriers can indulge in “price leadership”. Only non EU airlines should not. Have you heard of the R word ?

Can you believe that such words are being mouthed in the 21st century . Its easy to see behind the fig leaf. Lufthansa has simply arm twisted the authorities to prevent Emirates from undercutting it.

The most closed of markets in the world is the airline market. Who can fly where is governed by complex inter government agreements. Slots at airports are jingoistically protected. All sorts of tariffs are levied. Sick airlines are state supported. It’s a complete mess.

The EU is frankly one of the most blatant of cartels that exists. The EU has no business lecturing anybody on free trade. It is supposed to be the largest economy on earth, larger than the US. But then its not a nation – its just a cartel. And look at what it has done today. Supposedly democratic, it has taken a leaf straight out of Stalin’s notebook. Behind closed doors, some 20 odd people, in classic skulduggery, have chosen Herman van Rompuy as its President. Herman who ??

In the middle of it all is the poor consumer. Although you could argue that by definition an airline customer is not poor. But that’s no excuse for governments to conspire to screw him. Free the airline market around the world. And hey presto – fares will fall AND customer experience will improve. Heard of free trade and competition Mr van Rompuy?

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Change rules to win

I am delighted to present a guest post by Adesh Sidhu. Adesh runs his excellent blog Not being Sarkari. He is a "Customer Advocate, Apple fan, Desi and an avid reader". He writes passionately on customer service - his blog carries many excellent posts. Thanks Adesh for your post that follows

Big boys make rules. Big boys want to rule the world by the rules they have created. They have created rules, which are convenient to them, and these rules serve as entry barriers to new players.

For so long music industry worked on royalty and record labels were operating by the rules, which they have created. From music creation to marketing of music to enforcement of copyright, record labels handle everything. Singers and musicians were depended on record labels for their success. Record labels were the big boys and rules they created were suited to them. Customers had to pay whatever price record labels decided. If record has only one good song, customers also had to pay for 7 below par tracks.

Then came the digital downloads. Napster changed the rules of the game. They were small but agile. They did not have resources but they had ideas. They challenged the age-old business model of record labels. Customers lapped this idea of free downloads. Customers had the power to choose good songs over poor songs. Napster was David. They almost changed music industry.

But Goliath did not like it. They objected this, as they were clueless on how to play the game with rules changed. They got Napster banned. Napster started the revolution by giving music digitally and later on iTunes capitalized on this revolution. iTunes model was little different as they were charging from customers for music download and taken steps to reduce piracy. This time record labels decided to partner with iTunes. Record labels knew that if they have to stay in the game, they have to adopt new ways and means of doing music business.

Singers and musicians were dependant on record labels to launch them and promote their music. With the advent of social media, not-so-known but innovative singers and musicians started building communities of their fan clubs. They started releasing their music on Internet and their fans can download the music directly from sites. Record labels are eliminated and singers/musicians are communicating directly with their fans. David won again.

Lot of many times we decide not to compete because we do not have resources. We rarely think of competing with bigger players by changing the rules.


PS: - This article inspired this post.

In case link does not work, use the link in parenthesis. (http://www.newyorker.com/reporting/2009/05/11/090511fa_fact_gladwell?currentPage=all)

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