Pizza from dominos – good and bad

Last night we decided we wanted pizza from dominos for dinner. Having been used to Swiggy, I instinctively googled for dominos and tried to place the order online.

There is one major fuckup with the dominos website – it asks you to pick the retail outlet closest to you, rather than taking your location and picking it yourself. And so it happened that we picked an outlet not closest to us.

I quickly got a call from the guy at the outlet where my order had gone, expressing his inability to deliver it, and saying he’ll cancel my order. I gave him a mouthful – it’s 2016, and why couldn’t he have simply transferred the order to the outlet that is supposed to service me?

I was considering cancelling the order and not ordering again (a self-injurious move, since we wanted Dominos pizza, not just pizza), when the guy from the outlet in whose coverage area I fell called. He explained the situation once again, saying my original order was to be cancelled, and he would have to take a new order.

Again – it wasn’t just a fuckup in the payment in the Dominos system, in which case they could’ve simply transferred my order to this new guy. So I had to repeat my entire order once again to this guy (not so much of a problem since I was only getting one pizza) and my address as well (it’s a long address which I prefer filling online).

Then there was the small matter of payment – one reason I’d ordered online was that I could pay electronically (I used PayTM). When I asked him if I could pay online for the new order he said I had to repeat the entire process of online ordering – there was no order ID against which I could simply logon and pay.

I played my trump card at this time – asked him to make sure the delivery guy had change for Rs. 2000 (I’d lined up at a bank 2 weeks back and withdrawn a month’s worth of cash, only that it was all in Rs. 2000 notes). He instantly agreed. Half an hour later, the pizza, along with change for Rs. 2000 was at my door.

The good thing about the experience was that the delivery process was smooth, and more importantly, the outlet where my order reached had taken initiative in communicating it to the outlet under whose coverage my house fell – the salespersons weren’t willing to take a chance to miss a sale that had fallen at their door.

The bad thing is that Jubilant Foodworks’ technology sucks, big time. Thanks to the heavily funded and highly unprofitable startups we usually order from, we’re used to a high level of technology from the food delivery kind of businesses. Given that Jubilant is a highly profitable company it shouldn’t be too hard for them to license the software of one of these new so-called “foodtech” companies to further enhance the experience.

No clue why they haven’t done it yet!

PS: I realise I’ve written this blogpost in the style I used to write in over a decade ago. Some habits die hard.

Why PayTM is winning the payments “battle” in India

For the last one year or so, ever since I started using IMPS at scale, and read up the UPI protocol, I’ve been bullish about Indian banks winning the so-called “payments battle”. If and when the adoption of electronic payments in India takes off, I’ve been expecting banks to cash in ahead of the “prepaid payments instruments” operators.

The events of the last one week, however, have made me revise this prediction. While the disruption of the cash economy by withdrawal of 85% of all notes in circulation has no doubt given a major boost to the electronic payments industry, only some are in a position to do anything about this.

The major problem for banks in the last one week has been that they’ve been tasked with the unenviable task of exchanging the now invalid currency, taking deposits and issuing new currency. With stringent know-your-customer (KYC) norms, the process hasn’t been an easy one, and banks have been working overtime (along with customers working overtime standing in line) to make sure hard currency is in the market again.

While by all accounts banks have been undertaking this task rather well, the problem has been that they’ve had little bandwidth to do anything else. This was a wonderful opportunity for banks, for example, to acquire small merchants to accept payments using UPI. It was an opportune time to push the adoption of credit card payment terminals to merchants who so far didn’t possess them. Banks could’ve also used the opportunity to open savings accounts for the hitherto unbanked, so they had a place to park their cash.

As it stands, the demands of cash management have been so overwhelming that the above are literally last priorities for the bank. Leave alone expand their networks, banks are even unable to service the existing point of sale machines on their network, as one distraught shopkeeper mentioned to me on Saturday.

This is where the opportunity for the likes of PayTM lies. Freed of the responsibilities of branch banking and currency exchange, they’ve been far better placed to acquire customers and merchants and improve their volume of sales. Of course, their big problem is that they’re not interoperable – I can’t pay using Mobikwik wallet to a merchant who can accept using PayTM. Nevertheless, they’ve had the sales and operational bandwidth to press on with their network expansion, and by the time the banks can get back to focussing on this, it might be too late.

And among the Prepaid Payment Instrument (PPI) operators again, PayTM is better poised to exploit the opportunity than its peers, mainly thanks to recall. Thanks to the Uber deal, they have a foothold in the premium market unlike the likes of Freecharge which are only in the low-end mobile recharge market. And PayTM has also had cash to burn to create recall – with deals such as sponsorship of Indian cricket matches.

It’s no surprise that soon after the announcement of withdrawal of large currency was made, PayTM took out full page ads in all major newspapers. They correctly guessed that this was an opportunity they could not afford to miss.

PS: PayTM has a payments bank license, so once they start those operations, they’ll become interoperable with the banking system, with IMPS and UPI and all that.

Buying, Trying and Sizing

The traditional paradigm of apparel purchase has been to try and then buy. You visit a retail store, pick what you like, try them out in the store’s dressing rooms and then buy a subset. In this paradigm, it is okay for sizing to not be standardised, since how the garment actually fits on you plays a larger part in your decision making than how it is supposed to fit on you.

With the coming of online retail, however, this paradigm is being reversed, since here you first buy, and then try, and then return the garment if it doesn’t fit properly. This time, the transaction cost of returning a garment is much higher than in the offline retail case.

So I hope that with online retail gaining currency in apparel purchase, manufacturers will start paying more attention to standardised sizing, and make sure that a garment’s dimensions are exactly what is mentioned on the online retailer’s site.

The question is who should take the lead on enforcing this. It cannot be the manufacturer, for had they been concerned already about standardised sizing, they would’ve implemented it already. So far the retailer has only been an intermediary (a “pipe”, as Sangeet would put it).

However, with the transaction cost of failed transactions being borne by the retailers, and these transaction costs being rather high in online retail, I expect the likes of Amazon and Myntra to take the lead in ensuring that sizing is standardised, perhaps by pushing up the ease of search of garments from manufacturers who already practice such sizing (these retailers have sufficient data to measure this easily).

It will be interesting to see how this plays out. Given history, I don’t expect retailers to collaborate in coming up this a standard. So assuming each major online retailer comes up with its own standard, the question is if it will start off being uniform or if it will converge to a common standard over time.

I also wonder if the lead in standardising sizes will be taken by private brands of the online retailers, since they have the most skin in the game in terms of costs, before other manufacturers will follow suit.

In any case, I trust that soon (how “soon” that soon is is questionable) I’ll be able to just look at the stated sizing on a garment and buy it (if it’s of my liking) without wondering how well it’ll fit me.

Shopping offline can be underwhelming

Maybe to compensate for the amount I’ve been buying on Amazon over the last few days (mostly baby stuff), I set off on Sunday to buy some stuff offline. And it was a most disappointing experience.

The biggest problem was the lack of choice and availability and inventory. I first went to a Levi’s showroom to buy a pair of jeans, having ripped three of them in the course of the last year (thanks to squatting I’m guessing).

I asked for comfort fit jeans and was shown a pair. Was rather underwhelming and I asked for more. Turned out that was the only pair of comfort fit jeans in the store.

And then I was looking to buy a pair of shorts. At least three stores on Jayanagar 11th Main Road were visited, only to be told none of them stocked shorts (Levi’s, Wills Lifestyle, Woodlands). I might have cribbed about lack of effective categorisation in online shopping but it’s a more acute problem offline, given the transaction cost of going to a store.

On Jayanagar 11th Main Road, for example, you have brand stores of every conceivable brand, but few stores have chosen to differentiate themselves by what they sell, rather than what brand. So you lack stores that specialise in shorts, or T-shirts, and so on.

For a while now I’ve been looking for a new pair of spectacles (hate my current frame, so I end up wearing contact lenses even when I don’t want to). GKB offered some choice, but nothing spectacular. SR Gopal Rao said they didn’t have large size frames, and had no clue when they’d arrive.

And there ended my shopping trip. The only things I’d been successful buying was a packet of freshly made rusks from a bakery (feel damn lucky most bakeries in Bangalore have in-house kitchen where they bake stuff fresh) and some medicines.

When your demands run into the so-called “long tail”, I guess nowadays online is the best bet. So I’ll possibly buy another pair of jeans online, having bought one pair from Korra and returned a pair to Amazon. I don’t normally buy clothes online, but on other tabs of my browser I’m checking out shorts on Amazon.

Oh, and I must mention Lenskart, who might end up getting an order for a pair of spectacles. They’ve set up what I call “experience centres” where you can check out their range of frames and try them on. Orders are fulfilled through their online store, since prescription glasses cannot be sold over the counter anyway (since the glasses need to be ground). I strongly believe that this is how retail will shape out in the future.

Books, Music, Disruption and Distribution

Having watched this short film by The Economist on disruption in the music business, I find the parallels between the books and the music businesses uncanny.

Both industries have been traditionally controlled by the middlemen – labels in the case of music, and publishers in the case of books. Both sets of middlemen are oligopolies – there are three big music labels and four (?) major publishers. This is primarily a result of production costs – traditionally, professional recording equipment has been both expensive and hard to get. Similarly, typesetting and printing a book was expensive business.

However, both industries have been massively disrupted in the last couple of decades, primarily thanks to new distribution models – streaming in the case of music, and online vendors and e-books in the case of books. Simultaneously, the cost of production have also plummeted – I can get studio quality recording and mixing software on my Macbook Pro, and I already have a version of my book that looks good on the Kindle.

Yet, in both industries, the incumbents strongly believe that they continue to add value despite the disruption, and staunchly defend the value of the marketing and distribution they bring. In the above video, for example, a record studio executive talks about how established artistes may do well going “indie”, but new artistes require support in production, marketing and distribution.

If you see blogs and news articles on publishing and self-publishing, on the other hand, most of the talk is about how little value publishers themselves bring into the marketing and distribution process. While publishers continue to have a broad monopoly on the traditional distribution chain (bookstores, primarily), they have no particular competitive advantage in the new channels.

One of the successful indie artistes interviewed in the above video talks about how he was successful thanks to the brand and following he built up on social media, which ensured that his album had several takers as soon as it was released. It is again similar to advice that authors who want to self-publish get!

As someone who has completed a book manuscript and is looking for production and distribution options, I find the developments in the indie space (across products) rather interesting. Going by all this, maybe I should just give up on the “stamp of approval” I’m looking for from a traditional publisher, and go indie myself!

I leave you with a few lines from one of my favourite poems, which I believe is a commentary about the music record label industry!

Now the frog puffed up with rage.
“Brainless bird – you’re on the stage –
Use your wits and follow fashion.
Puff your lungs out with your passion.”
Trembling, terrified to fail,
Blind with tears, the nightingale
Heard him out in silence, tried,
Puffed up, burst a vein, and died.

 

The problem with venture capital investments 

Recently I read this book called Chaos Monkeys which is about a former Goldman Sachs guy who first worked for a startup, then started up himself, sold his startup and worked for Facebook for a number of years. 

It’s a fast racy read (I finished the 500 page book in a week) full of gossip, though now I remember little of the gossip. The book is also peppered with facts and wisdom about the venture capital and startup industries and that’s what this blogpost is about. 

One of the interesting points mentioned in the book is that venture capitalists do not churn their money. So for example if they’ve raised a round of money, some of which they’ve invested, liquidating some of the investment doesn’t mean that they’ll redeploy these funds.

While the reason for this lack of churn is not known, one of the consequences is that the internal rate of return (IRR) of the investment doesn’t matter as much as the absolute returns they make on the investment during the course of the round. So they’d rather let an investment return them 50x in 8 years (IRR of 63%) rather than cash it one year in for a 10x return (IRR of 900%). 

Some of this non churn is driven by lack of opportunities for further investment (it’s an illiquid market) and also because of venture capitalists’ views on the optimal period of investment (roughly matching the tenure of the rounds). 

This got me thinking about why venture capitalists raise money in rounds, rather than allowing investors continuous entry and exit like hedge funds do. And the answer again is quite simple – it is rather straightforward for a hedge fund to mark their investments to market on a regular basis. Most hedge fund investment happens in instruments where price discovery happens at least once in a few days, which allows this mark to market. 

Venture capital investments however are in instruments that trade much more rarely – like once every few months if the investor is lucky. Also, there are different “series” of preferred stock, which makes the market further less liquid. And this makes it impossible for them to mark to market even once a month, or once a quarter. Hence continuous investment and redemption is not an option! Hence they raise and deploy their capital in rounds. 

So, coming back, venture capitalists like to invest for a duration similar to that of the fund they’ve raised, and they don’t churn their money, and so their preferences in terms of investment should be looked at from this angle. 

They want to invest in companies that have a great chance of producing a spectacular return in the time period that runs parallel to their round. This means long term growth wise steady businesses are out of the picture. As are small opportunities which may return great returns over a short period of time.

And with most venture capitalists raising money for similar tenures (it not, that market fragments and becomes illiquid), and with tenure of round dictating investment philosophy, is there any surprise that all venture capitalists think alike? 

Sweetshop optimisation on festival days

As I mentioned in my earlier post, while Varamahalakshmi Vrata is considered rather minor in my family, it is a rather big deal in my wife’s house. So I headed to a nearby sweetshop called Mane hOLige to fetch sweets for today’s lunch.

Now, this is not a generic sweetshop. As the name suggests, the shop specialises in making hOLige, also known as obbaTT, which is a kind of sweet stuffed flatbread popular in Karnataka and surrounding areas. And as the menu above suggests, this shop makes hOLige (I’ll use that word since the shop uses it, though I’m normally use to calling it “obbaTT”).

I had been to the shop last Sunday to pick up hOLige for a family gettogether, and since I asked for the rather esoteric “50-50 hOLige”, I had to wait for about 30 minutes before it was freshly made and handed over (Sunday also happened to be yet another minor festival called “naagar panchami”).

Perhaps learning from that experience, when heightened demands led to long wait times for customers, the sweetshop decided to modify its operations a little bit today, which I’m impressed enough to blog about.

Now, as the subtitle on the board above says, the shop specialises in “hot live hOLige”. They are presumably not taking VC funding, else I’d imagine they’d call it “on demand hOLige”. You place an order, and the hOLige is made “to order” and then handed to you (either in a paper plate or in an aluminium foil bag, if you’re taking it away). There is one large griddle on which the hOliges are panfried, and I presume the capacity of that griddle has been determined by keeping in mind the average “live” demand.

On a day like Sunday (naagar panchami), though, their calculations all went awry, in the wake of high demand. A serious backlog built up, leading to a crowded shopfront and irate customers (their normal rate of sale doesn’t warrant the setting up of a formal queue). With a bigger festival on today (as I mentioned earlier, Varamahalakshmi Vrata is big enough to be a school holiday. Naagar panchami doesn’t even merit that), the supply chain would get even more messed up if they had not changed their operations for the day.

So, for starters, they decided to cut variety. Rather than offer the 20 different kinds of hOLige they normally offer, they decided to react to the higher demand by restricting choice to two varieties (coconut and dal, the the most popular, and “normal” varieties of hOLige). This meant that demand for each variety got aggregated, and reduced volatility, which meant that…

They could maintain inventory. In the wake of the festival, and consequent high demand, today, they dispensed with the “hot, live” part of their description, and started making the hOLiges to stock (they basically figured out that availability and quick turnaround time were more important than the ‘live’ part today).

And the way they managed the stock was also intelligent. As I had mentioned earlier, some customers prefer to eat the hOLige on the footpath in front of the store, while others (a large majority) prefer to take it away. The store basically decided that it was important to serve fresh hot hOLige to those that were consuming it right there, but there was no such compulsion for the takeaway – after all the hOLige would cool down by the time the latter customers went home.

And so, as I handed over my token and waited (there was still a small wait), I saw people who had asked for hOLige on a plate getting it straight off the griddle. Mine was put into two aluminium foil bags somewhere in the back of the store – presumably stock they’d made earlier that morning.

Rather simple stuff overall, I know, but I’m impressed enough with the ops for it to merit mention on this blog!

Oh, and the hOLige was excellent today, as usual I must say! (my personal favourite there is 50-50 hOLige, if you want to know)