Patanjali going online

Mint has a piece on Baba Ramdev-led FMCG company Patanjali going online to further its sales.

Some may have seen the irony in Patanjali Ayurved Ltd tying up with foreign-owned/funded e-commerce companies, even as it swears to end the reign of foreign-owned consumer brands in the market.

Patanjali is only being pragmatic in doing what’s good for its own business, of being available where the consumers are. Its decision is one more pointer to the growing importance of e-commerce as a distribution channel for packaged consumer goods.

I have an entire chapter in my book dedicated to this – about the internet has revolutionised distribution and retail. In that I talk about Dollar Shave Club, pickle sellers from Sringeri and mobile manufacturers such as Xiaomi who have pioneered the “flash sale” concept. In another part of the book, I’ve written about how Amazon has revolutionised bookselling, first by selling online and then by pioneering e-books.

Whenever a new consumer goods company wants to set up shop, one of the hardest tasks is in establishing a distribution network. Conventional distribution networks are typically several layers deep, and in order to get to the customer, each layer of the distribution network needs to be adequately compensated.

Apart from the monetary cost, there is also the transaction cost of convincing each layer that it is worthwhile carrying the new seller’s goods. The other factor to be considered is that distributors at various levels are in a sense loyal to incumbent sellers (since they are responsible for a large portion of the current business), making it harder for new seller to break through.

The advantage with online retailers is that they compress the supply chain, with one entity replacing a whole network of distributors. This may not necessarily be cost-effective from the money perspective, since the online retailers will seek to capture all the value that all the layers of the current distribution chain are capturing. However, in terms of transaction costs it is significantly easier since there is only one layer to get past, and online retailers seldom have loyalty or exclusive relationships.

In fact, the size and bargaining power of online retailers (vis-a-vis offline distributors) means that if there is an exclusive relationship, it is the retailer who holds the exclusive rights and not the seller.

In Patanjali’s case, they have already established a wide offline network with exclusive stores and partnerships, but my sense is that they seem to be hitting the limits of distribution. Thanks to Baba Ramdev’s popularity as a yoga guru, Patanjali enjoys strong brand recall, and it appears as if their distribution is unable to keep pace with their brand.

From this perspective, going online (through Amazon/Flipkart) is a rational strategy for them since with one deal they get significantly higher distribution power. Moreover, being a new brand, they don’t have legacy distributors who might get pissed off if they go online (this is a problem that the Unilevers of the world face).

So it is indeed a pragmatic decision by Patanjali to take the online route. And after all, in the end, sheer commerce can trump nationalist tendencies and xenophobia.

Book Release

So my book Between the buyer and the seller is now available on Amazon, in both print and kindle versions. You can go here to buy. Thanks to Amazon’s print on demand service, it’s available worldwide.

It’s been a long time coming. I completed the first draft way back in April 2016. Writing it was no easy task, but was definitely helped by the presence of one awesome coffee shop close to where I was staying in Barcelona.

Having written one draft, I went around finding publishers. It wasn’t a trivial process. In the process, I found out enough about the publishing industry to get a new prologue for the book (I guess that should be part of the Kindle sample).

And then in the course of the backs and forths with the publishers I found a lot of what I’d written to be absolute shit, and so revised the book two times. Then in December last year, the Takshashila Institution decided to publish it.

And then they sent it to some experts for expert opinion. Said opinion came back positive but with some suggestions. So I revised the book yet another time and implemented these suggestions. Then there was the copy editing process and yet another revision. Then the book design (if not anything, doesn’t it at least look good?) and typesetting and stuff. And formatting.

In the meantime, Shashi Tharoor and Bibek Debroy wrote some nice blurbs for the book – they’re printed at the back of the book now. And then some more hoops and procedures and printing and publishing and fighting with Amazon and the book is now out! For you to purchase.

I want to put out a special word of thanks to Anupam Manur, who has effectively “produced” the book, managing the entire process on Takshashila’s behalf. He’s been patient with my periodic abuses, and diligently got work done. The night before his wedding, he was up fixing some stuff on Amazon for the book.

Anyway, enough of my story. Now go buy the book and read it. Let me, and others, know what you think of the book. And spread the word!

Oh, and I want to thank all of you, my patient blog readers, for the encouragement through the last 13 years. It’s your collective effort and support that has made me a better writer, and resulted in this book coming out!

 

The Economics of Shakespeare and Company

During my vacation, I finished reading Salil Tripathi’s Detours, an enhanced collection of his columns in Mint Lounge of the same name. I quite liked the book. In fact, I liked it much more than his columns in Mint Lounge. I think the lack of word limit constraints meant he could add depth when necessary making it a steady and pleasing read (read Sarah Farooqui’s formal review of the book here).

In one of the chapters, he describes Paris in the way Hemingway saw it (literature and art are constant figures in this book, and the fact that I could connect to it (the book) despite my general lack of interest in these topics speaks volumes about the quality of the book). More specifically, this is about the Shakespeare and Company bookshop in Paris where Hemingway occasionally lived, and wrote his books.

George Whitman, a US army veteran who settled down in Paris after the Second World War, bought the store and ran it until his death. During these years, he hosted writers who wanted to visit Paris in an upstairs room, allowing them to basically live in the store as they wrote. There were frequent readings organised in the store where writers could connect with their readers, and writers and other regular patrons were frequently allowed to use the bookshop as a library – to simply read rather than buy books.

There was an occasion when Whitman’s store license ran out and he got into a dispute with the municipal authorities who refused to renew it, to which he responded by stopping the sale of books and running the shop as a library until the license was ultimately renewed.

While Salil describes this as a measure of Whitman’s commitment to good literature and helping authors, it was hard for me to read this chapter without wondering about Whitman’s finances, for none of the above is cheap. One of the biggest costs to running a bookshop is the cost of real estate, and if Whitman had an upstairs room for writers to live and write in, and could redeploy his shop as a library, it came at a significant cost of real estate. While readings might help sell additional books (most readers who attend buy at least a copy of the book that is being discussed), it can disrupt the regular flow of business in the store, and affect sales. The question that I couldn’t escape while reading the book was about the store’s finances and how Whitman managed all these activities.

One hypothesis is that he had alternate sources of funding (patrons of literature’s contributions, or family funds, for example) that allowed him to spend in writer welfare. The other is that margins from the book selling business were fat enough to allow Whitman to spend on writer welfare, and this spending paid him back by way of improving overall sales from his store. Back in the day when you could only buy books from shops, shops that curated well or stocked rare books could afford to charge a premium, and make significant margins which could go into activities such as writer promotion and welfare.

If this hypothesis is correct, it could explain why the traditional literature industry, including authors, are so incensed by Amazon’s rise, even if it leads to significantly better revenues. What Amazon allowed, by its initial print book mailing model, was for readers to access the “long tail” of books which they could purchase at a reasonable cost (they weren’t beholden to curator-bookseller any more). While the more passionate readers remained loyal to their curator-bookseller, the mass moved to the cheaper option.

While this created value for readers (in terms of lower prices for their books), it had the effect of cutting retail margins for books by a significant amount. Several bookshops became unprofitable under this new regime, and with the new margins not compensating for increasing real estate costs, many of them (including chains such as Borders) closed down. Writers weren’t directly affected economically – for readers who would have earlier purchased in such shops could now simply purchase the same books at Amazon for a lower price, but the dropping profitability of conventional bookstores affected them in other ways.

As Salil’s chapter on Shakespeare & Co illustrates, independent bookshops performed a social function far higher than curating and selling books – they provided an author a platform to connect with readers and enabled authors to meet and exchange ideas. They organised events for authors which raised their profile, and helped sell more books.

Their replacement by low-cost retailing models has cut out this additional social function they performed (without direct rewards). Without independent bookshops organising readings and offering writing spaces, writers have lost something they had access to earlier (though they’ve been monetarily compensated for this by means of higher sales driven by lower prices on Amazon). Hence it’s no surprise that writers have taken sides with their publishers in the battle against Amazon, online retailing and e-books.

In this context, this old piece by Matthew Yglesias in Vox is worth reading, where it talks about why Amazon is performing a socially useful function by curtailing the book publishing industry. Yglesias writes:

My best guess is that this is too pessimistic about the financial logic behind giving advances. It is not, after all, just a loan that you may or may not pay back. An advance is bundled with a royalty agreement in which a majority of the sales revenue is allocated to someone other than the author of the book. In its role as venture capitalist, the publisher is effectively issuing what’s called convertible debt in corporate finance circles — a risky loan that becomes an ownership stake in the project if it succeeds.

 

Shorts

So I’ve been trying to overcome my self-imposed taboos on online shopping, and trying to buy things online, especially brands and sizes that I already know and items that offline shops don’t stock much of.

As the title of this post might suggest to you I’m trying to buy shorts. I’ve had to decommission several pairs over the last couple of years for a number of reasons – some became too loose, some too tight, others wore out, more are fading away. And the lack of inventory of shorts in my wardrobe means that I end up wearing this one red pair pretty much everywhere.

While the beauty of online shopping is supposed to be that you get massive variety, and the long tail can get served, the problem is that the way sites are designed makes it hard to discover them. Here are two images, one each from Amazon and Jabong.

So I have two basic problems with the shorts that are available for sale online, based on these two sites.

  1. Too long: Check out the Jabong picture here. First of all, Jabong groups shorts and “3/4ths” (when did those abominations even become a thing) in the same category. But they are nice and allow you to specify length. I said “thigh length” and this is what they show me:
    Screen Shot 2015-10-27 at 6.25.31 AM
    I mean, shorts by definition are supposed to be short right? I grew up in an era when Pete Sampras was bossing Wimbledon and shorts of this length were classified as “bermudas”. If you look at the image above, save a couple of “sports shorts” (it’s sad that Jabong doesn’t even allow me to filter those out, since I’m not looking for them), they’re all knee length! Which is too long for a pair of shorts!
  2. Too narrow: Jabong refuses to admit that there is something called “relaxed fit” (even for cargos). Amazon has no fit filters for shorts. And the shorts all look like they’re just truncated pants rather than shorts. The difference between shorts and pants (apart from the extent of leg they cover of course) is that while the latter are narrow, shorts are more relaxed, and shouldn’t stick to your leg! And this is what Amazon shows me (while Amazon has a separate sportswear section, it continues to show sports shorts along with the regular shorts. They even showed boxers. There is no option to specify I want the button-zip-belt kind of “casual wear” shorts):

Screen Shot 2015-10-27 at 6.36.03 AM

All of them are way too narrow! Of the radius where they get stuck to the thigh when you sit down leaving you with the potential embarrassment of pulling them down when you get up.

I had ranted during an earlier attempt to buy online about the difficulty of sorting through inventories so I won’t go into that here.

All I have to say here is that it seems like “shorts” don’t mean what they used to, and I’m extremely unhappy about it.

Selection bias and recommendation systems

Yesterday I was watching a video on youtube, and at the end of it it recommended another (the “top recommendation” at that point in time). This video floored me – it was a superb rendition of Endaro Mahaanubhaavulu by Mandolin U Shrinivas. Listen and enjoy as you read the rest of the post.

I was immediately bowled over by youtube’s recommendation system. I had searched for both Shrinivas and Endaro … in the not-so-distant past so Youtube had put two and two together and served me up an awesome rendition! I was so happy that I went to town twitter about it.

It was then that I realised that this was the firs time ever that I had noticed the top recommendation of Youtube. In other words, every time I use youtube, it recommends a video to me, but I seldom notice it. And I seldom notice it for a reason – they’re usually irrelevant and crap. The one time I like the video it throws up, though, I feel really happy and go gaga over the algorithm!

In other words, there’s a bias which I don’t know what its exactly called – the bias that when event happens in a certain direction, you tend to notice it and give credit where you think it’s due. And when it doesn’t happen that way, you simply ignore it!

In terms of larger implications, this is similar to how legends such as “lucky shirts” are born. When something spectacular happens, you notice everything that is associated with that spectacular event and give credit where you think it’s due (lucky shirt, lucky pen, etc.). But when things don’t go your way you think it’s despite the lucky shirt, not because the shirt has become unlucky.

It’s the same thing with belief in “god”. When you pray and something good happens to you after that, you believe that your prayers have been answered. However, when you pray and something good doesn’t happen, you ignore the fact that you prayed.

Coming back to recommendation systems such as Youtube’s, the problem is that it is impossible for a recommendation system to get recommendations right all the time. There will be times when you get it wrong. In fact, going by my personal experience with Youtube, Amazon, etc. most of the time you will get your recommendation wrong.

The key to building a recommendation system, thus, is to build it such that you maximise the chances of getting it right. Going one step further I can say that you should maximise the chances of getting it spectacularly right, in which case the customer will notice and give you credit for understanding her. Getting it “partly right” most of the time is not enough to catch the customer’s attention.

Putting marketing jargon on it, what you should focus on is delighting the customer some of the time rather than keeping her merely happy most of the time!

Blossom, not babykutty

I wouldn’t be wrong in saying that most of the books I own have been bought at Blossom, the new and secondhand bookstore on Church Street, Bangalore. I have bought significantly from Premier Bookshop also, but there was an inflexion point in my reading after Premier closed, so most of my book-buying has happened after that. I have bought some books from larger stores such as Landmark or Crossword, but they are too few to be counted. In fact, I would hate to classify Landmark or Crossword as “bookstores” any more, given the amount of real estate they allocate for that trade.

So I was at Blossom last month, browsing its shelves. The Karnataka Quiz Association still gives out its prizes in the form of Blossom coupons, and since I still have a few unspent coupons, I was at the store looking if there was a book I liked. And possibly for the first time ever in that store, I was underwhelmed.

Essentially my book buying and reading habits have changed significantly in the last two years (my last “raid” on Blossoms was in September 2011). Sometime in 2012 i got myself a Kindle. While I initially used it to read PDFs and free e-books and instapaper, I soon warmed up to buying books directly from the Kindle store. The gamechanger as far as I was concerned was the free samples. You can download free samples of any e-book on your Kindle, and once you’ve read the sample (typically about 7% of the book) you can purchase the book with a single click (from your Kindle itself). Some of the books which I’ve wanted to explore have had me so hooked that I’ve ended up buying. And now (partly as a result of a weak ligament in my left thumb) I find it hard to read physical books!

The primary reason I felt underwhelmed at Blossom was that my process for book-discovery has also changed, along with my process for book buying. One of the advantages buying regularly from Amazon is that their recommendation engines start working for you. So nowadays, if I want to browse books, i go to the Amazon website and start looking through my recommendations. And so far, I’ve bought a few of my recommended books and have ended up liking them.

Being a regular visitor to the Amazon recommendations page means that I’m clued in to the long tail of books, which would happen earlier only when i visited special bookshops such as Blossom. Also, the breadth of Amazon’s collection means that I’m more likely to find a title I like on the Kindle Store than in a bookshop like Blossom. And add to this my preference for ebooks over physical books and you know why Blossom doesn’t pleasure me any more.

So every time I would look through the shelves on the third floor of the store (the non-fiction section housing secondhand books) and find something interesting, I would find myself reaching for my phone and checking if the book were available on the kindle store. I would contemplate buying the book only if it weren’t available on the Kindle store or if it  were extraordinarily priced.

I had gone to Blossom with about a thousand rupees of coupons (collected over various quizzes) but was able to spend only half of them. Solstice at Panipat (about the third battle in 1761) wasn’t available on the Kindle Store. It was a similar story with KA Nilakanta Sastri’s The History of South India. Jane Jacobs’ Cities and The Wealth Of Nations was available on the Kindle Store but the Blossom price was too tempting.

I realize that despite my binge on the Kindle Store, I have more unread physical books than e-books. I wish some day Amazon were to come up with a program where I could exchange physical copies of my books for ebooks. That way I’m sure I would read more.