City Shutdown

Piccadilly Circus on Christmas Day. By Justin Bramwell of the BBC

I wouldn’t have imagined that it would be possible for the capital city of a supposedly liberal Western democracy to completely shut down, even if it were for a day. The extent to which London shut down yesterday on account of Christmas proved me wrong, and the only parallels I could think of were Bangalore on the day after Rajkumar died in 2006, and Gurgaon on the day of Holi in 2009.

Considering that the latter two instances were essentially a response and a pre-emptive response to hooliganism, I was surprised to see London reach the same levels of shut down on an otherwise peaceful day.

There were no shops open through the day. A handful of restaurants were open, but only for those with reservations. A pub (short for “public house”) close to home had a signboard saying “for reservations only. Not open for public”. Most other pubs and restaurants were shut.

Even the small versions of large chain-stores that open from early morning to late night on most days were shut. So were the mom-and-pop stores that are “off-license” and hence not subject to Sunday trading restrictions (another irritating thing I find about Europe, coming from India where Sunday is the busiest day for shopping). Public transport wasn’t running. There wasn’t much private transport either – the streets were mostly empty. I didn’t pass by many medical shops but those too weren’t open.

Thankfully we realised that the shutdown was impending – I don’t really know how we realised, but by Monday it was clear that yesterday wouldn’t be a “normal day”. We duly stocked up on all essentials and non-essentials, especially given we have houseguests. The kids wanted to go to the park in the afternoon, and we weren’t sure if that would be open either (it was). A lone Starbucks in the area was open and it did brisk business.

I don’t know if there’s regulation that states that stores ought to close on Christmas in London (given “sunday trading rules”, I wouldn’t rule that out). To me this shut down illustrates the fragility of a city with one very dominant culture (yes, London is multi-racial and multi-national, but curiously everyone shuts down on Christmas). While Bangalore, where I’m from, has few foreigners and is majority Hindu, there is some low-level multiculturalism in the city that means that the whole city doesn’t shut down on the same day (unless there are riots, that is).

It’s possibly because in India we have so many festivals that there is no one festival that is the “major festival” for everyone. So while people for whom the day is the major festival go on holiday, others for whom it isn’t that major a festival remain open for business and profit from the reduced competition. In some sense, establishments “take turns to go on holiday”. Public transport runs (albeit at reduced levels) on these holidays.

Again, all of India isn’t like this. As I mentioned at the top of the post, Delhi virtually shuts down on the day of Holi – the result of one dominant culture in that city. Similarly, the memetic fitness of the Ganesha drowning event in Mumbai is so strong that that city shuts down on the drowning days as well  (again there’s an element of hooliganism present) – though not to the extent to which London shut down yesterday.

There are a few odd people in London who don’t shut down for Christmas, though. This one photographer from the BBC goes out every Christmas to chronicle the empty streets of London.

Oxford Circus. Source: BBC


Grofers scaling down

Readers of this blog might be aware that I’m not a big fan of hyperlocal grocery delivery firm Grofers’s business model. The problem is that there are no costs saved to make Grofers its margin – apart from the retail inventory expense incurred at the retailer (from whom Grofers procures), there is also the last mile delivery expense that is incurred which doesn’t leave much profits.

The reason for Grofers scaling back from nine cities in India, however, is not related to this. It is more to do with market size and scale.

Given the uncertainties in terms of demand and service times, a business such as Grofers makes sense only when there is a minimum critical mass in terms of demand. Serving a locality with only one delivery person doesn’t make sense, for example, since uncertainty in demand will mean that either that delivery person is underworked or service levels cannot be guaranteed.

If the average demand in an area can support more delivery persons, though, this can smoothen out the uncertainty (that aggregation smoothens uncertainty is one of the fundamental principles of operations) and higher service levels can be guaranteed without building in too much slack.

While the cities that Grofers has pulled back from are not small (Mysore/Vizag/Coimbatore etc) it is unlikely that any of them would have had the size and density of demand in order to support a scale of operations which would make sense for Grofers. There are several reasons for this.

Firstly, Grofers only captures the incremental demand for grocery delivery, and with most small retailers already offering grocery delivery, the value Grofers adds is to deliver from large retailers. While I don’t have data to support this, my hypothesis is that large retailers have a smaller share in small cities thus cutting Grofers’s natural market.

Next, the transaction cost of travelling to the store is lesser in smaller cities, given shorter travel times (on account of both size and traffic), further cutting demand for on-demand delivery. Thirdly, while smartphones are widespread across the country, my hypothesis (again don’t have data to support this) is that usage is lower in smaller cities (compared to larger cities). Fourthly, smaller cities are likely to be less dense than larger cities (data on this should be available but NED to compile it now) meaning delivery personnel have to cover larger areas.

Some thinking can lead to more such reasons, but the basic point is that not only are these cities small, but demand for on-demand hyperlocal grocery delivery is also much lower (on a per capita basis) than in larger cities for several reasons.

These two factors have together meant that the scale (and density) of demand that is necessary for Grofers to be viable as a business was simply not there in these cities. So it’s a logical move for them to pull out.

This doesn’t answer, however, the question of why Grofers entered these cities in the first place, since the above factors should’ve been apparent before the entry. My hypothesis here is that some fast-growing startups measure their growth in terms of the number of cities they’re in. I’ll elaborate on that on another day.