Why All Is Not Well At Flipkart – And How To Save It

FlipKart, India’s homegrown eCommerce success story (/work in progress?) was valued at $15B last year.

Recently though it was in the news for the wrong reasons, after a trio of small funds cut their private valuations for it by up to 23% – blaming, primarily, the fact that it was spending a lot more than it was making, in its quest for marketshare, with no end in sight to its profitless days.

Amazon of course famously did that for a long time, but not having profits is not the same as not having enough operating/free cash flow, so that’s a different story.

Coming back to FlipKart, I recently read a longish post on what ails FlipKart by Haresh Chawla, a partner at an Indian PE firm, that contains many illuminating observations and advice, about FlipKart, unit economics and about startups in India.

One of the stranger things from the post is about FlipKart driving saves revenue (or GMV = Gross Merchandising Volume) by becoming the number one destination for smartphones – to the exclusion of everything else:

So Flipkart sells smartphones by funding such deep discounts that even neighbourhood mobile shops buy from them as against sourcing them directly from the manufacturer. For example, Flipkart funds a 20% discount beyond the wholesale price in the case of Micromax. Now, if you have a valuation round coming up, sign up a few exclusive smartphone deals, pump in discounts and sell a few million smartphones. And you can claim that you will hit $10 billion faster than anyone else. Incidentally, Flipkart fell short of that number by just $5 billion, as Mint reported in this roundup of missed targets by e-commerce firms.

Given the number of marquee global VCs backing FlipKart, it’s weird that no one thought to question tactics like this one that guarantee a loss on each sale without the upside of loyalty, repeat purchases or even a loss-leader strategy. Especially in a market where (a) price trumps everything and (b) fierce competitors like Amazon can afford to bleed them out for as long as it takes.

You can read the full thing here.


Why Your Gym Doesn’t Want You To Show Up

For many of us, our New Year’s resolutions are merely a to-do list for the 1st week of January. Or worse.

Counting on that are most gyms in the US (and possibly elsewhere). Which is why they sell many, many more subscriptions than can ever fit inside at one time. 

So what’s behind it?

Yet another bias, writes Ana Swanson in the Washington Post today:

According to behavioral economists, the reason is that people are prone to something called “projection bias,” in which they tend to assume that their preferences in the future will be fairly similar to what they are right now. Projection bias is also why sales of convertibles and houses with pools spike during the summer – and why convertibles bought on days with abnormally nice weather are more likely to be returned quickly.

So what are we to do about it?

1. Give up on Gyms and sit tight.

2. Give up on Gyms and buy exercise machines at home. Then afterwards, when you don’t use the equipment, excuse yourself, because, you know, sunk costs, and sink deeper into your couch. 

3. Or, out-trick your tricky noggin. To quote Ms Swanson:

Though gym attendance tends to taper off somewhat over time,various studies have shown that people who offer themselves these types of incentives continue to go to the gym at higher rates even after the rewards cease.

So if you’re trying to goad yourself into exercising, you might consider creating a contract with yourself and giving yourself a small, designated reward (probably not a cupcake) each time you go to the gym. Then you can gradually change or eliminate the rewards once your gym habit is firmly established. If you stop exercising for whatever reason, just repeat the process.

Here’s wishing you and your resolutions a very Happy New Year!

The Young – And How To Lure Them Into Theaters

“For many teenagers, the idea of focusing on a single screen for an extended stretch is anathema”, writes Brooks Barnes in the NYT.

What does this mean for the movie industry?

…what really has the exhibition industry unnerved are two statistics released in the spring by the Motion Picture Association of America. Last year, despite a glut of extravagant action movies, the number of frequent moviegoers ages 18 to 24 dropped 17 percent, compared to a year earlier; the 12-to-17 age bracket dropped 13 percent.

Will billions at stake now and tens of billions at stake in the future (if changes to consumer behavior today persist into the future, as they most certainly will), movie theaters are experimenting with everything from

…seats buck and dip in close synchronization with the action on the screen. Compressed air blasts from headrests to simulate flying bullets. Fans provide a gentle wind effect.

to letting audiences bring in their iPads, showing text messages next to the big screen (!!!), providing a “270 degree” experience and more, says Barnes.

And the results?

Audiences – in the coveted 18-24 young male segment that’s being targeted here – seem to like many of these “innovations”. But since the 24+ demographic segment bought 58% of all tickets sold (source: this MPAA report), at least in in 2013, there is hope for purists such as this blogger, at least for the next 3-4 decades. 

Beyond that, we’ll probably just get movies streamed directly into our brains, with direct  neurological stimulation to produce just about any emotion or feeling (who needs real seats that shake when your brain feels the ground shake with just a few micro-amps of directed current?), Matrix-style.

Of Menus, Pricing And Revenue Maximization

The Guardian has an interesting article that everyone should read on how restaurants subtly manipulate patron behavior.

First on the menu, sorry, list, is the famous “anchor” Pricing strategy:

While you would assume that we read a menu from left to right, studies show that our eyes gravitate toward the upper right-hand corner first. This is often where the “anchor” – or the most profitable item – is located.

But this particular ploy is more cunning than simply getting you to buy the most expensive dishes: typically, having this usually quite costly dish listed will make everything look reasonably priced in comparison.

“Having an outrageously expensive item is both likely to get publicity for a restaurant, and will also get people to spend more,” says Charles Spence, experimental psychologist at the University of Oxford and co-author of The Perfect Meal: The Multisensory Science of Food and Dining.

“People think ‘I wonder if anyone ever orders that?’, without realising that its true purpose is to make the next most expensive item seem cheaper.”

Conversely, research suggests that diners look at the bottom left of a menu last, so this is where the least expensive dishes will be positioned.

Be sure to check out the rest of the article for other clever ways in which restaurants (and waiters) maximize their revenue on your next visit. 

Spicy Food And Loyal Customers


So what’s behind everyone and their mother introducing spicy/hot flavors in packaged foods?

Customer Loyalty, says Sarah Nassauer in The WSJ.

“You get endorphins when you eat something really spicy,” which feels adventurous to flavor-seeking eaters, says Krista Lorio, senior manager of consumer insights forGeneral Mills Inc., which owns Cheerios, Betty Crocker and other brands. That experience can “create a lot of loyalty,” she says. The company recently started selling Helper Bold, a version of its boxed line of pasta that comes in Firehouse Chili Macaroni and other flavors.

Who knew…

9.6 Degrees, Cereal And Marketing To Kids

John Brownlee writes in Fast Company about a new study from Cornell’s Food and Brand lab about characters on kids’ cereal boxes:

Cereal boxes aimed at children are specifically designed so that the eyes of the mascots look downward, making direct eye contact with the sugar goblins that they are hoping to seduce.

In a study of over 65 cereals and 86 mascots across 10 different grocery stores in New York and Connecticut, Cornell’s Food and Brand Lab studied the characters on the front of cereal boxes. What they found is that all characters and people on cereal boxes –whether Lucky the Leprechaun, or Michael Jordan on a box of Wheaties–are designed to make eye contact with the intended consumer. In fact, they have almost exactly the same focal point: they are staring out from the box at a spot about four feet away, which is the average distance from the shelf of a customer walking down a supermarket aisle.

The result? When a character looks straight into your eyes, brand trust is 16% higher and brand connectivity, 28% higher.

Not sure whether to file this under the “interesting” category or the “disturbing” one. Perhaps both.

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