Sunday, June 16, 2013

Why principles of pricing/price discrimination do not work at barber saloons

    Whenever I visit a barber's(or to be more politically correct. hairdresser!) saloon and pay the same rate on a Sunday morning as on a weekday afternoon, I wonder about what if the barber was to apply management principles of pricing to do the following:-
  1. There would be price discrimination by time(charge more on Sundays/evenings)
  2. Each person would be charged differently as per ability to pay-the migrant on daily wages would pay less than the CEO
  3. There would be a membership with credits, to encourage repeated visits to that saloon, and other perks like loyalty program, and benefits like appointments through apps to minimize waiting
          However we have the benefit of observing a corporate chain of saloons i.e Javed Habib, and I notice this does not happen. Why is this so? Firstly, price discrimination by time i.e applying congestion pricing[charging more during high peak hours] would need customer assent, and is more difficult to stomach than merely raising the average price. Secondly, the customer DOES incur some waiting time(indirect costs) while having haircuts done during peak hours, so it is in his interest to come during off peak hours.

Ability to pay is factored in since saloon rent/wages are factored in the costing. And those who care about these costs would frequent a roadside barber or less expensive saloon. So it does not matter, and is not required i.e price discrimination as per ability to pay.

Since people usually frequent the same saloon/barber, loyalty program would entail unnecessary complexity and expenditure-something like why electronic micropayments is not taking off in India, when there is a much easier option i.e cash/notes/ which will anyways be there, why add complexity.

Saturday, June 15, 2013 next flipkart of eyecare?

I ordered my new pair of spectacles online from after the old one broke. It had lived its life of 3yrs and getting a new one is difficult logistically since I get only weekends free and hardly any opticians shop near where I stay, so finally decided to give online shopping a try, and I was not disappointed. My review below of lenskart, but this post is more on the business model,

What do I mean by 'flipkart of eyecare'? Well, flipkart to me means speed, reliability(no cancelled orders), polite and prompt customer service and (till recently) deeply discounted rates passing on cost savings. All these seem true for as well. 

For some background, I read articles about them and founder Peeyish Bansal in Business Today and Economic Times. He is not a first time entrepreneur, in fact he had set up e-commerce ventures earlier in the USA and India in education and eyewear i.e and However, due to logistics issues and economic conditions, his focus shifted away from them to Lenskart.In November 2010, he set up, starting with contact lenses. In February 2011, he included eye-glasses and in March, sunglasses as well.  As per an Apr12 article in Business Today, Lenskart now gets about 45,000 visitors every day, of whom about 400-500 spend an average Rs 1,200 on ordering contact lenses, spectacles and eye accessories, and an expected FY12 topline of Rs 15-20 crore.

Lessons I could glean for this success[I call it success from the customer front, not so sure about the profitability but considering this is his 2nd venture, it should be profitable]
  1. Second time venture, so lessons learnt:-Logistics/customer service probably excellent due to this. Advertising on Facebook is also a good way to tap customers. 
  2. Tapping into an imperfect unorganized sector:-Like how found its niche in bus travel, they found theirs in eyewear, which saw entry of retail chains like Reliance and Titan only recently. As per ET article, optical shops typically sell frames even at 100-200% margins and an average person has no idea what a frame actually costs. “A frame that’s priced at Rs 5,000-6,000 in a store actually costs only Rs 2,000. Also, rates vary as per area, unlike e-commerce, so thats a perfect way to make the market efficient.
  3. Huge scope yet information asymmetry:- Almost one-third of our population has a vision correction problem and off these, only 25% use any kind of eyewear. The market in India is worth around $2 billion, growing at 25-30%. People usually trust their optician to prescribe something within their budget, but that is far from ideal. Online purchasing makes it transparent with his buying guide, risk free returns, and 'Try on your face'. Also, with use of smartphones and laptops increasing eye-strain, the market potential only goes up
  4. Savvy HR policy:- As per Business Today article. LensKart, for instance, has strict rules against poaching. Candidates are employed only if they have not changed jobs frequently in the recent past, and are not offered more than a 15 to 20 per cent hike over their existing salary. This ensures they do not pay too much for talent which quits soon. 
  5. Excellent customer service:-Be it instant chat on website, SMS asking whether satisfied or not, prepaid returns label for BlueDart and returns form, procedures are very streamlined.
  6. Great logistics They handle it in-house via EComExpress, which is quite responsive too, they accepted my request to deliver at residence quite easily, and followed up professionally. 
  7. Great offline ideas like 'Home Try-On', tieup with opticians etc, so they do not ignore the offline sector as well or the importance of physical customer connect.
  8. Spreading common costs like logistics across multiple verticials:- Bansal has launched three more websites, each of which, like Lenskart, aims to become the category leader on the net. While Watchkart and Bagskart were launched last year, Jewelskart went online in January. Valyoo’s investor seems to approve of the strategy. IDG Ventures MD TC Meenakshisundaram says that Valyoo focuses on creating category leaders in product segments where supply chain inefficiencies lead to high costs. Also, synergies arise from giving customers a coupon book to use for the other websites as well, I got coupons 'worth' Rs 2,000 with my eyeglasses.
  9. Getting domain names efficiently:-LensKart/WatchKart/BagsKart/JewelKart all convey their name at a glance, and probably save plenty of advertising dollars. 
Will be interesting to see how they progress. 

Saturday, June 1, 2013

How to review an Excel spreadsheet aka spreadsheet auditing

Anyone who has installed a spreadsheet software like Excel/Open Office can create a spreadsheet. but reviewing one is much more challenging. One needs technical expertise on the subject matter, but also an ability to review/audit the spreadsheet, which depends on diligence/knowledge of Excel audit tools etc. Having searched this topic for a hour today, I give below my insights on the same based on referenced links, and my own experience. Surprisingly, there is little focussed training on this, both in professional firms or in organizations where it is presumed that people will pick it up on the job.
  1. Keep data/constants separately, at one place for ease in updation, and document the assumptions/link to source file. 
  2. Build in checks(like period y-o-y changes), constraints etc to ensure arithmetic accuracy, sanity check on reasonableness etc.
  3. Use relative references and constant file naming conventions/file structure conventions, so that updating links possible using 'Edit Links' option. 
  4. If any manual changes made to formula cells, shade that cell for identification or else identify it separately. Otherwise, excel has an option to identify cell not simillar to its surrounding cells, that may help you identify cells where formulas have been edited different to that copied across range.
  5. Ensure the Excel is ready for printing, and for copying in presentation. This means, in addition to segregating data from algorithms, placing meaningful column and row labels in each portion of the spreadsheet, and not just what the preparer understands.
  6. Develop "Summary'/'Analytical Tab'  to synthesize the results of all key assumptions and analytical results, concurrent with the ongoing analysis, so that only key findings and results will be presented or communicate

A visit to CCD, Cyber City(DLF Phase III Gurgaon)

At 11pm, when you feel the urge for a hot bite and drink, making it yourself is not the best option for a bachelor(ok even married men would hesitate at waking up their wives for this, but then they would probably be housetrained for basic cooking :D). When I walked 5min to the nearest foodcourt, CCD caught my eye and surprisingly it was still open! Following were my observations-btw what drew me in was the value for money Samosa+Chai/Coffee for Rs 49(+taxes=Rs 58), comparable to what I'd pay in the much less comfortable food court.
  • It is open from 8am-4am(!!!) even longer than McD which is from 9am-1am. Am not sure whether the counter person meant  8pm-4am, actually that would kinda make more sense. There was just a single person on duty there. 
  • Comfortable cushioned couches instead of the normal chairs I saw in other CCDs
  • A TV playing Movies OK channel 'Maine Tujhe Pyar Kiya'!
  • A wall advertisement by having QR codes of products which users could scan to get directed offers. Personally, I felt that was pretty cool
  • Promotional pamphlets by Samsung for its Galaxy S4, and by Vodafone for its trial 3G pack of 500MB for just Rs 49. Both being yuppy brands, advertising in CCD is a good idea
  • The usual merchandise of coffee, cups, strainers etc for those inclined to purchase
  • CCD times-an in house publication.
In all, a comfortable place to hang out and apt for the luxuriant ambience of Cyber City.