Magazines or Books: Changing Value Propositions

Recently, while traveling by train from Hyderabad to Kolkata, I was faced with a dilemma, I have not faced before. Whether to buy or a magazine or a book? In the past, they both had their distinct price points, hence did not compete at all. A typical magazine at Rs 15-25 and a book for over Rs 250, had their distinct positioning. Magazines was meant to be read during the journey to catch up on the latest and discarded. Book was supposed to be read at leisure, brought back and stacked at the book-shelf, adding to one’s collection.

 Regular readers of magazines would have noted the sudden across-the-board increase in prices of magazines. BusinessWorld which had long been priced at Rs 10 per week, has been increased to Rs 15. Outlook Business,a fortnightly, is now priced at Rs 25 against Rs 20 until recently. Forbes India has been launched at a premium price of Rs 50/-. Mind you, they mention this is just the invitation price. The general news magazines like Outlook and India Today have also revised their prices.

Wondering if this is in response to rising costs or declining revenues from advertising. Just as the prices of magazines are going up, the prices of Indian paperbacks have been brought down.

I found several bestselling paperbacks like Chetan Bhagat’s “3 Mistakes of my life”, BPO-Sutra, compiled by Sudhindra Mokhasi priced at Rs 95/-. Even non-fiction/ management books like Kishore Biyani’s “It happened in India” and Rashmi Bansal’s “Stay Hungry, Stay Foolish” are priced at a relatively inexpensive Rs 99/- and Rs 125/- respectively. What should I buy, a magazine at Rs 50/- or a book at Rs 95/- ?

Suddenly, the book looked a great bargain. You guessed it right. I ended up buying a Rs 95/- paperback. By playing the price game, it appears that the publishers have been able to expand volumes considerably. Rashmi Bansal wrote in her blog recently, that her book has already crossed the 100,000 mark.

The next time you visit the airport or railway book stall to buy a magazine, do check out the books on offer.

 - G. Mohan

Fighting Economic Downturn: A Saga of Gastronomic Compromises

 

 

A few days back, Warren Buffett in an interview to CNBC not only mentioned that the US economy had fallen off a cliff but people were changing their habits like he had never seen.

 

Looks like the economic slowdown has not spared the  passionate foodies of  Hyderabad (and Secunderabad) either. I heard a colleague who met with the manager of a restaurant called Arya Tiffins Centre in Secunderabad. It is a typical Udupi kind of joint which serves South Indian breakfast and snack items like Dosa, Idli, Uttappam, Vada etc along with   beverages. It is frequented by office-goers and middle class families. It has a thriving business, with people having to wait to get a seat during rush hours. Its average daily sale was about Rs 1,45,000, until six months ago.

 

Even today, the rush at Arya Tiffins is more or less the same. Yet, the daily average sale has dropped sharply to Rs 1,05,000 – a drop of over 30%.  The manager blames it on the trading down of eaters due to the slowdown. While the sales of inexpensive   but bland idlis have gone up significantly, down are the sales of fancied items like paneer dosas , mushroom uthappams ,  flavored milkshakes etc.

 

No wonder, the  McDonald scrip is soaring at the US bourses.  

 

- G. Mohan

Times They’re a Changing …

A look at today’s Economic Times (Saturday, 7^th February), Hyderabad edition, clearly brings out how much press advertising has got affected by the slow-down. Firstly, the newspaper is a lot thinner, 14 pages instead of 24 pages just a few months ago.

 

On closer look, I find there are tender notices from various Government departments and PSUs in pages two and three, which would make up for about three-quarters of a page. In the last page there is half-page of advertising. This includes a big advertisement from Economic Times itself pushing “The Power of ideas” campaign. The other advertisements are small inserts from SIDBI ( 30 column-cms approx) and British Council (10 column- cms). The stock pages have the usual small inserts from brokers, who may be having a long-term contract with Economic Times.

 

Just one page of paid advertising in India ’s leading financial daily, is a telling comment on the state of the advertisers. Even if one discounts for the fact that on Saturdays, the circulation for ET may be lower, a share of just 7% advertising in a newspaper is shocking.

 

A look at Friday’s ET shows three-and-a-half pages of advertising out of a total of 16 pages. About 20% of advertising in a newspaper, which in the boom times gained so much notoriety for filling up with advertisements making a friend remark “In ET, I have to search for news between advertisements.”

 

If an aggressive media house like the Times is struggling to sell space, wonder how others are coping with the slowdown.

 

- G. Mohan

Cellphone Recycling

 In an interview to ET, Robert Anderson, Executive VP of Nokia has commented that “For the first time ever, the replacement market is now larger than the entry market in countries such as India.” This insight has led manufacturers like Nokia to provide attractive designs and features in mid-level handsets.

 
This insight also means that several million handsets are being discarded every month. India already has over 300 million cellphone connections. India adds about seven million new mobile connections every month. If replacement market is bigger than the entry market, atleast four-five million handsets are being discarded every month. This will only grow in the future.

 
These discarded cellphones are lying in homes or godowns of the cellphone retailers, who often lure the customers to buy new handsets with an exchange offer. The circuit boards of cellphones have precious metals which can be recovered. The cellphone chargers have useful copper which can be easily recycled. On the flipside, these electronic wastes are harmful to the environment if discarded or incinerated unscientifically.

 
In several European countries, the onus of cellphone recycling has been put on the original handset manufacturers. This has led companies like Motorola to come up with a program titled ‘Race to recycle’  which has been designed for kids and schools to collect old discarded cellphones. Motorola funds this program by providing grants to schools. 

 
It is time for  the Indian government to issue clear guidelines for cellphone disposal and force the handset manufacturers to set up a reverse supply chain to collect the old handsets.This also presents an opportunity for small businesses to create collection systems in towns and cities. The handset manufacturers will surely need to use their services to make the recycling schemes work efficiently.

- G. Mohan

Tata Nano vs. Tata Indica Vista : Free Publicity vs. Paid Advertising

 

Courtesy the Singur land acquisition dispute, Tata Motors has been occupying the headlines for the last few weeks. Every report on Singur invariably features the brand name – Tata Nano.Notwithstanding the fact that not a single car bearing that name has been rolled out yet, Tata Nano is already a humongous brand. 

 

When Ratan Tata, unveiled Nano during the Auto expo in January this year, the who’s who of the world media covered it. Except for one-full page newspaper advertisement, Tata Motors hardly spend anything on advertising for Nano. Yet, Nano is a household name today, thanks to the extensive coverage for all the reasons, right and wrong. Analysts estimate that the buzz created by the free publicity for Nano is worth over Rs. 5000 million

 

Right in the middle of this raging Singur controversy, Tata Motors has launched a new model – Tata Indica Vista which by many accounts is a major upgrade of Indica. Auto analysts have rated the car highly. Tata Motors has launched a high octane advertising campaign. Unfortunately, the response to the campaign can at best be termed as tepid.  

 

Tata Motors now have a piquant problem on their hand. Thanks to the brouhaha over Nano, for which the production facility is not yet ready, once the booking starts, the waiting list is going to be too long, even if they meet the October 2008 launch deadline.

 

On the other hand, Indica Vista, despite its large advertising budget, is unlikely to keep the Tata Motors’ factory busy.

 

On both counts, Tata Motors seems to have some disappointment in store, unless, of course, true to the Indica Vista tagline, they manage to “Change everything”.

 

- G. Mohan     

Why India is Lucky to be a Banana Republic

When I buy my weekly requirement of fruits and vegetables at a relatively upmarket superstore in Hyderabad, I see there are atleast four to five varieties of apples - red, green and what have you. But  there are no bananas.

 

Occasionally, one does see speciality bananas from Kerala, which are nearly five times more expensive than the normal bananas. For bananas, I look out for a hand-cart vendor who sells only bananas. I see his customers are daily laborers, lower middle class families or servants of the rich and upper-middle class.  

 

It makes me conclude that apples are for the rich while bananas are for the poor. In a super market an apple costs approximately Rs 25. A banana costs Rs 1.50. For the price of one apple, one can buy a dozen bananas.

 

Why should apples be so expensive and banana be so inexpensive ? Is the apple nutritive contentwise superior to the banana ?

 

 My desktop research produced results conclusively in favor of bananas. 100g of a banana is equivalent to 95 kcal of energy whreas the corrresponding figure for the apple is  47 kcal. Bananas have more carbohydrate, protein and fat than apples. Apples scores over banana only on fiber content. On both Vitamin B6  and Vitamin C  count bananas are superior to apples. Besides, the banana is a proven source of instant energy.

 

 A manual laborer works hard physically, he needs more calories which he gets in a banana, whereas the  weight watching rich go for apples.

 

Bananas suffer  from one disadvantage though. Their shelf life is much shorter than  apples.

 

If nutritively,  the banana is  such a wonder fruit,  why are they priced so low?

 

I found one answer in the fruit statistics released by Indian horticulture database. In terms of supply, the banana is the number one fruit in India,  accounting for  32.9 % of total fruit production, whereas apple accounts for just 3.5 % . The yield/hectare of banana is 4 times more than the apple.Yield/hectare for apple is 7,538 kg  and banana is 30,631 kg. Other input costs being equal, an apple is four times more expensive to produce than a banana.

 

So it is just supply-side economics at work!

 

- G. Mohan

General Motors: From Making History to Becoming History ?

The venerable General Motors, the largest automobile company in the world is having the toughest year in its 100-year history. The stocks of GM are trading at a 54-year low.  The market capitalization of this 181 billion USD company is just 5.73 billion USD. Yes, less than 6 billion USD!

 

Bond markets have already reduced  GM bonds to the junk bond status.

 

As someone who grew up studying how GM had developed and put in practice so many stellar ideas of business management, I can not but feel sad about the state of affairs in this legendary company. May Rick Wagoner get all the support needed to pull GM out from the brink of bankruptcy.

 

- G. Mohan.

ICICI Bank’s Act of Atonement

ICICI Bank  has started Disha Financial Counselling service (www.dishafc.org)  as a Corporate Social Responsibilty (CSR) initiative. Disha offers one-to-one free counselling on credit, debt management and general financial education. These centres have been started in seven cities. 

In an advertisement for Disha in BusinessWorld, the copy mentions that a large number of credit card holders have over 25% of their annual income as credit card debt. This service is aimed at those people who are unable to plan their finances and know their limits. 

With RBI and courts coming down heavily on strong arm tactics applied by recovery agents on behalf of credit card issuers like ICICI Bank, Disha is a long-term initative to reduce credit card defaults.  

Is Disha, a penitence by ICICI for bringing in an American illness into Indian middle class ?

 - G. Mohan.

 

 

An Unsolicited Advice to Praful Patel

The airlines in India are crying hoarse about mounting losses due to rising fuel cost. Vijay Mallya, has declared if the government does not reduce the ATF prices through tax concessions, Kingfisher would be forced to cut flights. Spice Jet has already announced a reduction of flights from 117 to 100 per week. Praful Patel, the Minister has sought the appointment of the PM seeking concessions in taxes to prevent the industry from going belly-up. 

 

Indian, the domestic airline division of Air India, is under direct control of  the Union Ministry of  Civil Aviation. Indian had a 22% market share at the end of 2007-08. It made a loss of Rs 2.75 billion in 2006-07. In 2007-08, Air India is likely to report a loss of Rs 20 billion, out of which Indian’s share will be over Rs 10 billion. The projected losses for 2008-09 will be much higher.

 

Here is an unsolicited advice to the Minister. Instead of giving tax concessions to the industry, the Minister through an administrative order could simply withdraw all passenger flights of Indian, until the situation improves. This would correct the demand-supply situation quickly, improving the viability of the industry. As such the average seat factor for most airlines is less than 70%.

 

This would save the government twice over. It will save the revenue loss by giving tax concessions to the industry. It will alsoreduce losses in Indian. Its staff will be happy coming to work, doing nothing and collecting their salaries. They are quite used to it anyway.

 

- G.Mohan.

The Businesses Hit by IT Slowdown

According to the annual report for 2007-08, published by the Union Ministry of Communications and Information Technology, the IT-BPO sector ended the year with a direct employment of two million people compared with 1.63 million a year ago.

 

Every one job directly created by the sector generates four additional indirect jobs related to it. Thus another eight million are estimated to have been indirectly employed by the sector last year, the report says.

 

Essential support services that will be least affected by IT slowdown include security, housekeeping, canteen services, hardware maintenance.

 

IT companies that have a high-level of on-site component use the services of a travel agency for overseas tickets, foreign exchange and visa services. BPO companies running 24X7 call-centers engage transport companies. These companies too will suffer, but only to a limited extent.

 

The sectors which will bear the brunt of IT downturn are: outsourced HR services, real estate, shopping malls, multiplexes, automobile, restaurants/pubs and of course, financial services.

 

- G. Mohan.