Retailing Trends

I came across this excellent McKinsey China podcast on e-tailing trends and thought would share the highlights and the links with my readers. I have also added my insights into the blog post:

The super-charged growth of online retail is changing this dynamic and creating incremental consumption. Millions of newly minted shoppers can now log on and purchase goods they could only dream of acquiring just a few years ago. By 2020, China’s e-tailing market may reach $420 billion-$650 billion in sales and add 4-7 percent to the nation’s private consumption. – McKinsey China

Retailing moving from location based to occasion based: With real estate getting more and more expensive, retailing has pivoted its focus from location driven business operations to occasions-based business focused on weddings, birthdays, etc etc.

Logistics & Delivery centers: With the growing e-commerce retailing space and upcoming smaller players in the market, the logistics and delivery centers market has a lot of potential for growth.

Payment gateways: Newer payment gateways need to be introduced for different market sets. Regional or Country-driven systems would emerge and then hook up with the global payment gateways. The importance of foreign exchange management and treasury operations would rise.

Mobile based solutions: With mobile penetration growing in developing countries as well, there would be a higher need for mobile based solutions for retail sales, advertising, consumer need assessment and market reach.

E-commerce platforms: More and more players would emerge, smaller ones of which would focus on niche markets with product differentiation as their key to growth.

Supply Chain Management professionals and solutions: There is going to be more need of supply chain management professionals who would likely have a degree in language as well. A good chunk of products would manufacture in China and knowing Chinese would create a definite connection with the suppliers. Also, more organized supply chain solutions would need to emerge, systems catering to the SME end of the market, not just the big players.

Less jobs for women in retailing; more jobs in logistics (mostly for men): Since traditionally, retail has been a major employer of people, especially women, there will be a decrease in jobs in the traditional retailing sector as companies reduce their square footage of retail space. This could lead to growing number of women entrepreneurs in this vertical with the requisite experience, but energies would need to be channeled in accordingly for that to happen.

Lifestyle change from routine jobs to unstructured enterprises: The nature of work would change for a vast majority of people who would now not expect to work in the safe, secure 9-5 shifts that are time-focused, but instead work on a flexible, results-based (efforts-focused) working model.

Clearly, the retailing landscape will drastically change in the next 15 years with several new names emerging and leading the show.

 

Global Demographics

The way the world operates has changed a lot in the last 100 years, a lot of which can be attributed to how things have changed due to incremental and revolutionary technologies. People are now living healthier, longer lives in many of the world’s advanced countries. With the rapid diffusion of knowledge and spread of technological research, we would see this trend grow. Think about our world. Wikipedia has this interesting table of global population breakup of top 10 most populated countries:

Top 10 countries with largest population

 

Notice how the top 3 countries in the world constitutes around 40% of world population. “Approximately 4.06 billion people live in these ten countries, representing around 58% of the world’s population as of April 2012.”

4 out of the 7 billion people live in 10 of the 196 countries. This would have implications on how marketing is done, where power circles of tomorrow would flourish and what trade balance will be like.

Moreover, 3.27 billion people form the current global labor force. With the median age of 28, the world will choose the products it will consume and the services it will pay for.

The World Demographics

 

Political leaders, businesses, marketers with a global outlook will only be ahead of the game if they understand this global demographic. Increasingly, the world is becoming so interconnected that almost anyone expecting to do meaningful work for the networked economy needs to take note here.

 

Economics of Value

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Commodities are cheap. They’re cheap because they’re standardized, easy-to-find and easier to replace. There’s nothing unique about them and their value is driven from a consistent set of expectations from each of the units in terms of shape, size, color, taste, or performance.

Economics keep coming into the equation and before I make my point, let me share two unique products with you:

Koh-i-Noor
Koh-i-noor Diamond – The most valuable diamond in the world

Cost: Priceless

Koh-I-Noor means as “Mountain of Light” from Persian. It’s a 105 carat (21.6 grams) diamond that was once the largest known diamond in the world. The Koh-I-Noor was originated at Golconda in the Andhra Pradesh state of India. It was owned by various Sikh, Mughal and Persian rulers that fought each other from time to time. The stone was found to measure 36.00 × 31.90 × 13.04 mm. The gem has now become the property of the British crown and is kept in HM Tower of London and it’s a popular tourist attraction.

Clive Christian Perfume – the most expensive perfume in the world

Cost: around $215,000

It is a mixture of pure and precious flowers from all around the world. The collection used is a rare one and of its purest forms. the lead crystal bottle to keep such a potion is handmade and the collar part of the bottle is an untainted gold-plated 24 karat and sterling silver. It is stamped with one of a kind seal and has an outstanding diamond cut solitaire. The top is twisted after the unique design granted by Queen Victoria herself. The price of this magnificence is about $215,000.

 

When we think about products, it is simpler to understand why scarcity leads the price higher and uniqueness could mean the product becomes priceless. It is uncommon to think on similar lines about skills, expertise and individual contribution – when people are just used to doing regular work and only doing the thing right, they’re seldom thinking about choosing the right thing to do and excel.

If you are always into the regular rut of churning out deliverables; working on that final budget spreadsheet; or that major sales kickoff presentation, you’re doing important work – but that kind of work will help you little to drive your value up.

Take any important brand you care about and you would find that the price it is charging and people are willing to pay for that is not significantly related to the costs – that’s the effect of brand value; it makes the costs irrelevant.

When talking about individuals, you have to take charge of your own career and direction to create that sort of value – that is the only way out. If you’re not ready to bring out the ‘unique’ in ‘you’ forward, then your value will probably keep falling down with every new innovation in technology and/or almost certainly, somebody else will come forward to do the same work you do for less. Welcome to the Globalized World.

In order for you to command respect, value and high compensation, you have to regularly endeavor to keep the unique aspects within you (your USPs) shining! Be it your own entrepreneurial negotiation or a shot at corporate decision making, you have to be scarce to be valuable – you become scarce when you consistently do what most others would not try and most of the fewer who try could not do.

How businesses operate: A Day in the Life of Various Business Operations

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Today was an interesting day. Within 1km radius in Karachi city, I encountered various types of businesses.

As I started off the day, I checked out the local food suppliers to the bakery in locality. Their business essentially thrives on effective distribution through various channels. The idea is that you need to be there every day or every few days to make sure your customer buys from you. Here, having the right person with every distribution van becomes a necessity, to get effective feedback and arrange appropriate response.

Moving on, I saw an interesting part of the old city area where auctions are the way to go to do business. These specialty shops in one lane in old city area of Nanak Wara sell special leaves called ‘paan’ in 3 different quality ranges. The product comes from within Pakistan as well as Srilanka (Ceylon). Their way of selling takes you to what you might have read about auctions in commodity markets operating in 1800’s. It was an interesting sight. Their business thrives on identifying the potential buyers in an auction and effective use of words to excite them about the lot being auctioned. Also, they usually have dedicated individuals sitting outside these shops shouting off their particular category and quality of paans being auctioned. The mental alertness of the auctioneer is at the core of this business – considering they procure these betel leaves (paans) within the same day they’re cut and auction them the next day (shelf life of 2 days at best), they have to sell off their lots in the 2 hours or so that the auction market operates.

During the day, I visited a local wholesaler in the high-end electrical parts in the refrigeration segment. His business focused on telephone-based order management and workforce focused on effective inventory management, warehousing and quick order processing. Here, the owner was sitting on the main seat for most of the day, however, his presence was necessary to make things happen around there since he was the only one who could talk to customers – in one or two rare instances where one of his employees picked the phone up, customers preferred to wait for the owner to get done with his conversation on another phone than register their orders with that employee. It’s how they worked.

How Businesses Operate

I then had a chance to notice another businessman who picked up things from the famous ship breaking market in Karachi, Shershah. These items included things ranging from small locks and handles to large chain pulleys. The real skill in this work lies in identifying the right kind of products from the huge range available and then getting it to the right kind of buyers – interestingly, most of these small vendors/operators focus on a small niche of products and buyers only.

On on way to one of the places I had to visit, I saw an old fruit vendor and approached him. His business thrived on how his fruits looked to the people passing by and his profits could be maximized based on his assessment of the buyers’ ability to pay (It may not have been right to be doing so, but he seems to be doing it as his right).

During the latter half, I found two engineering businessmen who collected old stuff from scrap markets and reingeered, renovated and reburbished several medium-range electronic equipment, sealed them and sold them forward. Their business had a chain of buyers lined up for them – so the key to their business was in effective work in the product engineering end.

In evening, at home, I worked on some current projects. These projects are mostly being done virtually from project idea generation, brainstorming sessions, communication (in many of its forms), actual work, status updates, project management, delegation, deliverables submission and follow-ups, payments as well as banking. It’s strikingly different from the paan auction business model where things are still operated the way they were done 200 years ago!

So, common themes amongst successful businesses include: focus on effective communication (with internal and external stakeholders), product optimization, customer-centricity and hard work.

All in all, a day well-spent. Now, this blog post would be posted and read by you in your country like several others from a host of other countries. One wonders how far-reaching and fast-paced impacts can be created today through the use of technology – many things that are still considered impossible with the old-economy business models.

The Battle of Minds in the New Economy

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As paradoxical it is to know man seems to have mastered the beasts since ages despite its apparently weak physical build and smaller size, it is intriguing to understand accept that technology has and will only increase this mastery – in this new economy, no more is it about brick and mortar structures any more. I can imagine many corporation heads deriving a sort of satisfaction from that lovely facade, pleasant water fountain, the corner office and brigade of people reporting to the individual.
Hofstede’s study on cultural differences took into account the space being indicative of a particular cultural setting and the power reposed in a position – I wonder if the same study conducted now would keep such high importance on space- power distance is not as important as it used to be. With the possibility of reaching infinity in various spheres now becoming realistic, things are fast changing.

In this new economy, it’s about getting smarter – no more do you need a brigade of semi-competent, highly specialized individuals to run huge departments. Now, you need competent, versatile, technology-savvy, proactive, learning individuals. It’s all about the battle of minds in the new economy – whoever has the best minds would be the winner in the long-term.

Clearly, this would mean new types of work setting, more global cultural exchange, common business terms across a wider world, more emphasis on technology, more emphasis on innovation (not just the regular rut, but actual productive work delivery) and definitely newer, higher and remarkable compensation for those who qualify. Some years into the future, all jobs, except non-tradeable ones, would be benchmarked on global parameters as far as standard of craftsmanship, quality and pay are concerned.

It’s clear the coming decade is going to produce more millionaires than in any previous decade in human history – since every mind is a factory with growth and productivity as output deliverables, innovation being the point of distinction  and the channel (internet and the new media) becoming widely available, the way the world works is bound to change.

The age of industrial revolution is fast fading, the fixed-form factory work environment is obsolete. The sooner we accept it, the better it will be for our future.

The world is changing; the question is are you geared up for it?

Paradigm of 21st Century

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The previous century was all about modern inventions. Wright brothers invented airplane flights. Henry Ford brought the assembly line to life and created a revolution in car industry. John Baird pioneered the mechanical television. Lazlo and Georg invented ballpoint pens. Thomas Edison gave us light bulb. Edwin Land created Polaroid cameras. The list goes on, but you got the point. With the overwhelming influx of the new inventions getting quickly commercialized, living standards increased tremendously. During that era, things were simply a matter of getting new inventions commercialized on a mass level. People benefited a lot by ‘Location Arbitrage’ whereby they took a technology from one place and commercialized that into another part of the world. Rules were simple. Just bring in something new to a place, or get the same old thing to a new place and you could make money. Since transportation and communication only developed faster in the latter half of the century, those who knew the right places and the right people made money. With a bit of luck and some hard work, one could definitely make it big.

In the last decade of the previous century, with the commercialization of the World Wide Web, the paradigm changed. Now, irrespective of your place, you could get to know about technology, products, people, lifestyles and living standards of people in other parts of the world. With the world actually turning into a global village and improved communication and transportation, making location arbitrage was not so simple anymore.

New Paradigm needs New Thinking!

With the turn of the century, with the onslaught of all the social media, social bookmarking, web 2.0 and ease of connecting the right people anywhere, many businesses vanished, and many had to change their norms. People watch news on Live Streaming. They read newspapers online. They bank online. They don’t look into the hard copy of Britannica Encyclopedia anymore; they just ‘google’ it. It’s not about brick-and-mortar based structures anymore. People make a living online.

For you to make big in this new paradigm, it’s not so much about inventions and some hard work, but more about innovations and a lot of hard work.

Entertainment per Capita

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Economists and thinkers often talk about GDP/GNP per capita as their discussion parameter when talking about national happiness. FT reported last week of Bhutan’s efforts in finding the the true Gross National Happiness (GNH). It also noted that most of the developed world is now bent on finding ways to maximize not the GDP, but GNH!  It’s amazing to note that possibly, money can’t buy happiness.

Some years ago the economist Richard Easterlin showed that, just as would be expected, wealthier people in any given country are more likely to tell a survey-taker that they are happy with their lives than are poorer people in the same country. However, Easterlin also found two other things that don’t fit so well with the economic perspective. First, he found that as countries get richer, beyond the level where basic needs such as food and shelter are met, people don’t report being any happier. For example, although today most Americans surveyed will tell you they are happy with their lives, the fraction of those who say that they are happy is not any higher than it was 40 years ago, when average incomes in the United States were considerably lower and few could even imagine developments like mobile phones or the Internet. Second, he found that–again, once you get above a basic sustenance level–on average, people in rich countries don’t report being all that much happier than people in lower-income countries. The finding that people in rich countries don’t report much greater happiness than those in lower-income countries–even though, in any given country, the rich say they are happier than the poor do–is called the Easterlin paradox, after its discoverer.

Funny – isn’t it, when we put this in perspective where most people seem to be running after getting richer on one hand have always wanted to be satisfied and happy on the other?

There is no denying to the fact that money is very important, however, entertainment per capita is a relevant new benchmark in this economy where we are not totally over with the ripple effects of the depression cycle worse than the Great Depression of 1929. Entertainment has to be associated with a hard form as well as a soft form. Economies and governments have to provide ways for their people to find an easy, inexpensive catharsis to their feelings to let the balance be.

Food for thought: How often do you measure life by the moments that take your breath away?

Floods in Pakistan: Worst ever in the History of the Nation

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There are instances when one feels quite helpless at the state of affairs and wonders how could he make any positive difference. Indeed, the recent floods in Pakistan is one such occasion when many Pakistanis are feeling this way. Around 20 million people are estimated to be affected by the floods directly and innumerable societal affects on a broader scale. It is a natural disaster of such a huge scale that government, military, NGOs and civil society are working together toward saving people and helping survivors still feeling quite helpless.

Some major issues that have sprung up in light of the floods and extended damage everywhere are:

  • Rescue of living people in flooded areas
  • Availability of food
  • Access to medicines, health facilities and psychological support
  • Access to clean water
  • Provision of shelter to the affectees

All these issues seek an immediate attention. It is clear that resource scarcity, ineffective resource mobilization and difficulty in doing rescue operations due to geographic difficulties are significant hurdles in the near-term.

On the longer-term, issues of higher importance remain to be resolved. Some of those issues are:

  • Channeling the floodwater out to sea and repairing/developing dams, barrages and water channels throughout the country
  • Rehabilitation of affectees back into their own areas
  • Provision of alternative homes to the affectees
  • Employment generation across all over Pakistan, especially in flood-affected areas
  • Preparing land ruined by floods for use in agriculture, again
  • Arranging for food security of the country by managing the food reserves (of wheat, rice, grains, etc.)
  • Re-establishing the social protection measures and infrastructure (schools, colleges, hospitals, clinics, roads, parks, etc.)
  • Finding hope and setting direction for the broken families, destitute adults, orphans and providing them psychological rehabilitation and some activity to keep themselves productively occupied

It indeed is a big loss and it cannot be corrected in one day, one week, one month or even one year. The short- and long-term goals for putting things back on track and bringing the house in order would need huge amounts of dedication, efforts, mutual support and commitment to a unified goal – of progressing together and reviving again. More than monetary aid, these are issues that need human care and support.

Pakistanis are a resilient nation. They have been through worst of conditions. As long as they stand united, I am sure the revival will come through. All that is needed is a firm faith in Almighty, coherent policies at the governmental level, support from all segments of the society and most importantly BELIEF in oneself and each other.

LONG LIVE PAKISTAN!

Global Geopolitics.

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As we stand today, the size of the world GDP is estimated to be $70 trillion and the global population has registered to the level of 6.8 billion. However, the dispersion of income and power play amongst nations is clearly unbalanced. Today, USA is supposed to be the only superpower in the world, but that title is fast fading amidst rising Asian forces from China and India. In terms of population, the world has been exploding at an exponential pace. With the global population crossing the 6 bn. mark in the year 2000, things started changing rapidly. Now, China and India jointly comprising around 37% of the global population and the power balance is shifting.

We live in the information age today, where knowledge truly is power and economic prowess of a nation only can lead it forward in the global superpower race. There is no denying to the fact that USA would have a difficult time retaining its unipolar strength in these changing dynamics.

In order to gauge any country’s economic power and relative strength, we have to consider the following criteria in mind, amongst other things:

  • Technological Edge
  • Geographical Advantage
  • Access to Water
  • Access to Energy Sources
  • Supply of Food Channels
  • Economy’s fundamentals

USA versus China:

It might not be the biggest land area covering country on the face of earth, but USA is a huge economic force with its GDP standing at $14.26 trillion (20% of the global GDP), the country is ahead on the technology curve and thrives on innovation spearheaded by entrepreneurial activity spread all over and the country focusing its efforts on high-end value-added service sector accounting for about 77% of its GDP.

Geographically, USA has clear advantages over other upcoming superpowers. It is practically sharing borders with only two countries: Canada on the northern end and Mexico on the Southern end. Additionally, one very important point is clear in the picture below that USA has access to water from two of the largest oceans in the world, Pacific and Atlantic Oceans and it also reaches the Gulf of Mexico on the south-eastern end.

Although 71% of earth is practically water, the geopolitical climate of the world dictates that water would be a major reason for clashes in the next big World War. Here, USA clearly has edge over its chief rivals in the power game.

The off-shore oil exploration seems to be more practical again in USA’s case due to access to various oceans. At this point, it is noticeable that the per capita consumptions of oil in USA compared to China are huge. According to Nationmaster.com, USA consumed 68.672 bbl/day of oil per 1000 people whereas the consumption of oil in China stood at only 5.733 bbl/day per 1000 people (2007 data). This is definitely going to change with China working out as the ‘Global Factory’ for all the top companies all over the world. Moreover, with the increasing level of urbanization and increasing income levels in Asian countries, the per capita energy consumption is bound to shoot up.

China has a very different geography to deal with, having 14 nations bordering the country, it needs to diplomatically champion its ties with them in such a way so as to assure not only geographic security, but also economic prosperity. China borders with Afghanistan(76 km), Bhutan (470 km), Burma (2,185 km), India (3,380 km), Kazakhstan (1,533 km), North Korea (1,416 km), Kyrgyzstan (858 km), Laos (423 km), Mongolia (4,677 km), Nepal (1,236 km), Pakistan (523 km), Russia (northeast) (3,605 km), Russia (northwest) (40 km), Tajikistan (414 km) and Vietnam (1,281 km).

Due to its geographic position, China’s sea routes pass several different countries coming from the Arabian Sea on the west, and this wet bulk (Crude oil) transportation is especially risk-prone considering any unstable conditions in the region. It, therefore, makes perfect economic sense for China to help Pakistan develop Gwadar Port and adjoining infrastructure in the Baluchistan province so that the trade route for China becomes more manageable.

Also, the reason for China’s keen interest in the Iran-Pakistan gas pipeline and other oil/gas exploration and transportation projects in and through the Central Asian countries is the importance of these to China’s geo-strategic success. As the country grows further, so will its energy demands and consequently, it would need to focus on developing sustainable solutions for energy issues through the Central Asian Republic countries and other countries on its western border.

To sum up, China is an evolving power center; it has to develop and crystallize a range of strategies for geo-political security amongst other developments. So far it has been doing a good job in making sure that its long-term sustenance is not sabotaged by geographic challenges. It has to work on many different projects to achieve the status of a super power in this unipolar world.

Courtesy for data and graphs is CIA The World Factbook and World Consumption & Production data is taken from US Energy Information Administration Website.