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Next Retail Disruption: Brands Will Facilitate Sale of Used Products & Renting Them

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We are all familiar with people buying second-hand cars, mobiles, books, etc. usually these are sold by third parties – not the companies themselves.

A major shopping and lifestyle cultural shift will happen. It can disrupt the way we shop.

Possibly this could be the next major disruption after online shopping came into existence.

So What Is Driving This Disruption?

New business models are disrupting the old models, as the customer preferences are changing. Generation Z and Millennials, who are inclined towards sustainability, experiencing life, and less inclined towards amassing assets, are embracing the idea of buying quality used products and selling them back (when not needed, instead of keeping them forever) or renting used products.

The success of Uber, Airbnb, Patagonia, and many others are good examples. This trend is soon to catch up, in all other industries, including furniture and even cloths & accessories. Buying used products or renting dresses etc are not seen with interest by customers who are Gen X or those earlier. But with Gen Z and Millennials (the growing customer segment) are very much open to using rented or used products. This is going to be a cultural shift in the shopping.

But the disruption is when, the brands themselves buy their unused products from customers and resell them in the market as seconds or on rent, by ensuring quality and certifying it. This is the major disruption to happen across the industry.

A McKinsey report states that the best data out there shows that 33% of the Gen Z and Millennials did some type of resale purchase or rental in 12 months. Now that’s a huge business opportunity.

Participation in that market is growing by 40% year over year. That’s fast growth.

But will brands offer to take back their products and reselling them, affect the sales of their new products (cannibalization, as it’s called) or affect cashflows as they buyback?

Not necessarily, if properly planned.

Companies need not buyback. Instead, they can offer gift coupons in return. This means the customer will use the coupon to buy something new as well. This is a win-win for both the buyer and the seller. Besides, it is a good opportunity to be connected with customers always.

As for cannibalization, it need not be so. The fact that the products can be given back to sellers after using, reduces the decision barrier for customers to try new things. The worry of “will it be a waste”, doesn’t bother them anymore. This could create an explosion of experimental buying from the customers. Thereby increasing sales and profitability.

So how does this affect the present business models of businesses?

Be proactive: Explore how you can enter this space. What can be bought back and resold? What can be rented?

Customer Segment:
Which customer segment should be attracted to this? Can a present “non-customer segment” be targeted? How to customize the business and its shopping experience to attract them? Will it affect the sales from the existing customer segment?

Product Quality Review: If a product has to be sold and resold, it has to be of good quality. Do your products have it? How many cycles will it go? What can be done to improve it? Businesses have to build products that are more durable and sustainable – so that they can have a long life. This can be a shift from the present “use and throw” products to more sustainable and durable products. This can save the environment.

Process Change: Study what process changes need to be implemented? What new activities need to be undertaken? Does it need resources and infrastructure? Businesses have to have a team or department, to accept the customer goods, quality checks them, make repairs or cleaning, repackaging it, new showrooms for it or dedicated places in existing showrooms, branding and marketing it, etc.

Re-Branding: The new service and its impact on the public should be structured to ensure brand images are not destroyed overnight. It has to be planned well to sync with the Gen Z and millennials who will be its main customers. Strong brands will have a boost, as more customers will opt for branded products as it available even on a rent basis.

New Channels: Businesses and entrepreneurs have to be ready with the channels for the new product line- the resale buying and selling.

Embrace Technology: Technology will also have to be involved to manage its e-commerce sale.

In short, for customers who are premium brand lovers who can’t afford them, good times are ahead.

For entrepreneurs, who are struggling to get a higher market share, this is a good opportunity to disrupt and penetrate the market.

Study -> Structure -> Disrupt ??

Asia is a Great Market: To Explore, To Expand & To Invest

As our entrepreneur’s businesses come under heat of recession and slow down, it’s time to explore unexplored new markets for expansion, diversification and investment. Geographic expansion is the buzz word that needs to be seriously considered by entrepreneurs who want to be relevant in the market place. Complacency in this matter, could mean falling out of the market in few years.

As NRI entrepreneurs, begin to explore African market, with all its hidden exoticness; there is yet another market that is more relevant. The growing Asian giant economy. It’s huge, its growing and it’s becoming less globally integrated and more regionally integrated. And this opens up many opportunities.

Asia is Big & Growing

Just to understand how big the Asian economy is, we can explore some numbers from the paper published by McKinsey Global Institute. For instance, the GDP of Asia has grown from 32% to 42% within a period of 2000 to 2017. And it is expected to reach 52% by 2040. As this happens, it is interesting to note that GDP of Europe, North American has been falling.

Not just that, at consumption level, Asian market is to consume 39% of the total global consumption by 2040. These numbers show immense opportunities not just for production or manufacturing but also for services, R&D and host of other.

That is, Asia is more promising the established present markets. And as entrepreneurs, it is important that we operate in growing opportunities rather than saturated markets.

Shift From “Globalisation” To “Regionalising”

Another positive findings is that, there is a growing shift from globalising (more inclined towards western cultures and products) to “regionalising”. Regionalising is about costumers preferring products and services that pertain to the asian region. Be it new products, services, mobile apps, tourism, food etc. This has resulted in more intra-region trade happening, and this opens up good opportunity for the entrepreneurs in the region.

To understand this better, it’s in interesting to find that 60% of goods traded in Asian countries was within the region itself. This is also the case, in Investments (71%) and FDIs (59%). And interestingly 74% of the travellers travel within the region. And because of this global recessions and crisis, may not affect the Asian economies in a major way.

I wish to make a special note on the tourism part. In Kerala, when it comes to foreign tourists, we see mainly Europeans and the Arabs. Asian tourists are not that common. This means, there is a new shift and boom happening in Asian tourism market that our Kerala tourism is missing out. Hope this write up would be an eye opener to the tourism operators to start marketing Kerala as an opportunity to the Asian market and have a good piece of that growing 71% travellers.

Asia Economy Is Diverse, Yet Similar

Understanding the Asian market is important before making a market entry or investment. Each country has different cultures, different laws, different priorities. And Each country is at a different economic level. McKinsey paper, divides the Asian market in 4;

– Advanced Asia: Countries that constitutes those with highest GDP (UDS 30,000 to USD 60,000), and are highly urbanised, like Australia, Japan, New Zealand, Singapore and South Korea)

China: China is a classification on its own. It is the world’s second largest economy. It acts as the anchor economy for the rest of Asia.

– Emerging Asia: These are diverse countries and economies but are highly connected economies. These includes countries such as Bhutan, Brunei, Cambodia, Indonesia, Laos, Malaysia, Mongolia, Myanmar, Nepal, Philippines, Thailand and Vietnam

– Frontier Asia and India: These are economies that have had historically lower intra-regional integration, and broader range of trading relationships. For example in 2017, Europe, Middle East, Africa and North America accounted for 45% of these economies imports, 66% of the exports, 53% of the FDI inflows, and 53% of the FDI outflows. This classification includes India, Afghanistan, Bangladesh, Fiji, Kazakistan, Kyrgyzstan, Maldives, Pakistan, Sri Lanka, Tajikistan, Turkmenistan and Uzbekistan

Steps to Enter The Asian Market

First, learn about the economic opportunities. It is important to understand that customers in each of these economies will have different tastes and preferences. You will be able to understand that with a single visit to a local supermarket, where perhaps half of the products will be unfamiliar to you or the economy you come from. The best way to start is to visit trade exhibitions in each of these countries. Exhibitions, help you to see what is on offer, who are providing it, and get more information about the economy and the products from the exhibitors.

Second, learn more. Visit each of the countries you wish to consider and walk through the streets, visit shops, and see what is being sold and how it is being sold. This is a great education and can spark many ideas

Third, interact with local business community. The possibility of an Indian association is very high in almost all countries. Visit them and talk to them. Their local knowledge and experience will go a long way. Also visit local chambers of commerce and Govt ministries that promote trade, FDI and economic activities.

Fourth, better to have reliable local partners, who will invest and be part of management. This will help a long in avoiding unnecessary mistakes

Fifth, be culturally relevant to customers. It is not enough to think about Loas market from an Indian perspective. Your product might have good demand and acceptability in India or Middle East, but it may not be on the country that you wish to target. May be, the product is relevant, but it will need to be packaged, branded, marketed and sold in a way that appeals to the local people.

Sixth, be culturally relevant to management. Operating in a foreign country will require having workforce and management that consists of largely local population. It is important to have a management system that appreciates and flows well with their culture. Else the business is bound to have management issues.

Seventh, proper risk analysis has to be done before embarking on a business venture, preferably a detailed PESTLE analysis. It is important to know, what all risks can come up, and also how to mitigate it when it comes up. Usually risk analysis will be done by a local business consulting firm. But there is a risk of the local business consulting firm, not recognising some elements as risk, which can be a risk factor to us, due to cultural issues. Hence it is always ideal to hire two business consulting firms while doing market research or risk analysis in a foreign country- one a local consulting firms that understands the market better, another an Indian consulting firm that understands the client better from a cultural perspective.

Conclusion

Asia is big, growing and attractive market for entrepreneurs and investors. Visionary entrepreneurs have to explore and expand in these markets.

Management: Do you sacrifice PC for faster P?

In the book, 7 Habits of Highly Effective People, Stephen Covey, mentions about a formula “P/PC” or “P divided by PC”.

Where P is the production of our desires or the desired outcomes – the results we seek.

PC is the assets and resources that help us achieve the P.

For example in the story of golden egg laying goose. P is the golden egg and PC is the goose that lays it.

Now most people only care about the P, not the PC. As a result, we don’t do anything to maintain our upgrade the PC. We only focus on pushing the PC to deliver more P. Then one fine day we destroy the PC, resulting in no more P.

This is relevant in our business and personal life.

In our business P can be the products we produce (that gives us revenue and profits). PC is the machinery that does the production. If we focus only on producing more and more, without caring to stop to repair and maintain the machinery, then one day the machinery will break down stopping the flow of produced good completely.

On a personal level, our P can be a happy life that we have with our family or friends. And PC can be the family or friends. But if we don’t do anything to improve and up grade your relationship with your family or friends, then the P (happy family) will suffer in long run.

So never sacrifices PC for faster gratification of P. Then you will end up like the man who killed his gold laying goose to get all the gold at once.

So what is your P and how are you treating your PC? Share your comments, opinions and experiences below.

Is Globalisation On Decline? Why It Matters To You?

Beware of Globalisation! Get Ready to face globalisation! Be Globalised ! These were some of the many thoughts that used to occupy the minds of entrepreneurs who were directly or indirectly involved in businesses from any sector.

The ambitious wanted to be a global company, via globalisation. The less ambitious was mostly scared of it. But did you know, Globalisation is declining since 2000.

So what trend is replacing it? What it means for your business?

Globalisation is the buzz word that we have been hearing for many years. Globalisation symbolised shipment of goods across the world, outsourcing of work to cheaper countries, etc. But post 2000, things began to change.

The 2008 crisis and the Great Recession made the international trade go down. But most of us believed that once the markets got back on tracks, the international trade will flourish once again. But surprisingly, it didn’t. Today, 10 years later, as we look back, we find that shape of Globalisation has changed dramatically.

The cross boarder trading of manufactured goods has declined and instead the cross border trading of services has increased!

This means goods that are manufactured in a country is sold more inside the same country, than it being exported, this also meant lower imports. This is because, companies are no longer seeking cheaper destinations to manufacture. For example, according to Mckinsey Global Institute, only 18% is the export from a low wage country to a high wage country. The reason could be automation, which depends less on manpower cost.

Countries have started identifying larger consumer markets for their products in their own countries. This is a major shift. It also means manufacturing of goods closer to the target market, instead of shipping it from across the globe. This is because, “speed to market” is very important in several industries where trends come and go very fast.

Another major shift is that a cross border trade shift , is happening with nearby countries. Which is called as regionalisation. Regionalisation is the current big thing. That is, companies are more interested in shipping goods to nearby countries or nearby states. This makes movement of goods faster, less expensive and increase customer presence by adhering to local cultures and trends.

So what does this mean to your business? small or big? what ever industry?

It means either success or failure. Failure if you stick on the old models (especially if you are in the manufacturing or EXIM business). Failure, if you are in the service industry and you cannot capitalise on this new wave of growing global opportunity.

It also means success to your business, if you locate your manufacturing units closer to your markets, you start exploring your regional markets (can be nearby states or nearby countries), or if you move into the “service industry” to tap the global demand.

So which side of globalisation history are you? the old chapter or the new?

Economics: Why Your Business Should Be More “Social”, “Caring” & “Humane”

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Businesses of the past and present focused more on profits, by providing goods and services that customers liked. It can be at the cost of environment, exploitation of weaker sections of society, unethical practices, creating health issues etc. The customer usually didn’t care- and so businesses also didn’t care.

But in the last few years, we have witnessed a shift. Customers are becoming more concerned and vocal about how companies produce what they produce.

This shift is a result of the new generation in the market. The Gen Z or customers who are currently aged 24 or less. They are considered as the generation of truth and openness. They do not follow the values of the other generations. They have their own values.

Their values, preferences and tastes are quite alien to the Generation Baby Boomers (customers aged 60 and above) and Gen X (customers aged between 40 and 60).

And interestingly, when compared to Gen Y or millennials (aged between 25 and 40) they are less idealistic, believe in savings and job security than higher salary.

The Gen Z is more open, more tolerant to differences, nature loving, more ethical. They seek the truth in matters without perhaps diplomacy and compromise. A trait that older generations might find unacceptable.

They are also more active in opposing companies, governments, establishments that are against their values.

It is important for businesses that plan to stay long in business to know the Gen Z, as they are the youngest and growing population. Ignoring them is digging own grave. Knowing what they like and don’t like will help businesses to,

  • Design products and services that most suits them
  • Source raw materials from places that their customer does not have a problem with
  • Brand their products in ways that appeals to the new generation
  • Market their products in channels that they like to use and are available
  • Sell in a manner that appeals to them
  • Get more new generation to work in their businesses
  • Get more new generations to be interested in investing in their businesses

The list goes on as to why this new generation should not be ignored.

Among the various factors that Gen Z is concerned about is the ethical values and openness of companies to diversities. With the Internet and the information it provides at finger tips, they do study more about the companies and brands they use.

They prefer companies that,

  • Are honest and not do cheat
  • Does not exploit the nature nor people
  • Does not discriminate against different people based on sex, religion or ideologies
  • Does something for bringing goodness in the world

So if your business is not what they like, then be ready to close down in few years. As over the years, the percentage of Gen Z will increase in the market. And the percentage of other generations influenced by the Gen Z values will also increase.

Proactive Businesses: Growth Happens With Proactivity

Stephen Covey in his “7 Habits of Highly Effective People” lists “Proactivity” as the first habit to be effective. This is because, proactive mind is the foundation for all other habits that transform someone to be effective, is based on. So is the case with business organisations.

So what does it mean, for a business to be “proactive”?

Before answering this, we need to know what “proactivity” is, and what is its opposite.

Proactiveness for an individual means, a human taking responsibility of their own lives. Recognising that our behaviour is a result of our decisions and not our conditions. That despite the negativity around us from limitation of our body, our family, our society, our government, our economy- that we have the obligation to take a decision and be responsible to find a solution. That is instead of blaming everything around us (even if they do deserve the blame), we find ways to overcome it, rather than accepting it.

This is really tough. It takes real guts to actually do it. But this is what separates the winners from the losers. History is so full of it.

Same is the case of businesses. A proactive business is one, that takes responsibility of its own success. Recognising that its decisions, policies, strategies and tactics will define its path forward to success, and not the external or internal environment. It does not blame someone and sit back in losses. It finds a way out. It finds a way to grow.

And we have seen companies that are proactive, that rose from worst situations to be world leaders. In fact, it is during recessions and bad economic conditions, that new players come out of nowhere and bypass the old big players.

So what is the opposite of proactive? it’s “reactive”. Reactive companies are what we see all around us. Companies or businesses that react to situations, to new policies, to new regulations, to new economic challenges. Reactive people are always affected by the physical environment. Their success and failure is depended on the environment they are based in. Similarly Reactive Businesses, their success and failure depends on what is the state of the environment they operate in. If its booming, they do well. If it’s going down, they also go down. They don’t have a control over their status. It’s like a balloon floating in the air, or a paper boat in a river.

So what should businesses do, to be Proactive?

First they should have a Proactive Leader. The leader should inspire his team to build a proactive culture. A culture that breeds more people, who believe in the power of proactivity. Such people think, plan, take decisions in a proactive manner. The rest will be history.

Success is not easy. Success and growth is for the proactive ones.

PEOPLE WHO THINK BIG, SHOULD START IN PHASES

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Why Think Big?

As Stephen Covey said, “Start with the end in mind”. Thinking big allows you to think ahead to your ultimate goal, and provide constant motivation and drive to achieve your milestones. And small achievable milestones make your mission a reality; pragmatically speaking.

‘Thinking big’ means being able to dream and visualise what you can achieve on an audacious scale: with no limits on your thinking.

It is about being open-minded, positive, creative and seeing opportunity in the big picture. It allows you to set a grand purpose, a raison d’etre for your business, which would clearly help to think about the various paths to achieve your vision.

And subsequently, achieving Big does not necessarily require starting Big.

Why Start in Phases?

It’s always enticing for Investors to start capital intensive retail businesses with huge fancy stores and designer-clad interiors, all in the hope that customers will be attracted enough to purchase from them. But that expectation falls short when the business realizes that they have not yet established trust, brand image or goodwill. And one would start to realise this challenge whence they see the huge overheads and payables which mounts to a large sum within a year of operations.

Today we live in an age of brand based marketplace, where the idea of brand image and brand associations are ever so important and those who play the brand game very well know how to tap into the psyche, sensitivities and personal priorities of the consumers.

Brand building uses various methods to associate their brand image with the needs of its customers, and thus customers come back for more of their products just because of their brand affinity and status correlation.

Take the example of the clothing brand Supreme, which has an immense cult-like following. With only 11 Brick and Mortar Supreme stores operating worldwide, they currently have a valuation of $1 Billion US dollars. Do you think that they spent an immense amount of capital worldwide to gain such a valuation and customer base?

No.

Supreme started its operations in 1994 with a small store in Manhattan. With their exclusive apparel and accessories for skateboarders, they focused their design and brand to accustom to the needs of skateboarding sub-culture and streetwear.

Their strategies included ‘affordable exclusivity’ and increasing scarcity to create hype. All of these have made Supreme, establish itself among global giants like Vans and Nike who are competing in the same market.

Creating a great sought after brand and establishing goodwill requires patience and carefully planned customer acquisition strategy. And much of the initial capital investment should be utilised strategically. And also by fine-tuning the value proposition based on feedback from its lead users.

Starting small requires less resources and can minimize the risks.

Scaling up should be done in phases with each phase implementing a strategic action. This phased growth strategy provides the firm with substantial time to find shortfalls and mistakes, and thus gaining knowledge to take corrective measures. Gaining steady momentum and scaling up to achieve growth requires one’s own ability to find mistakes and correcting their actions to mitigate future costs and capture larger markets.

Think Big, Start in Phases and Scale-up.

How Do We Win In A Hostile Environment

One of the biggest challenges that a Startup, Innovator or an Entrepreneur faces is the resistance and demotivation he faces from his own family, especially Father and Mother. People to whom you can’t talk back, people you are forced to listen to when they speak, people whom you have to see everyday.

It might be a taboo to talk about this. But it’s a reality that is preventing many from not starting anything, or not starting a business that they love to do opposed to what they ought to do.

Some parents are such wholesale dealers of negativism that it’s unimaginable. They use religion, emotional black mailing and even emotional attack to stop you from making that jump, or from continuing what you are doing.

I feel it’s the hardest part that our young entrepreneurs face. Many a times it’s about money. Most of our old generation do not see the beauty of creating something new. They are only concerned about the financial aspect, “so how much are you making now?”. And that’s it.

The measuring yard is only the positive cash flow, the rest (innovative product, a service that adds value to humanity, something that creates jobs, saves environmental etc) gets no appreciation from them. They see it with contempt. It’s always something that others have to do, not their sons or daughters.

How do we survive this extreme challenge, that erupts within our house itself? Positively ignore.

Just know that your life is yours (not your father’s, mothers’s, wife’s or even your kids). You don’t get a second chance. You believe in something, and if doing it makes you happy- just do it. You should learn to detoxify yourself everyday from the negativity that you heard the other day. If possible move away from staying with them (if you have brothers and sisters who are with parents- as they should never be made alone). And look into mirror and say, it’s not about money, big house than neighbour or bigger car than your friends. It’s about living a life that you won’t regret. Money is what you earn in process to get your family and yourself going.

Then you might end up making a multi billion enterprise or you might end up doing a small business. Either way, you die without regrets nor will you pass the responsibility of living “your life” to your sons.

What Modern Entrepreneurs Need?

Direction & Inspiration

– Vision Milestone

– Periodic Motivation

– Business Couching

– Mentoring by Experts

Knowledge

– Market Trends & Impact

– Customer Trends & Impact

– Competitor Moves & Impact

– Political Trends & Impact

– Technological Trends & Impact

– Ecommerce Trends & Impact

– Taxes & Impact

Skill

– Using Technology for Business Efficiency

– Using Management Tools & Frameworks for Operation & Growth Efficiency

– Developing Leadership Skills

Funding

– Short Term funds for short term needs

– Long Term funds or investment for long term needs

Share Holder Value Creation Is Not Everything

Most businesses, that have shareholders tend to focus on satisfying the investors only. And investors love profits. This means to improve profitability, return on investment and pay back periods- the management many a times have to compromise on their commitments to the employees, customers and environment.

Make no mistake, shareholders are very important. Without them, there is no capital and without capital there is no business. But the management strategy should not be entirely focused on them. Because many a times, the shareholders may not know what is good for them in the long run.

Shareholders usually invest in a commercial business for two reason. Immediate profitability or long term profitability / appreciation. For businesses with a vision, it is essential not to have investors who are short term focused. This will prevent business from investing in itself, its people and its relationship with the customers. As all these can be construed as “unnecessary expenses” that should otherwise have been shareholder’s profit.

But without investing in people, the organisation will not have the capable team to fight the competition nor grow. Without investing in building a relationship with the customers, the future customers will diminish. Without investing in the brand, will mean no value to the firm even after years of operation. Without investing into growth, diversification and research, the

business may not survive long.

Who does all this affect? The shareholders.

So the management has the difficult of job of ensuring that the right balance is maintained while creating value for all the stakeholders (and not just the shareholders).

This situation can be made easy, if the investors are rightly chosen in the first place. Choose investors who are long term, and who believe the firm should have a good brand value.

Promoters before targeting the “right customer segments” have to target the “right investor segment”.

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