The Economics of Consumer-Supplier: Indian Perspective # 3

This post is prompted by an article I read in the Economic Times of India of today titled "The devil is not really in the retail" (this text is also posted to the letters to the editor)
I agree with the bottom line of the article that we have to increase (sustain + increase) private consumption. What is mixed up is the relationship between the private consumption and the modern retail. For one, what kind of private consumption should be increased? Daily consumption items or lifestyle items? What is modern retail? How is modern retail making it possible for increase in daily consumption items and lifestyle items – this is the area which is still gray. Rather, it is shade of higher grey towards the consumer lifestyle items to which the modern retail is as of now related to in India.
The so called modern retail is not a vehicle to provide a public place to meet. That is the business model to entice spending while doing so. There is no social good being done by the modern retail. It is in fact creating a burden on the existing infrastructure by not planning its operations at a location where it can benefit from the economies of scale and lower costs.
The advent of modern retail and discounting on daily consumption items is no backed by the quality parameter (in the case of unbranded goods manufactured by leading brands). The use of purchasing power to enable a discount is not reflected in the delivery of quality goods. This is evident from the fact that the so called modern retails are branding their consumer items under own or third party brands and packaging without having any certified quality standards. They do not confirm to ISI or BIS or any other published transparent self created standards. Creating a discounting modern retail model and expecting it survive in the long run without investing in quality is not going to be profitable to the consumer and hence to the retail industry.
The modern retail industry believes it needs to be in the thick of consumers and hence is plagued by high costs. If it was smart enough to not incur costs but let the consumer incur the reach costs – it would be strategically located in a better, bigger, convenient (to reach with public transport or create a transport model) and cheaper location – to benefit from tax structures and lower cost of utilities. The modern retail industry is profitable in spite of the so called cost structures and inefficient government policies – well then there is scope for further discounting and giving flip to consumer demand. Which demand – of course that is the question?
The modern retail industry would do good for itself (thru doing good for the consumer) if it lobbied with the government to update, modify, change the outdated and inefficient measures / standards enabling the consumer get a truly better quality goods for consumption –both daily consumption and lifestyle.

The Economics of Consumer-Supplier: Indian Perspective-1

Consumer is King (maybe in his own home!!) Here are two corporate airlines (http://tinyurl.com/7fslcd) finding technical reasons which have no concern with the consumer to not pass thru cost benefits of falling production cost. If they are so concerned about consumers benefits that they advocate - then they should transparently pass thru the real costs which are of third party. Well, they do not have the systems to do it - then they need to invest in those. Consumers will want and demand transparency in costs - Value that they pay for. When? Sooner than we know. (Vested interest declaration : I avoid both these airlines 100%!!)

update : 29 Dec 2008

Both the airlines have today announced cut in base fares ...finally the market forces force them to do it without any other reason to bank on.

The Economics of Consumer-Supplier: Indian Perspective

For the past 2 months now, that i have been following up the financial crises and it implications in the world over; the impact of the same on Indian economy is clearly evident. In the meanwhile, one thing that has been intriguing me :: who is actually suffering in this economic crises -- the consumer or the supplier. I am taking the view as these two identities are the fundamental cornerstone of the economic enterprise.
In India, the inflation is down 4 -5% over the last 2 monts from a record high, economic growth is projected at over 7%; interest rates are down due to government intravention; job losses announced and unannounced do not seem to be a big issue; Oil price (India is a big importer) are down to 40's $/barrel; Airline fuel costs are down accordingly; YET -- there is NO

• downward revision in prices of air tickets;
• not many discounts being offered on consumer goods;
• fall in demand for services industry;
• reduction in prices of house by builders.

(not an exhustive list)

Two items from the above list 1> airline ticket and 2> house prices are the ones that bring in more wonder to me. Why are they not falling??

The airlines who have been charging extra in the name of fuel surcharge had to simply reduce this component proportionately per the price reduction in fuel. Yet they don't -- leading to confirmation that this so called fuel surcharge includes items of making more margin rather than covering the cost by a pass thru to consumer. What are the consumer doing about it -Nothing. Have they stopped buying tickets - NO. Have they protested in media, directly to airlines or consumer forums - NO. Why?

On the other hand, the builders have been running after the government to take action. Lower interest rates, enhance credit facilities for loan etc - what is that the builder is offering from his pocket(profits) - NOTHING. Why are consumers not waiting - shunning high prices; complaining etc. Because the consumers have money, they are themselves party to the price rise by creating a demand - and giving opportunity to the builder (suppliers) to raise prices.

So is consumer activism (ability to know its rights and ask for them) linked to the economics of everything?

I voice my concern and will advocate it to the world. The consumer is king (without clothes) today and it needs to regain its clothes by advocating its rights.