On unbelievable discounts

 

Discounts

The current discount mania is at times unbelievable.

My parents recently took an A/C cab costing just Rs. 115 for 10 kms. That is cheaper than the highly subsidized public transport A/C bus!

A fast food app-only store has been delivering items to my home for less than fuel+raw material costs since the last 3 months!

The question everyone asks is, how is such a low price-strategy sustainable over a long term? And customers might be benefiting, but what about others in the value chain?

  • The biggest cause is perhaps VC money. Venture capitalists and investors are pumping in money with the hope that at some point in future, these startups/companies will become profitable.
  • Or it could be that the parent company has deep enough pockets to destroy competition. Capture entire market and then raise prices.
  • A disturbing reason might be that the creators are being squeezed bone-dry. An example – farmers from surrounding villages bring vegetables to the city outskirts. Traders buy at extremely low prices and sell to people high, which are still at a discount compared to supermarkets. The only thing I can think of doing in such an instance is to make a choice with my wallet and not buy.
  • On the positive side, producers and consumers are now directly connected. This could have led to the “tata bye bye” of middle-men, and we are finally getting products and services at healthy prices. For e.g., getting flats on rent no more requires brokers.
  • Technology might have disrupted (a favorite word with everyone these days) the complete scenario, and transformed buyer-seller habits. And even if prices do increase later, no one wants to go back because of additional benefits like convenience.
  • The greatest reason to cheer however would be, if technology has actually made the entire process or supply chain efficient.

I guess this isn’t so for many of the instances we see currently, but I genuinely hope this would become the primary reason in future, and then we could whole-heartedly go for the discounts.