Small Scale

Most of us have been hearing, reading a lot of talks about business development & goodness of business. Invariably such articulations turn over to the side of real value, big picture, essence of entrepreneurship etc…

Prior to proceeding further let me unfold a few arguments of mine  -

1. The books that have titles such as 'Entrepreneur is you' or '10 Quick Ideas for Successful Business'; have nothing new to offer than what your surroundings have taught you.

2. Most MBA courses offer nothing new to you. They will tell you the same things that your parents have been telling you or what your uncle has been telling you for past few years. Perhaps it is the case of one liking the fact or paying USD 30,000 or INR 500,000 and learning it.

Above mentioned views have been the fairly constant since I started learning economics in college. Unfortunately they have not changed, although I have tried my best looking for counter arguments. Of course, if the above scenario has changed by a strong margin of 50%, I would love to hear about it.

The best argument against the above mentioned points is and always has been – small scale business in your locality that never goes bankrupt.

I remember, as a kid I used to be fascinated by those small shops, vegetable vendors in our locality. The vegetable vendor used to give me a small carrot to nibble whilst my mother or grandmother completed their purchase {of course I don't remember 99% of these instances}. What I remember is going to purchase veggies as a representative of my grandmother or mother. The vendor would tell me, don't buy that but this one! He knew those two women & thus advised accordingly. About 15 years have passed by – in between the vendor passed away due to illness. But his wife took over the business. As locality grew she now has set up two small stalls instead of one.

I remember that yellow looking shop called ‘Vaishali’. We used to order our monthly grocery from that shop. Interestingly there are 4 shops that will offer you the same service in a range of 20-25 mts. All seem to be functioning really well even after 15 odd years. Here you can place your order at the start of the day & tell the shopkeeper to deliver the goods later in the day. Money was to be given at the time of delivery. At the time of delivery if you thought something was wrong with the 'Daal' that was sent, you could always get it exchanged (free of charge). I remember a whole bunch of instances wherein we used to get a message along with the order “this time around rice is not good. So I am sending only 1 kg. I'll send the larger quality in 7-10 days if you want.”

I am more than certain of the fact that none of these vendors know who Peter Drucker or Philip Kotler is. I am sure they don't even know who Alfred Marshall or JM Keynes was! They neither read a fat management book, nor went for a fancy MBA course; so how can they sustain with a decent profit margin for such a long time without making too many drastic changes? There are a variety of answers to these but a few of them stand out. 

Most of these vendors actually become a part of a micro-system, which they are aware of & also they speak of. This micro system turns into a local economy – there's a vegetable vendor, there are a few general stores, there's a stationary shop, a small garage, a cycle/bicycle repair shop, a confectionery shop, a unique shop {this will change from area to area – could be a jewellery store, artefacts store etc.}. This economy is complete & there's no need for anyone to go outside this economy on a daily basis. Of course for your special needs you will indulge into a cycle of “import-export” i.e. visit other parts of the city.

Like I said, these vendors are aware of this micro-system. Thus they actually try and strengthen their hold in that area. In that process they will chat with you, they will ask how your unwell son is doing, they will tell you about something new they have bought i.e. a new freezer {now cold drinks will be cold most of the times}. If one observes carefully he/she will notice that these vendors remember your name. That’s a really good start for customised consumer operations. At the next step, they will start remembering what you want on a regular basis i.e. customised service. As a consumer you are more than happy with it. Once in a while you will get some purchases at a lower rate & that should seal the deal for you! 

Interestingly, their ambition to not expand vehemently actually helps their cause. They want to make sure that they do well in the existing setup. So their business strategy is to be small & strong within the area. It helps them define the scale of deliverables very easily. They may not have some fancy chocolates available but they will have at least 3-4 types of rice & 8-10 different soaps.

Your preferred daily consumer products = f {products in the market| your preference, availability of the products, access to the shop}

What the above line implies is that your preferred goods are also dependent on what sort of a service your nearby vendor provides (along with your own preference). If he states that “dada/bhaiyya, buy Lux. They have got news soaps for the whole family. It’s better than Dove.” He achieves two things with this statement – 'He finds out whether the consumer is open to new ideas and whether he can influence your demands. He will remember that Mr. Joshi, Mrs. Kulkarni, Dr. Mandke,……… and Mrs. Sharma like new products. On the other hand their college going sons are adamant.’ 

The point is, by shutting the option of ambitious expansion (the big picture, the big opening etc.) he opens the avenue of specialisation. The vendor specialises in providing day to day goods to a certain set of consumers with customisation. Each consumer has a subtle or vivid idea of being treated specially. That vendor deals with it really well. And putting together the customisation, absence of ambition and specialisation gives him a successful local store. The same store that offers him certainty of profit margin over a long period of time.

Few years back a retail chain named “Tru Mart” opened a store near my house. I quite liked it, so did my grandmother. Over a period of 8-10 months we realised that it doesn't have half the items we want! About 2 years later it closed down. The smaller shops, they kept on functioning like they were before {I do know many such areas in Pune}.

In recent times micro systems in India have defied the odds of business cycles to a good extent and offered a lesson in sustainability. It might be a good idea for management students to take these lessons into account along with Philip Kotler 101 and Henry Ford 202.

If you are aware of such a scenario, then do share it in the comments section.