Small Eateries -- Bottom of the Pyramid, really!
The late Prof C K Prahlad, the most famous Guru of Corporate Strategy, had come with a concept called the "Bottom of the Pyramid". He had advised big corporations to tap the enormous power of the people who belong to the lowest rung of the economic pyramid. In fact, even Indian organizations like the ITC have faithfully followed his advise, and have come up with smaller packs of each of each of their products, thus aiming for a big market for their products.
Be that as it may, even if he were alive today, Prof Prahlad would be really proud with one manifestation of his concept in practice -- the hundreds of small eateries in big cities like Chennai, Coimbatore, Bangalore, New Delhi and even Mumbai.
What is special about these small shops is that they sell a huge variety of South Indian snacks at very cheap prices. Their hygiene is nothing to feel proud of.
However, there are tens of thousands of regular customers who frequent such shops only because they cannot afford the prices in the more regular hots, including the middle-class hotels, where prices have increased by over 400% in the past ten years. It is really interesting to understand what makes these shops tick.
Firstly, these shops are very much mobile. They do not have a regular shop at any place. Their owners are from the lower middle classes who are entrepreneurs ever willing to experiment with a different business model -- huge volumes at very low prices.
In the city of Chennai, for example, there are such shops at every street. These shops sell a single "idli" for less than five rupees, or five rupees at the maximum. A "dosa" would cost Rs.20/- at the maximum.
The regular customers in most of these shops that open right at 6.30 AM in the morning, are customers who land in the city, very early in the morning, and would like to complete their breakfast for just under Rs.30/- every day.
It is very interesting to understand the average customer of these shops. Chennai has expanded in all the three directions, and Arakkonam -- a small town some seventy kilometers from Chennai Central, has a number of these small shops too. I recently had a chat with one young man, Vijay, who was busy eating his breakfast in one small shop near the Railway station.
With a Master's Degree in Commerce, and just over two years of work experience, this Junior assistant in a small company at Ambattur, on the outskirts of Chennai, would have to catch the 8 05 local, as he would call it. He would not like to disturb his mother, who is already sixty years old, or his retired father, who had very little savings. His only sister is studying for her degree in a local college at Arakkonam. The travel time is more than 90 minutes and, our young friend, is a very regular guy, in this "kaiyendhi bhavan" as they call it in Tamil.
His monthly salary is just Rs.7500/-. He has a season pass for the local train, and his breakfast and lunch expenses do not exceed rupees sixty every day. When I quizzed him as to whether eating out is not costly, he replied with a wry smile that even if his mother were to cook at home and give him his breakfast everyday, it would be much more costlier, as the cost of cooking gas and spices have actually gone through the roof.
His breakfast was the five "idlis" that he had every day. He did not mind that the "sambar" and the "chutney" were not of very good quality. Lunch, he explained, would be limited to a plate of "curd rice" at another small shop near his office. Sometimes, he would switch to "lemon rice".
There are thousands of Vijays in Chennai, and in each big city. These are people who are also contributing to the "economy" in some small way. They are honest tax payers, with absolutely no access to black money.
The hundreds of thousands of small eateries survive because, the real wages have actually come down. There is a huge insecurity, which often translates into investment in rather risky savings instruments. Vijay, for example, explained that he saved Rs.1500/- per month in a local chit fund at Arakkonam. He assured me that the guys operating the chit fund were highly reliable, and had access to quick money, should be need it, for his father's medical expenses.
So, we have the full picture. A very young man, unmarried, is the sole bread winner. He is a regular customer in one of the small eating shops. He has no thought of even switching to another, for he finds the taste tolerable. As for infection, he just said " sir, we are all used to it".
Some 75,000 crores is all bad debts that the big Corporate India still owes to the banks. These will probably be written off as bad debts. But when will the likes of Vijay see better days, with some limit to food inflation, which is the highest in recent years, and which threatens to add to social tensions of a tall order?
However, Prof C K Prahlad, was always right. The Marketing wiz kids from the best B schools better study the business model of the small eateries to learn more lessons.
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