Friday, January 22, 2010

India - Management Learnings from the Roadside Vendors

I always have a great sense of appreciation for the roadside vendors in India particularly with respect to their management style. I strongly believe that a keen student of management can learn many a tricks from these vendors. The first is managing the business environment and the external challenges. They handle the local authorities, the police, and the local mafia as also the economic challenges of the complex hafta payments. Second is the perfect management of credit sales and good collection system without any legal documentation and back office credit administration. And most of them do not have a formal financing system financing their working capital requirements and yet manage their cash flows. The local panwalla is a perfect example where along with the art of making pan, the panwalla also efficiently enters the credit transaction in his small note book. Third is the salesmanship and the ability to maintain high level of customer relationship. Think of the vendor who sells you books and magazines on traffic lights. Even though he may be hardly literate, he is able to convince you to buy the latest bestsellers. Be it the panwalla or the roadside dhabawalla, they have a steady set of loyal customers and they also understand the customer preferences quite well. The panwalla is famous for knowing the intricate requirement of its regular customers, where your favorite pan or your brand of cigarette is dispensed to you on your arrival without you even specifying your requirement. Fourth is the flexibility in pricing. Look at the vegetable vendor or the fruit vendor, who effectively manages a zero inventory at the day end through a sophisticated flexible pricing model determined largely based on customer loyalty and the day end flexible pricing without the announced happy hour pricing of the sophisticated organized sector retailers. Fifth is the ability to compete with strong competitors with established shops and stronger financial muscle power. This happens largely on account of the first four factors and the tenacity of the vendors and the will to succeed.
It is perhaps a subject for intensive research which will bring in many interesting answers of the success of the spirit of Indian enterprise at the bottom of the pyramid. The true spirit of "pucca business in kuchha".

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