(17/40) The economics of business - Mattresses : No one appears excited about buying a mattress, but a lot of firms sure appear excited about selling them! Let's understand why! Ever seen someone going to an insurance agent with a smile on their face? Or getting excited about buying a new tyre to fix their flat? The mattress fall in the same infamous category of grudge purchases - that things people buy because they have to, not because they want to. The humble mattress gets replaced primarily if you're facing a back issue, or if the mattress is severely worn out or damaged - on average once in every ten years or so. So how do you win in a space like this? 1. Improve point of sale attractiveness: Despite the rise of online, an overwhelming majority of customers prefer getting their matteresses in physical stores. And the nature of the purchase (grudge, relatively undifferentiated) makes firms compete heavily on price. On average firms spend 10% of their topline on point of sale conversion - to push that reluctant customer into making the purchase. 2. Innovate to reduce grudge cycle length: The second way firms are attempting to address the issue is by bringing out innovations that makes the product aspirational, reducing the element of grudge! While global matteress firms have innovated primarily on comfort (think memory foam) back home we've also had leading players innovate on health (think neem infusion). The data on this however is mixed, with the average purchase cycle still constant at north of 11 years. 3. Innovate on packaging & return: The new bunch of DTC startups emerging in the space have primarily optimized on packaging and returns. These companies offer customers a better price eliminating middlemen, become cheaper to ship since they are vaccum shrunk before delivery, and offer peace of mind to customers since they come with anywhere between 10-100 days return. Surprisingly the return numbers on DTC matteresses are below 3-6%(almost inline with furniture returns), extremely low compared to the ~30% for traditional ecommerce - people just don't prefer returning bulky stuff! 4. Maintain strict cost discipline: When you're aware that the customer is not going to be too loose with their purse strings when making the purchase, maintain a razor-sharp focus on cost. Both the key raw materials for mattresses (TDI and Polyols) need a very disciplined supply chain and temperature controlled environments. The manufacturers of these are also fairly concentrated, driving the requirement of scale to get fair terms on your key cost item. As a gift to all those who made it this far, here's a special tid-bit on India's largest mattress manufacturer. Their brand is actually not owned by them, but rather a private subsidiary, with whom they have a 5 year contract and pay a royalty every year! LinkedIn for Creators #licreatoraccelerator
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Most exit polls indicated a thumping victory for BJP for a third term! A good time to review key items the party has on its manifesto that could create opportunities in the market. We will be playing quality opportunities amongst these under Bharat Bet Research!💹 (Sign up: bit.ly/joingsnra) Agri & animal husbandry🌾: + Atmanirbhar in pulses and edible oil, new clusters for vegetables + Focus on high-yielding climate-resilient fortified seeds + Massive vaccination campaign for veterinary diseases + Pearl and seaweed farming to boost income Manufacturing⚙️: + Food processing: Fruit, vegetable, seafood, and dairy processing focus. Comprehensive monitoring of supply chain to ensure quality. + Pharma: Pharmacy of the world by focussing on pharma research and manufacturing, especially APIs. Research linked incentives for companies to invest in drug and chemical R&D. + Electronics: $100bn+ electronics manufacturing industry built over the last 10 years. Plan to scale this 3x. + Defence, shipbuilding, railways and aviation development focus. + Textiles: Focus on textiles, garments, and apparel manufacturing + Lab-grown diamonds: Will make India the world's largest producer of lab-grown diamonds. Infrastructure🌉: + Railway: Adding 5000km of new tracks every year + Kavach train protection system: Expanding coverage of indigenous kavach train protection system + Redevelopment of 1300+ railway stations to world class standards (railway lounge optionality?) Energy⚡️: + Energy independence by 2047: Reduced petro imports, renewable production, improved energy efficiency + PM Surya Ghar muft bijli for solar electricity in homes + Expanding nuclear energy via small modular reactors + Targetting 500GW renewable via massive solar parks Urban infra🏙️: + Piped gas: Provided to 1.1cr households, will further expand to all major cities and towns + Open landfill free cities: WIll continue elimination of open landwills to manage waste + Water secure cities: Waste water treatment, aquifer recharge and smart metering for bulk customers Tourism🛕: + New projects to develop religious and tourist sites inspired by the Kashi Vishwanath corridor + Holistic development of Ayodhya as it begins catering to millions of devotees every year + Restore and preserve ASI monuments + Thematic circuits: Border villages, island hubs, adventure tourism, sustainable ecotourism, riverine tourism
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One of the reasons we share the most recent research report as a sample is that we want you to understand not only our research depth and report style but our timing and contrarian value approach as well! Our latest report is on a proxy to infra growth in India + Capacity doubled in FY24 + Margins ramp driven by improved efficiencies + Management guide of 30%+ volume growth in Q4 + Sub 15x valuation You can read it here: http://bit.ly/gsnsample
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PVR is the absolute boss of Indian movie distribution. It controls just 18% of the screens in India but has a 42% market share in Hindi box office collections and a whopping 59% in English box office collections! But instead of going on the aggressive like you would expect a market leader to do PVR is actively de-risking. Reducing Financial Leverage: PVR has been consistently reducing debt over the last year. They plan to further reduce net debt by 50% over the next 12-15 months with a mix of free cash from the business and 300-400cr asset monetization. Reducing Operating Leverage: PVR now plans to move towards a developer-fitted, company-operated model that will increase revenue share outflow to the developers but reduce capex per screen by 30-35% over the next few years. Slowing net screen growth: They have also brought net screen addition to just around 3%, with a 7% gross addition, and a 4% closure of old screens. The screen closures, typically theaters in older malls with lower footfalls have remained high after the Inox acquisition. Even this growth is going to be focussed on the South Indian market where single screens still dominate. More diversified business: The business is also partnering with Devyani Foods for food courts in malls, to get a more pre-ticketing F&B revenue which comes in irrespective of how movies do. They start this year with 5-6 food courts in FY25. Whether this move is a sign of the times to come in the physical movie distribution business, or PVR playing the waiting game as peers like Carnival struggle with debt and restructuring, only time will tell! But it certainly makes for an interesting case to track! Disc: This is not a recommendation, please consult a SEBI Reg professional or do your own diligence before taking any investment decision.
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Greatness is often sacrificed at the altar of downside protection. RBI denied two genuinely deserving people the Kotak CEO post to maintain 'independence'. Almost anyone who was tracking the bank would have expected either Shanti Ekambaram or KVS Manian, both of whom had built the bank from the ground up, to take charge post Uday Kotak. It is very hard for A-type individuals who are more competent & have built from the ground up to play second fiddle to an outsider. As a shareholder I'm disappointed to see him leave, but I understand the decision 100%. No reco.
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The champs and duds of the Indian wedding proxy market👰 Gold, Silk Sarees, and Sherwanis are strong proxy plays to the flourishing wedding market in India. As the earnings season continues, we see how top players in this space have performed. Gold: Gold players continue to hit it out of the park with the continued growth of organized players. While Titan grew its jewellery business 18%, smaller players like Kalyan were able to grow at 34%. Caratlane, Titan's omnichannel jewellery platform continues to lead growth for Titan growing at a stellar 30%! Silk Sarees: While not quite hitting it out of the park, listed silk saree retailer Sai Silks reported a decent improvement in same-store sales growth to 6% and a topline growth of 11%. The business recently ventured into silver jewellery retailing and has a strong store growth trajectory lined up in the affluent Tamil Nadu market, making it a business to watch out for in the coming year. Sherwanis: Leading male wedding apparel player Manyavar continued to struggle, as competition in the space heats up, and it continues to operate at super-normal 65%+ gross margins. Same-store sales declined 3.3% in the quarter and 10.3% in the year. Notable the management attributed the slowdown to lower weddings and muted consumer sentiments. As organized competition begins to heat up in the space, the business will likely have to take an important call on the tradeoff between margins and growth. Disc: The post is for educational purposes and is NOT intended as investment advice. Please consult a SEBI Registered professional before taking any investment decision. May onboarding for my Investment Recommendation offering (SEBI Registered) has now begun. Links in the first comment.
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1yWith grudge cycle length remaining stagnant and long, I wonder how do brands build customer loyalty especially when repeat purchase is non existent