Alok Puranik
With the way investors are getting attracted towards technology based businesses, it seems that investors should adopt a rational approach towards technology. The technology itself is absolute. Technology can be used for advantages or disadvantages. But every technology should go by giving profit, it is not necessary.
Big troubles first sound, then they come on their own. When in reality he himself comes, many people do not even know what has happened. Something similar is happening in the economy these days, very slowly but in a very concrete way. The digital economy, the computer economy, has become very trendy now. Discussions on these are also going on continuously. But little is being discussed about how technology is fundamentally changing the economy. And this change is not in everyone’s interest. Technology-based models pose a threat to the business of intermediaries in many businesses.
A few days ago a report was published involving lakhs of distributors and sales agents of companies like Racket, Unilever and Palmolive. It was said that the kirana stores are constantly linking directly with the retail business of big houses. Due to this there has been a decline of twenty to twenty five percent in the sales of intermediaries. This has adversely affected the supply chain. There are about four and a half lakh people in the country who have been going to every nook and corner of the village and city as sales agents to order goods from grocery stores and deliver goods to them.
Now through technology, grocery shoppers can directly order goods. Through Jio Mart app, grocery shopkeepers order from their shop itself and the goods reach them within 24 hours. The company gives more goods to the shopkeepers than the intermediaries, because the earnings of the middleman are not included in that price. Large buyer companies are selling goods directly to grocery shoppers by taking goods from parent companies on a large scale. Due to this the business of small intermediaries is getting ruined. Obviously, the grocery shop owner or any customer will take the goods from where it will be cheaper. This is causing hindrance to the small intermediaries, who earlier used to sell goods to the kirana shops by keeping their margins thick at higher prices. Now if big companies are giving the same goods to the grocery shops cheaply due to their technology and scale, then who will turn to the old middlemen.
In the kind of situation that is being created, small middlemen traders can survive only if they give goods cheaper like big companies. But for this it is necessary that they also get cheaper goods from the companies. Companies can give cheaper goods to companies of big houses, because they are very big customers. The scale, supply prowess, technology of these big companies cannot match the smaller intermediaries. That is, small intermediaries cannot take goods from all the companies at the exact price at which big companies collect taxes and deliver them to the grocery shops through their technology. The reason is clear. A large company can make a big investment in technology, but it is not possible for small intermediaries to make that investment.
So there is a huge change in the economy that small intermediaries, small businessmen will be out of the market because they are not able to compete with big business, big technology. And the point is that it cannot be stopped by law. That is, such a law cannot be made that grocery traders will have to buy their goods from small intermediaries at expensive prices and they will have to boycott companies selling them at cheap prices. The market is run by the game of demand, supply, cost and profit. The middle ones either sell cheap and give some different service, give something special, then only then the customers will be attractive towards the middle one. Otherwise the customer will go to the one who wins in the price and cost game. Big companies are winning this game in a very strong way.
Price is related to which side is adding what value to it. As the newspaper is printed and finally reaches the reader’s or customer’s home. There are several intermediaries between the newspaper’s press to the customer’s home. Part of their earnings goes from the earnings that the customer pays. If all these intermediaries disappear, then obviously the price of the newspaper will become cheaper. This is the reason why customers who read the digital version of the newspaper on a computer find the newspaper cheaper, they have to pay a lower price, because that price does not include the profit of the intermediaries.
Something similar is happening in the grocery business. Not only is there an existential threat to the intermediaries of the grocery business, but there are other dangers associated with the digital economy, which investors also need to understand. To some extent they are also understood, but they are yet to be fully understood. Recently, shares of technology-related companies were issued in the market. Investors invested in them. Investors invested heavily in the shares of a company called Zomato. Zomato’s job is basically to sell food items. But there was great enthusiasm in the market about it.
Investors showed similar enthusiasm for the shares of companies associated with Paytm. Many investors feel that due to being connected to technology, any company will be successful at the very top level. But in reality it is not so. The basic principle of investing is that companies should make profits. If the companies make profit, then the investors will get a share in that profit and the price of the shares of the respective company will go up. In the event of low profits or no profits, no matter how much expectation is placed on any company, but in reality that company will not be able to give great returns to its investors in the long run.
Technology itself is a lot, but not everything. The availability of technology does not mean that everything will be profitable. For example, the price at which the shares of the company with Paytm was issued, this stock could not maintain the same height and came down. That is, whoever thought of making a profit by investing in Paytm, he got upset. With the way investors are getting attracted towards technology based businesses, it seems that investors should adopt a rational approach towards technology. The technology itself is absolute.
Technology can be used for advantages or disadvantages. But every technology should go by giving profit, it is not necessary. Therefore, in the changing environment of technology, investors have to understand very carefully and those businessmen who are earning their share as an intermediary in the sale and supply of any product and are not doing anything special. Some big player will take the help of technique and slam them and the ground will slip under their feet.
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