Note; In all industries below, profits is what matters eventually.
Travel Industry
Interview with CFO, Anil Khandelwal, Cox & Kings
My observation: Cox & Kings primarily focused on 'packaged tours' while other players like Makemytrip, Cleartrip, Goibibo, and Yatra focused on flight ticket booking and hotel bookings.
The competition in flight booking and hotel booking is intense. In flight booking, the margins are wafer thin (5-7%). The margins in hotel business are better (10-20%). However, because of heavy competition, all players are under-cutting each other. Especially, emergence of players like oyo, treebo, fabhotels etc., has intensified the competition in hotel bookings.
In fact, in FY 15, Makemytrip made a loss of $89 million (about Rs. 600 crores loss) on revenue of $169 million (Rs. 1,100 crores). Goibibo made a loss of $69 million ( Rs. 450 crores) on revenue of $91 million (Rs. 600 crores).
So, competition is that bad. What does a smart player do in such a market scenario?
Well, Cox & Kings side-stepped the low margin airline ticket booking business and heavy competition hotel booking business, instead it is focusing on 'packaged tours' business. So, it doesn't bleed much. When things settle down, may be it can selectively start getting the other business.
So, this is what smart players have to do in a heavy competition market. They have to play 'smart' and let the growth-chasers raise capital and perish when no capital is available.
Other points that the CFO makes:
- Travel sector is highly under-penetrated in India.
- There is enough space for more players to come into this industry (this seems to be the theme across industries. Industry sizes of travel, retail, logistics are so large that there is space for many players and atleast 4 or 5 large players). This is not a winner takes it all scenario.
- One interesting point the CFO makes is that they see online and offline as just two points of sale. And both allow customers to choose packaged holidays as per their convenience.
- Customer may prefer off-the-shelf packaged holidays because they don't have to worry about planning everything. We do it for them.
Retail Industry
Similar strategy seems to have been played by D-Mart's founder Radhakishan Dhamani. He started may be a year or two later than Big Bazaar's Kishore Biyani. While Biyani focused on rapid growth, Damani focused on profits. Eventually, we see now that Damani's firm is many times more valuable than Biyani's.
In fact, Biyani tried to do so many things - groceries, apparel, real-estate, kirana format, financial services, etc., - he did not do well in any of them. Damani tested and perfected one format, he continues to do well.
Logistics Industry
Ecom express was set up in 2012 as a pure play logistics supplier for ecommerce portals. Before it was set up, in 2011 Delhivery was set up. So, Ecom express is not first.
While others tried to grow aggressively into many cities and into different categories, Krishnan (CEO & Founder of Ecom express) says that they chose to perfect one city before moving to another. Otherwise, they would be spreading the capital thin on many cities. Just like Damani they seem to have taken experiences from each city into the next city.
Also, Krishnan says that they are not interested right now in local delivery of groceries etc., because it is not viable right now. They economics don't work with such low volumes. Logistics is expensive.
Sources:
Cox & Kings
Interview with CFO, Anil Khandelwal, Mint Newspaper, Oct 20, 2016 (original source: Interview on CNBC TV18, Oct 19, 2016)
Makemytrip
http://www.livemint.com/Money/2h2MuHNF72HyiW3GGY8T3N/Along-With-Ibibo-MakeMyTrip-also-gets-absurd-private-market.html
Travel Industry
Interview with CFO, Anil Khandelwal, Cox & Kings
My observation: Cox & Kings primarily focused on 'packaged tours' while other players like Makemytrip, Cleartrip, Goibibo, and Yatra focused on flight ticket booking and hotel bookings.
The competition in flight booking and hotel booking is intense. In flight booking, the margins are wafer thin (5-7%). The margins in hotel business are better (10-20%). However, because of heavy competition, all players are under-cutting each other. Especially, emergence of players like oyo, treebo, fabhotels etc., has intensified the competition in hotel bookings.
In fact, in FY 15, Makemytrip made a loss of $89 million (about Rs. 600 crores loss) on revenue of $169 million (Rs. 1,100 crores). Goibibo made a loss of $69 million ( Rs. 450 crores) on revenue of $91 million (Rs. 600 crores).
So, competition is that bad. What does a smart player do in such a market scenario?
Well, Cox & Kings side-stepped the low margin airline ticket booking business and heavy competition hotel booking business, instead it is focusing on 'packaged tours' business. So, it doesn't bleed much. When things settle down, may be it can selectively start getting the other business.
So, this is what smart players have to do in a heavy competition market. They have to play 'smart' and let the growth-chasers raise capital and perish when no capital is available.
Other points that the CFO makes:
- Travel sector is highly under-penetrated in India.
- There is enough space for more players to come into this industry (this seems to be the theme across industries. Industry sizes of travel, retail, logistics are so large that there is space for many players and atleast 4 or 5 large players). This is not a winner takes it all scenario.
- One interesting point the CFO makes is that they see online and offline as just two points of sale. And both allow customers to choose packaged holidays as per their convenience.
- Customer may prefer off-the-shelf packaged holidays because they don't have to worry about planning everything. We do it for them.
Retail Industry
Similar strategy seems to have been played by D-Mart's founder Radhakishan Dhamani. He started may be a year or two later than Big Bazaar's Kishore Biyani. While Biyani focused on rapid growth, Damani focused on profits. Eventually, we see now that Damani's firm is many times more valuable than Biyani's.
In fact, Biyani tried to do so many things - groceries, apparel, real-estate, kirana format, financial services, etc., - he did not do well in any of them. Damani tested and perfected one format, he continues to do well.
Logistics Industry
Ecom express was set up in 2012 as a pure play logistics supplier for ecommerce portals. Before it was set up, in 2011 Delhivery was set up. So, Ecom express is not first.
While others tried to grow aggressively into many cities and into different categories, Krishnan (CEO & Founder of Ecom express) says that they chose to perfect one city before moving to another. Otherwise, they would be spreading the capital thin on many cities. Just like Damani they seem to have taken experiences from each city into the next city.
Also, Krishnan says that they are not interested right now in local delivery of groceries etc., because it is not viable right now. They economics don't work with such low volumes. Logistics is expensive.
Sources:
Cox & Kings
Interview with CFO, Anil Khandelwal, Mint Newspaper, Oct 20, 2016 (original source: Interview on CNBC TV18, Oct 19, 2016)
Makemytrip
http://www.livemint.com/Money/2h2MuHNF72HyiW3GGY8T3N/Along-With-Ibibo-MakeMyTrip-also-gets-absurd-private-market.html
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