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Sunday, September 27, 2009

Competing in Commoditized Market- Learnings from Indian Fruit & Vegetable Market

Hi Everybody

Recently couple of my friends & I visited the local fruits & vegetable market (picture above).

One of the Interesting thing I noted there was that the fruits & vegetable market (pic above) somewhat reflected the same condition prevalent in any other sector (Aviation, Retail etc) with many sellers selling homogenous products which are commoditized. Now of course the scenario of a Perfect Competition in the fruits & vegetable market is slightly more as compared to being present in other sectors due to advertising & branding efforts being used in other sectors to differentiate.

But this got me thinking..............

If you look at it, as a customer when I visit to the fruits & vegetable market, I am not dedicated to one vendor (as there are many sellers & everybody is selling the same thing). Since there are many vendor, as a buyer I can negotiate the price to a very large extent. I look for quality, but almost all sellers have quality fruits & vegetables.

Then the big question is:

How does vendors in the fruits & vegetable market differentiate themselves (remember everybody is selling the same thing with no branding/packaging)

I spent couple of hours trying to understand how do these vendors differentiate themselves & attract customers.

Here are some of the observations:

Being Different ('stall design')- As people passed from one fruit stall to another, I noticed that they tend to stop at stalls which were designed differently from others. It may be product placement/ certain items being kept. Notice in the below picture a stall is designed using decorative bulbs & shiny disco balls!!!. Notice how the products are cut & displayed.

At Vendor's cost- Haggling is a way of life in India. I guess in India we tend to be satisfied when we have gained something at vendor's cost. I think vendors understand this & they are pretty smart at instead of keeping a fixed price policy, they offer high prices & let the buyer negotiate. After some hard bargaining they finally sell items generating a profit at the same time providing a feeling to the buyer of having gained something at vendor's cost.

Reflecting Freshness- People look for freshness & quality when buying fruits & vegetables. In order to ensure the items on display reflect these, the vendors sprinkled water on them to generate a feeling of freshness. Water also ensured removal of dust from the items.

Generating a feeling of limited time availability- I get a feeling that the fear of loosing out on good deal adds a reason for the buyer to buy something. Similar thing was observed in the fruits & vegetable market. Vendors told buyers of the limited time availability, seasonal effect, limited stock. The idea was to generate a feeling of limited availability so that buyers fear of loosing out on good deals & can buy.

Now if you look at it, the Fruits & Vegetable market is not a scenario that any company would like to be in (as it is a highly commoditized market, a state of Perfect competition, no investment on branding & advertising methods to differentiate). Still the vendors who are operating in this market understands nitties gritties of Indians & Indian Culture so well that they have successfully integrated their understanding into their business to earn a profit. I believe companies/industry sectors (OEM's, FMCG etc) can learn so much from these sellers about India, Indian consumer & how to compete in commoditized market.



Photo Source: Girish