By Deepak Gopalakrishnan Sep. 26, 2019
There used to be a time when the discount was solely intended to drum up sales in the low season. But today’s “discount-addicted” Indians need to realise that, at some point, we’re going to have to go back to paying the actual price of these products.
Iremember this one time in our office when I watched a colleague spend close to two hours trying to find a way to discount the price of his phone, using every coupon site and bank hack he could think of. A few hours of scrounging later, after which the company probably had to pay him to buy the phone, I caught him arguing with a potential client. From what I gathered, he couldn’t understand why the client wanted him to do the same work at a lower cost. I thought that was poignant.
There used to be a time when the discount was an aberration rather than the norm. It was genuinely meant to drum up sales in the low season, or leverage on times of spending. Firms would grow (or die) sustainably, leaving a healthier economy all round. Companies would make better products and more money, allowing them to hire better people who would make better… You get the idea.
Contrast this with headlines over the last few months, in India and abroad. Thousands of restaurateurs have logged out of Zomato over what the head of the National Restaurant Association call Indian’s “discount addiction”; WeWork has withdrawn an IPO after investors had the guts to ask probably the only question they should be asking, “How do you expect to make money?”. And of course, how can we not talk about the poster boy of discounting and inflated valuations, Uber, which made a loss of five billion dollars in a quarter, compounding the headaches already caused by driver strikes, lawsuits, and general bad PR?
I’m not saying the above companies or their in-the-red brethren are inherently bad or evil, and in some cases, their mission is truly admirable. But it’s when the goal becomes to “keep getting bigger, no matter how much we’re losing” that you know something must eventually break.
There used to be a time when the discount was an aberration rather than the norm.
Venture Capitalists — who are to thank for all our freebies — mandate millions of users in a remarkably short span of time. They don’t care how these users acquired, or whether they’ll even use the product again. So the users are enticed with freebies, discounts, loyalty programs, you name it.
In the show Silicon Valley there’s a telling scene in which a newly-instituted CEO explains his job to the young idealistic founder: It’s not about making money, but getting a better return for the company’s investors, by ostensibly driving up the “perceived value”, and selling it off to a bakra who will carry the chain forward. That hilarious scene is a sad reflection of so many companies today that are valued in the billions, but have no clear path to making money. An average vada pav stall in Mumbai is theoretically more profitable than Uber, Ola, Swiggy (the irony), OYO, and hundreds more.
This can’t last forever, surely. Eventually, investors will need to see returns. Which means either customers will need to pay more, or the cost of operations will need to dramatically fall. Or both. Companies that would normally focus on the latter are pushed to expand, expand, expand — formulating an untenable model for more places that are ever-so-happy to partake of an investor’s largesse. If rapid expansion doesn’t happen, a competitor can come and pull the rug out from under them. As it’s been made clear, people care about discounts, not brands. Everyone loves Swiggy and Zomato now, but it’s only going to take another name to come in with a slightly better deal to take all the discount-seeking moochers away.
Now, before you label me as a economics-hating commie, I should clarify that what I’m saying here is capitalism at its purest. Let the market decide what products and services are worth (this is something the father of free-market economics, Adam Smith, himself, espoused in the 18th century). What if the cost of your ₹300 Uber ride was actually ₹600? What if you needed to pay your delivery guy thrice what you are used to? Surely this is not unreasonable. Just the fact that you would think otherwise is a sign of how much discount culture has preponderated.
Venture Capitalists — who are to thank for all our freebies — mandate millions of users in a remarkably short span of time.
Discount culture gives us temporary conveniences and sidelines long-term solutions: If a vocal elite can get a cheap cab, there will be fewer demands for efficient public transport. It also devalues actual human effort: There is a person braving the rain to get you a pizza at 2 AM, not an automated programme. We may say it’s magic that you can order something today and get it tomorrow at no extra cost. But that’s simply not true. Someone needs to foot that bill.
Think about your own job. Let’s assume you’re a graphic designer. How would you feel if your employer sold your designs at a massive discount, promising you that this would be only to get the client hooked, and create more work later at the regular cost? There are two immediate things to worry about. For one, the client will not know how much the actual work costs, and will use the discounted price as an anchor. Then what happens if when your rate goes up, someone else offers work for cheaper? This is exactly what’s happening now — and there are millions of drivers and delivery guys unable to understand this, getting as enamoured of initial high returns as we all are of cheap prices.
Discount culture leads us to expecting cheaper rates everywhere we go, for any new service that might come up. This is best exemplified by the recent horde of entitled pricks wondering why restaurants aren’t honouring Zomato Gold. Let me clear it up for them. The management couldn’t get their chef to take a salary discount. Imagine that!
Let’s face it, this VC-fuelled party can’t last much longer. At some point, we’re going to have to get back to paying the actual price of these products. What a world that would be. Where Uber drivers are paid what they deserve, companies grow steadily but profitably, and my colleague can close a deal without hours of negotiation, on a phone he paid the actual price for.
Deepak 'Chuck' Gopalakrishnan is a freelance writer and marketing guy who lives in Mumbai. He runs two podcasts (Simblified, The Origin Of Things) and a satire newsletter (The Third Slip). He used to work in advertising until his soul couldn't take it anymore, and now spends all his time annoying his cats, listening to prog-metal, cycling and writing bios of himself in third person. He has an irrational love for cold water and Tabasco.