Of Plato and Biyani | Value Research The kind of anguish that traditional retailers have due to the coming of online retail isn't new, as history suggests
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Of Plato and Biyani

The kind of anguish that traditional retailers have due to the coming of online retail isn't new, as history suggests

On February 1, 2015, I am moderating a discussion on new retail versus old retail at a literature festival. Old retail, as you know, is the old way of doing things - the consumer goes to a shop and buys what he wants. He can on occasions call up the shop, order what he wants and get it delivered at his home.

New retail is the new way of doing things. The consumer simply needs to go online using his smartphone, laptop or even an old-style desktop computer and order whatever he wants to. The consumer in this case can order stuff at midnight and even five in the morning. There is no time constraint, as is the case with old retail. Further, the choice of goods and services for the consumer is huge.

In the case of books, many books which are never available in a bookshop are always available online. In the case of clothes, large sizes which are always difficult to find in old retail shops are available online. Also, on many occasions the stuff ordered online is cheaper.

All in all online retail a winning formula for the end consumer. The trouble is that the incumbents (the old retail) are not liking it as they fear losing business to this new way of doing things. A few months ago Kishore Biyani, who runs the Future Group, told The Economic Times: "How can someone sell products below their manufacturing prices? This is legally not allowed in the country. Someone can do such undercutting only to destroy competition. Just because they have foreign funding, they can't kill local trade like that." This comes from a businessman who built his business by offering discounts over long weekends. Similar statements have been made by others as well, batting in favour of the old retail. The broader point here is that whenever any new way of doing things comes along, the incumbents tend to resist it. This seems to have become a trend.

Tom Standage makes this point in Writing on the Wall: Social Media the First 2000 Years. In the opening chapter of this book he discusses what happened in Greece when writing was first introduced. "Writing was seen as a threat to the supremacy of the spoken word, which was central to Greek culture. Political, legal and philosophical arguments took place through face-to-face dialogues and debates," writes Standage.

Interestingly, this was also the time when "Aristotle's definition of an ideal city specified that its population should not be so large that a single speaker could not address all its citizens." Hence, the way things were, the spoken word was good enough. Given this, writing was looked down upon. And when writing was introduced to the Greek culture, the incumbents did not like it one bit and made attempts to resist it. The philosopher Plato summarised the Greek case against writing. Following were his words: "Writing underlines the need to remember things and weakens the mind, creating forgetfulness in the learners' souls, because they will not use their memories; they will trust to the external written characters and not remember of themselves."

Further, Plato feared that people ended up relying on documents would become "hearers of many things" and would "have learned nothing." "They will appear to be omniscient and will generally know nothing," he feared.

And this was not the end of it. "Plato advanced...that a written text is no substitute for a spoken dialogue...Mere written words, Plato argued, cannot convey the flashes of insight through which philosophical truths come to be understood," writes Standage.

As Plato put it: "Every man of worth, when dealing with matters of worth, will be far from exposing them to ill feeling and misunderstanding among men by committing them to writing." Ironically, Plato's arguments against writing have survived to this day primarily because he chose to write them down. And the objections made by Plato essentially reflect "the disquiet in Greek society at the mental and cultural changes associated with the spread of writing and literacy." Nevertheless, despite these initial objections, writing did spread in Greece and all over the world. But the resistance has been so huge that the world is still not 100 per cent literate.

Getting back to where we started, what Biyani and others of his ilk are doing is similar to what Plato did when writing was first introduced in Greece. Incumbents are comfortable with the existing way of doing things, and anything that challenges that natural order tends to be resisted. Even within the old retail, the fight between the relatively new big retail and the old kiranawallahs has played out in the public domain. But the question that should be asked is: Does the new retail make sense for the end consumer? And the answer is it does. Given that, it should be allowed to flourish. The trouble is that in the debate around the old retail and the new retail, the consumer does not have a voice.

As French economist Frédéric Bastiat put it in an essay titled "That which Is Seen and that which Is Unseen," "In the economic sphere an act, a habit, an institution, a law produces not only one effect, but a series of effects. Of these effects, the first alone is immediate; it appears simultaneously with its cause; it is seen. The other effects emerge only subsequently; they are not seen; we are fortunate if we foresee them."

What he means is that whenever any topic is discussed threadbare, only the most visible and basic issues tend to be discussed. This is what is happening in the debate around the old retail versus the new retail. The old retail has been attacking new retail for its discounting strategies. It has also been offering sob stories around jobs being lost as well.

Then there is the government angle as well. Various state governments have gone after the new retail for not paying their taxes properly. But in this entire debate nobody is talking about the impact that the new retail has on the end consumer.

As Bastiat put it in his essay: "There is only one difference between a bad economist and a good one: the bad economist confines himself to the visible effect; the good economist takes into account both the effects that can be seen and those effects that must be foreseen."

The fact that the new retail makes sense for the consumer needs to be 'foreseen'.

Vivek Kaul is the author of Easy Money. He can be reached at [email protected]

This column appeared in the March 2015 Issue of Mutual Fund Insight.


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