Dell’s India Pricing Mantra – If They Can’t Afford It, Charge Them More

30 05 2007

I’m looking to get a new laptop ASAP as my current Acer Aspire 9412 has decided to make my life miserable by shutting the LCD down completely, and also petrifying a hinge to the extent that it’s broken off a chunk of plastic from my cover. So anyways, since I had been warned just over 3 months back by Acer that the hinges might be a problem, I took out some extra protection and extended the warranty to 3 years. All good, or so I thought. It turns out that Acer has an International Traveller’s Warranty, not an International Warranty. What that means is that you’re entitled to 3 years of service in the country you bought the laptop, and also for UPTO 90 days in any country you visit and have a problem. Now, the problem is that I wasn’t informed of the 90 days clause until today, and my 90 days just expired 10 days back. So the good news is that I have the warranty to cover the breakages, the bad news is that I have to go back to Malaysia to get it fixed.

So, I need a new laptop otherwise I have to wait until my next trip to Malaysia, which is out of the question since I haven’t a clue when that is. Having this Acer warranty experience firmly in mind, I decided not to fool around with companies like Acer, HP/Compaq, Toshiba, and focused on Dell, IBM and Apple. I’d called all three and checked that when they say “International Warranty” they mean “International Warranty”. Now, the Apple would have been my first choice, except that it costs an arm and a leg. Same with IBM. So I decided on Dell. Now, always looking for the best deal, I talked to my dad in Malaysia this morning and he said that Dell had some really good deals on the market. So, I logged onto the Dell Malaysia site and started configuring a nice Inspiron 6400 with all the bells and whistles, and most importantly a 3-year complete warranty for about RM4,900, or about Rs.58,000. A bit steep, but the bulk of the cost is in the warranty, so its worth it.

When I configured the exact same spec on Dell India, the configuration cost came to Rs.86,000 or so, a premium of almost Rs.28,000 or 48% on the Malaysian price. Here’s the spec in detail for you to try out for yourselves:

Intel(R) Core(TM)2 Duo Processor T7200 2GHz, 4MB Cache, 667 MHz FSB
Genuine Windows Vista(TM) Home Basic 32 bit (English)
3 Years CompleteCover (Asia Pacific Regional Coverage Only)
Artic Silver with Alpine White accents on a black base
15.4″ Wide Screen XGA TFT Display with Truelife(TM): 1280×800
2GB (2 X 1024MB) 667MHz Dual Channel DDR2 SDRAM
256MB NVIDIA(R) GeForce(R) Go 7300 TurboCache
120GB SATA Hard Drive
Internal 8X DVD+/-RW Combination Drive with dual layer write capabilities
McAfee(R) Security Center(TM) 8.0 – 15 Months OEM (English)
Dell(TM) Wireless 355 Bluetooth Module
Intel(R) PRO/Wireless 3945 Dual Band 802.11a/g 54Mbps Wireless Mini Card
65W AC Adapter
9-cell 85Whr Lithium Ion Primary Battery
Dell(TM) Large Backpack
A/V Cable Kit

Now I did some homework and found that if I had this machine bought in Malaysia and then shipped to me by Fedex or DHL, the duty component is only Rs.10,000. And the freight is around Rs.5,000. So for an extra Rs.15k, I can get the shipment here in an extra 3 days, and still save Rs.12K. I can even save that if I get someone to carry it with them when they come, which is my preferred choice.

Feeling extremely belligerent and eager to make someone at Dell’s life miserable, who wouldn’t feel like that after finding out about this kind of bare-faced robbery, I called Dell’s Customer Service number in Bangalore to find out if they could explain why this kind of disparity exists. So, when I asked this chap why the cost of the exact same spec in India was Rs.28k more than in Malaysia, he gives me a mini-lecture on a new-fangled pricing theory invented by Dell.

It goes like this. Apparently, the difference in price is due to the difference in purchasing power in Malaysia and India. So, I asked him, “Ummm… Is India’s more or less?”, to which the response is, “India’s is less, sir” “Yet you charge them more in India?”, I ask. He retorts, “Yes sir, that’s right.” I didn’t proceed any further as I could tell this chap was getting very testy with my questioning.

So, according to Dell, if the people in a country have a lower purchasing power, you make the products more expensive in that country. Shouldn’t things be more affordable in a country that has lower purchasing power to appeal to a wider audience??? Apparently, in the Dell’s world, in the IT industry actually, the answer is no. By this theory, a loaf of bread in India should be more expensive than in Malaysia, which it isn’t. Apparently, since everyone in the IT game benefits from this, no one bothers to reduce prices to attract a wider market. And I find that this pattern repeats itself in many markets, including automobiles, electronics, household appliances, etc. I still remember a funny story of a time when my cousin and his wife visited my folks in Malaysia. He went nuts and bought 4 or 5 electric rice cookers cause they were dirt cheap in Malaysia compared to India, something like RM40 or Rs.450 in Malaysia compared to over Rs.1,500 in India. Imagine! Rice cookers!

The real irony here is that Dell laptops sold in India are actually assembled in and shipped from Malaysia. So, Dell’s product cost is the same for both India and Malaysia, but there’s a huge difference in the retail price. I can accept a difference if there’s a difference in your production cost, but how can you justify jacking the price up if the costs are essentially the same? Ok, they may tack on 10% for import duty, 5% for freight and handling and all that for India, but how does that explain the remaining 33%? Isn’t there already a profit margin built into the system in the Malaysian price? Is the Dell brand worth so much that it justifies a 33% price premium? I don’t think any brand is worth that much, when there so much competition in the market.

No wonder Dell is trying to enhance its presence in India so aggressively. They’re milking the Indian population bone-dry and laughing all the way to the bank. It’s criminal that the Indian public is so misinformed that they’re willing to pay so much for products that are essentially over-valued. FYI, all memory manufacturers offer a lifetime warranty on RAM. In India, the retailers only give you a 2-5 year warranty. Ask your retailer next time, he’ll say its cause there’s no proper distributor in India for RAM, which is total bullshit. It’s cause they want you to buy more RAM.

So, back to my predicament. I’m getting the machine ordered in Malaysia and brought along the next time someone flies over here from there. I think I can wait a few weeks to save over Rs.25K. I’ve already converted my Acer into a quasi-desktop so I can still work at the office. The only thing is that I have to learn to live without a laptop at home for a while. Might be an interesting exercise in self-control. I might have to stock up on books to read. A lot of books.

For those of you interested in buying a Dell or any computing equipment in India, but not willing to pay Indian prices, let me know. I might be able to help you to save some money by getting the kitting done in places like Malaysia. After all, a good entrepreneur is always on the lookout for new venture opportunities. By the way, I’m extremely serious about this offer. ‘Course its limited to people I know, or people referred by people I know, or people who are really really desperate, and can show proof of desperation… whatever that is… 🙂

Note – 27/6/2007: I’ve got a few requests upon people reading this post to do this import of laptops as a business. I’ve got no issues with helping people by advising them how to save some dough, but I’d rather not get into the whole legal ramifications of doing this as a volume business.

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Insights into Online Video – The Desi Factor

13 05 2007

I’ve been ranting about different things for the past two months, but haven’t really gone into what I do. Well, I have but not entirely. Some of you might be wondering, “Just what does he do?” Others might be wondering, “Uh huh! Ok! So whats that got do with this post?” Other’s might not give a damn. Still I”m gonna give you a little insight into my “normal” world. I’m doing this cause some people have come to the conclusion that I’m a HR consultant. Please, I have my standards. I won’t sink that low on a full-time basis. To those HR folks reading this, it’s nothing personal. It’s just that I’d rather do something more “interesting”. I am a technical consultant primarily, and in starting up new operations HR is a big part of the equation, not my sole interest.

Anyway, back to my story. one of the projects that I’m working on currently has to do with online video. I can hear those groans, “Not another YouTube clone!” Well, it’s a yes and no kind of answer. Yes, we’re into online video like YouTube, but no we’re not the same as YouTube. With over 300+ YouTube clones already on the market, and over 100 million videos circulating out on the ‘Net [though many may be duplicated on multiple sites], you can only survive if you focus on a new direction.

I’ve come to the conclusion that YouTube was a freak of nature that can only happen once. If you look at the market metrics, the Google-YouTube monopoly dominates the online video sharing market by over 50%. The initial MySpace binge and the consequent Google buyout have made YouTube synonymous with online video in the minds of the general public. So the other 300+ sites out there are scrambling to pick up whats left, which makes it a very crowded space to fight for breadcrumbs. Not to mention the associated headaches of how to attract users and how to make money at the end of it all.

Taken in the Indian context though, the market still has opportunity. I don’t think there’s another society in the world that’s as obsessed with TV as the Indian diaspora. The key driver of online video is the availability of broadband internet access (512k+), which is just starting to become mainstream in India. Okay, there are a few Indian-oriented video sites out there that already, but their content is what I’d call “base”. This isn’t me trying to put down my competitors. But when the majority of the videos on those sites are “Sachin’s Greatest Knocks”, or “Guru Movie Trailer” or “Hot Desi Chick Stripping” [I kid you not about the last one, there’s literally TONS of adult content on these sites, all “contributed” by the users] you end up getting a little stifled for choice.

If you get on YouTube, you have access to a variety of content that covers quite a few topics, everything from comedies to documentaries. You don’t get that variety on the Indian sites today. If you’re obsessive about Indian movies (mainly Hindi), then you might be sated by the stuff you find currently on Indian video sharing sites. But if you want variety all in one place, then sorry but there isn’t much choice for you.

Getting back to the Indian obsession with TV. India is a country with over 40 regional languages [I’m sure its more, but I didn’t want to appear too stupid and say 400 or 4000. 40+ is safer but still gets my point across]. Practically every state has its own unique language. And especially in South India, Hindi is not as common as in North India. Sitting in Madras, my TV provides me with access to over 100+ channels [without a special cable box], of which a large percentage is in regional languages showing things like news, soaps [serials in Desi Lingo], and of course movies. All this is pretty much the same as in the US, but the primary difference between the US market and the Indian market is the variety of languages in which content is being produced. This variety of content is why an average Indian household’s TV is on for at least 6 hours day, and that governments are giving away free TVs to win elections. The sheer variety of content ensures that there is something for almost everyone to watch, so people are obsessed with watching TV. This variety of content is king.

So, the key to online video in India is to project it as Web TV. Why TV??? As I mentioned before, TV in India implies variety of content. And that’s exactly what you need to capture users. I don’t think the Indian online video viewing public is at that stage yet where they’ll contribute their own videos ‘en masse’, so its primarily a passive video watching environment, i.e. TV that’s available online. So, you need to get people to treat it like TV. To do that, you need the right kind of content. You can’t manage this if you’re only working with 4 kinds of content, although I’m sure the porno-maniacs out there will beg to differ and go into the variety of content available in certain genres.

And if you can create a sense of ownership which says to people, “This is your own TV channel! Do what you want with it! Add your own videos! Organize what you want, how you want!”, you can capture the hearts and minds of users. And the advertisers will follow. That’s how you make money in this game.