I came across this article by Prof Sanjay Bakshi
I was thinking about the Moat (low price) and i believe its very badly misused throughout by investing community.
Low price is moat depends on product you are carting to the society,Price has never been the single criteria for the customers. Like Apple moat is Quality they place their product at premium (way above competition) still enjoys the highest market share in phones, i don’t think cheap Chinese manufactures have any moat at all as we keep seeing new and new brands coming in that segment but i have not seen any brand apart from Samsung trying to complete with Apple.
Moreover if you see low cost moat companies like WallMart or GIECO they don’t sacrifice with the quality WallMart selling the same brands at lower price than anybody else people know these bands and its a easy decision for them to pick up from WallMart same applies for GIECO too.
Even page industry formed its moat around the quality at adequate price they were never the cheapest underwear sellers using beautiful model selling it over the TV and they will never be.
Now come to luxury products like jewelry, Is low cost really a Moat ? I think when you are going to buy gold or stones you worry about getting cheated more than cost. Nobody understands quality of gold and stones in general. Stones i have found hardest to understand which Vaibhav Global sells.
and i would defiantly not buy looking at framed TV advertisement.
I think in both aspects Prof Sanjay Bakshi was wrong in the above report the Moat and Psychological aspects, In hindsight its easy to say but its imp to understand why ? if you have read the first chapter in the book influence (mention by Prof Sanjay Bakshi) about the Ruby you will know where i am going , In that a lady had a hard time selling Ruby stone even by doing all she could like putting it at prime location in store, giving discounts etc but when her shopkeeper mistakenly doubled the price of ruby it got sold immediately. The reason is the biases we have in our mind that says quality is always priced high and because no ordinary person has the ability to judge quality of stone they took price as a parameter to determine it.
This is way important psychological aspect in Gem selling than cheap TV trick Vaibhav Global plays (Something completely ignored by Professor in his thesis)
This plays a huge role in gems selling and i don’t think cheap gems has any moat at all in jewelry business what Vaibhav Global catering to, here the moat is like out of 4 road side " Thela wala " one manages to sell at cheapest price that no one can compete with. well that is good enough but that will not turn the fortunes of " Thela wala " bcoz customer base is very small there is no scale in that business on the other hand quality and brand can change fortunes that is what exactly happened with TITAN & Rakesh Jhunjhunwala .
If cheapness would have been moat NANO wouldn’t never been disaster for TATA MOTORS.