Postcards from the supermarket – Which is more expensive? Buy-side Vs. Sell-side

Greetings from the produce section of your local supermarket. As I was meeting an old friend for lunch today, I came across some novelty melons. When I thought about how much they costs, the question of value came to mind. In this case, I would argue that their value could be totally different if one were to take a sell-side versus a buy-side perspective. Answer key at the bottom of the post, no peaking.

Greetings from the Produce section of your local supermarket.

Yesterday afternoon, my daughter said she was hungry. So, I made her a strawberry jam sandwich. She was still hungry, so I asked her to go to the supermarket next door to buy some fruit. She came back with a melon and said we got the most expensive one.

I freaked out!

Why?

Because I thought she got one of those Japanese musk melon that costs hundreds of dollars. What a relief it was when I found out that it only costs HK$60 (around US$7.50).

The biggest watermelon I have ever seen

That brings us to today. As I was getting ready to meet an old friend for lunch, I passed by a high end supermarket in the centre of town and I saw the biggest watermelon in my life. If you can see the label below, it was called a Japanese Jumbo Watermelon. What was even bigger was the price tag. I won’t reveal it yet, but it costs an arm and a leg.

FullSizeRender 4Given the previous day’s experience, I proceeded to check out the prices of some of the other types of melons.

Here is one of a Korean musk melon.

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Then, some Japanese varieties. Here is a Japan Shizuoka Melon.

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And here is a Japan Heart Shape Melon.

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Which one is most expensive?

This got me thinking…would my kids be able to guess which one is more expensive? If I asked you to rank them from the cheapest to the most expensive, my guess is that 95% of you would get it right. The answer is at the end of this post but try not to jump to the end just yet.

When we think about price, most of us probably approach this question from the “Buy” side perspective (i.e. the consumer perspective).

Buy side Vs. Sell side – Value can be very different

But as I wondered who would fork out such a huge sum for these novelty produce, I started to think about which one is more expensive from seller’s perspective.

I guess there’s probably the odd fellow who shells out thousands of dollars for a heart shaped melon to impress a new girlfriend but in most cases, these fruits probably just sit there. At the end, when they start to spoil and the owner or the staff probably crack the melons open and eat it themselves so it doesn’t go to waste.

So from the seller’s perspective, these novelty melons’ value is really just as a sales gimmick. From a marketing perspective, they help to draw in the crowds but in terms of their actual sales value, in most cases, it is zero (i.e they don’t sell). Conversely, although the regular fruits sells for much cheaper, their higher volume means they offer much greater value to the seller.

So if one had to rank the fruits from cheapest to most expensive, it does really depend on whose perspective you take. Now you can scroll to the bottom to reveal the actual prices of the melons. Did you get it right?

Buy side perspective – From cheapest to most expensive

Sell side perspective – From cheapest to most expensive

 

 

 

 

 

Answer – Actual price of the produce

  • Korean Musk Melon – HK$80 (around US$10)
  • Japan Shizuoka Melon – HK$498 (around US$64)
  • Japan Heart Shaped Melon – HK$1,388 (around US$180)
  • Japan Jumbo Watermelon – HK$2,988 (around US$385)

Postcards from London

Greetings from London! We have just spent two weeks vacationing in London. It seems like everyone had the same idea and chose the UK for their summer holidays. According to stats from VisitBritain, in the first four months of 2017, visitor arrivals are up 11% while spending is up 14%. In addition, in this post, we share some of our new economy impressions on car services, shared accommodation and cord cutting.

Greetings from Sunny London!

For some strange reason, I’ve always been very fortunate with getting great weather whenever I visit London. During this recent trip, it only rained for one out of the 14 days that we were there. And as you can see from the various photos, we are talking about clear blue skies and the need for 50+ SPF sunscreen.

Although I have been to London many times on business before, this was our first family vacation there in like 20 years ago.

In keeping with our Postcard series (e.g. Tokyo and Causeway Bay), here are some takeaways from this trip.

  • (1) Cheaper currency really drawing in the tourists – Tourist arrivals up 11%, spending up 14%
  • (2) New economy experiences – Impressions on Uber, AirBnB and cord cutting

Cheaper currency => Tourist arrivals up 11%, spending up 14%

Chatting with family and friends, it seems like everyone is heading to London this summer. Although we didn’t ask why they were vacationing in London this year, I suspect the cheaper Sterling probably had something to do with the decision.

In order to find some data to back up this gut feel, this was what I found from the VisitBritain website. In the first four months of 2017, the number of visits is up 11% YTD and the total amount of Spending is up 14% YTD to £6.2bn. On a rolling twelve month basis (from May 2016 to Apr 2017), the number of arrivals and the total spend are up 6% and 5%. Both are at the highest levels on record.

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Source: http://www.visitbritain.org

As to be expected, the increase in arrivals was mostly driven by higher tourist arrivals. Those travelling to Britain for holidays were up 26% in 4M 2017  while those visiting friends and relatives were also up 7%. Conversely, given the uncertainty caused by Brexit, the number of business travellers decreased by 4% in 4M 2017.

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Among the various regions, the cheaper currency appears to draw those from the furthest away. Travellers from EU countries only grew 7% in 4M17, North American visitors rose by 16% while those from the Rest of the World was up a whopping 24%.

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Since the visitor data is only released 7 weeks after the end of each month, it would be interesting to see if our impression of strong tourist arrivals is born out for the summer holiday months (June-August).

Implication – UK retailers may surprise on the upside.

New economy experiences – Impressions on Uber, AirBnB and cord cutting

One of the other key notables from this trip is our first time trying AirBnB. Although we had known about AirBnB for some time, in the past, we had always shied away from it for family vacations. I always had this recurrent worry that we would show up with kids in tow only to find accommodation cancelled at the last minute.

Well this time, we gave it a try. To a large extent, this decision was driven by costs. London hotels prices are outrageous. With AirBnB, we were able to cut our hotel bill by 50%.

Are we sold on AirBnB? I’m not sure. While the savings are substantial, every member of our family was very happy when we transited back to the hotel at the end of the first week. We are not talking about a fancy hotel like a Four Seasons but just a solid 4-star hotel. So what did we like and what did we not like about the AirBnB experience?

  • Pros – Savings. Get to see and experience a nice residential neighbourhood. Full working kitchen. Access to washing machine.
  • Cons – You have to really scrutinize the specs. Our assumption that the place will have a TV and A/C was wrong. Cleanliness – it was tidy and neat but it just did not feel as clean as a hotel. We all wished for disposable slippers. The neighbours – As the flat is being used by all sorts of people, we could feel some grumbles directed from our neighbours partly due to the previous occupiers’ behaviour.

Incidentally, during our stay, I read an article that AirBnB is readying a Premium Tier to try to attract higher paying travellers who prefer the amenities guaranteed by fancy hotels (Bloomberg article here). This point definitely resonated with us but I can’t help but wonder what is the right price point for this service. If the savings for this Premium Tier is just 25%, would it be enough to draw higher paying travellers from hotels? I’m not sure.

Ubers, car services and taxis

Relative to AirBnB, I am more sold on Uber. For one, the commitment level is much lower. If one were unfortunate enough to get a bad driver or a bad car, you just have to suffer through the car ride. Rather than being on the hook for thousands of dollars, we’re only talking about tens of dollars.

During our stay, in addition to Ubers, we also rode on taxis and/or booked a car service when possible. From a cost perspective, I was surprised that the cheapest option was actually the car service. Taxi’s were the most expensive option, especially since we usually ran into traffic and what was supposed to be a 15-20 minute ride often took twice the amount of time. Comparing the three, if it costs £20 for the cab ride, the car service would cost £11 while the Uber would be slightly more expensive at about £12. Using another example of a trip to Heathrow, the car service costs £48 whereas a taxi would have cost around £70.

In terms of ease of use, the car service’s app is very similar to that of Uber. You can also track your driver and settle all payments through the app. The only draw back is that it needs a longer lead time (around  20-45 mins) if you want your car. Whereas for Uber, you can usually find a car that is just minutes away.

Implication – If Uber and AirBnB were both to list, I think I would be more positive on Uber than AirBnB.

Cord cutting and unbundling

The last takeaway from our London vacation is “cord-cutting”. Since our AirBnB flat did not come with a television, so for one week, we did away with traditional television. Instead, since the flat had wifi, our family turned to their respective iPhones and iPads for entertainment during those early morning jet-lag hours.

The conclusion is that one really does not need the traditional cable subscription. YouTube and the other streaming service offer more than enough entertainment. Even if one were to be seriously addicted to sports or some premium TV shows, it may be more cost-effective to get a subscription to Netflix or get an NBA/NFL league pass. Rather than spending HK$580/month on a Sports/Entertainment bundle where one only watches 2-3 channels, it makes much more sense to unbundle and pay for what you want.

Implication – Cut cable TV subscription.

To finish this Postcard, I like this quote from our visit to the Harry Potter Warner Brothers Studio Tour – “No story lives unless someone wants to listen.”

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Postcards from Causeway Bay

Many of the best ideas come from daily life. If so, my recent trip to Causeway Bay would suggest that one ought to revisit (1) tourism and consumption play, and (2) Korean and global cosmetics. On a lighter note, fighting through the crowds also entails two of the five love languages. Happy Mother’s Day.

There is a story that famed investor Peter Lynch got some of his best ideas from daily life. Supposedly, what led to his investment in Hanes was his wife’s comments about how good L’eggs pantyhose were. There was probably a lot of subsequent research and due diligence but the initial idea generation was from daily life.

People mountain, people sea

Well, I have just returned from Causeway Bay and wanted to share three photos that I took. As you can see from the crowds below, tourism and consumption appears to have returned full force to Hong Kong.

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So, what are some key takeaways from the above:

  • Check out tourism and consumption plays – I know part of the crowds was due to a special annual event taking place at this department store but you just cannot ignore the size of the crowds.
  • Very high demand for cosmetics – I was only on two floors but from what I gather, the crowds were biggest on the cosmetic counters. The Korean and European brands had the longest queues. This would seem to validate an earlier idea which was despite the geopolitical issues, there should be demand for good products and strong brands.

Two out of the five love languages

On a lighter and non-financial investment related note, Dr. Gary Chapman talks about the Five Love Languages. These are (1) Words of Affirmation, (2) Quality Time, (3) Receiving Gifts, (4) Acts of Service, and (5) Physical Touch.

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Having fought through the crowds to get the one thing that my spouse requested, I think I can check off two of the five love languages and this ought to bring my standing back to the “friend” side of “frenemies”.

Happy Mother’s Day!

Postcards from Tokyo

Greetings from Tokyo. I just got back from my third trip to Tokyo in as many months. Two key takeaways from this trip: (1) Shrinking portions = Inflation? (2) Watch out CX, budget airlines are for real

Greetings from Tokyo.

I just came back from my third trip to Tokyo in as many months. I won’t go into the details on why I was there but just to say that I see tremendous value in Tokyo at the moment.

Two key takeaways from Tokyo

As I reflected on this recent trip, there are two key messages that I wanted to note:

  1. Is inflation starting to creep back in Tokyo? and
  2. Watch out CX, budget airlines are for real.

Continue reading “Postcards from Tokyo”