On our recent trip through Rajasthan, somewhere between Pushkar and Jaipur, we went through the “marble district” where they are mining, cutting and selling some absolutely beautiful marble. Were the shipping costs not so high, I would have liked to have bought a giant block or two and shipped them home. As we were dodging the lorries carrying tottering multi-tonne marble slabs, praying they would not fall over and crush us, we drove past literally hundreds of small businesses making and selling these slabs. The interesting thing to me was how many marble vendors there were and how each one looked exactly the same. If a person wanted to buy some marble, how would he choose? Or, more importantly, how would one of these vendors stand out? What if you are the 76th shop along the road? What new customer will stop in to see your product, there are 75 other suppliers ahead of you and 100 after you?
I’ve wondered this same thing when visiting souks in the middle east. It’s common to have 20 shops all located right next to each other selling the same spices, dates or fruit. Well I’m no expert on marble nor on Asian economics and commerce theories, but I do know a thing or two about competitive markets in the West and here, if you don’t distinctly differentiate your product and you are in a competitive market, you’re dead meat.
Businesses that fail to differentiate their products or their overall proposition through features, quality, design, price or some other set of unique points (like being low-cost producer or inventing some new and unique business model) tend to either get acquired or disappear. Like fish in the sea, the fish with a clear advantage get bigger and either eat the little fish or eat all their food so the little fish starve.
What does this mean to us? There are currently a large number of small to medium sized call centres based out of India, over time there is bound to be consolidation (some believe this will happen sooner, rather than later). The financially strong and the ones with a unique product and/or superior business model will survive, the others probably won’t. It might be possible to find some niche to occupy where there is less growth potential and so does not attract the big fish (this we might call the “hiding under a rock” strategy which seems to work for fish as well). But the consolidation will come because markets abhor inefficiency like nature abhors a vacuum and there are economies of scale to be gained in this business. Moreover, the international market, an increasingly the domestic market is crying out for change in the services that call centres, or contact centres if you prefer, provide (more on this in the future).
The marble vendors of northern India have apparently found a way to survive in an utterly undifferentiated market. This won’t be the same with call centres. We operate in a global environment and the global forces of competition act on us in spite of protections provided by the Indian government. I think any independent call centre that wants to grow, prosper and stay independent will need to find the keys to differentiation. I will talk about these keys in a later entry but for right now I will say that price is definitely not one of them.