Lessons from Paanwala to deal with direct plans

The advent of internet has completely changed the way we shop. We can now buy almost anything from the comfort of our homes. The disruption brought by the internet and smart phones has wiped out many traditional businesses. Even the mutual fund distribution business is not immune to this disruption.

Given the rising penetration of internet and increasing financial awareness, is there anyway by which individual MFDs can save their business?

There might be. And the answer may lie in the business model of professions which are least affected by the internet.

The first business that comes to my mind is 'paan shop'. This business continues to flourish in the physical mode and I do not see them going online in the near future. The chances of consumers making their paan at home is also very remote.

So, what makes this business standout from the rest? My guess is this — the paan that we get at the paan shop is not a sum of its ingredients but much more than that. Watching the paan being made, the everyday chatter, political discussions and the view of buzzing traffic from a quiet corner deliver an experience which cannot be replicated at home.

Another important lesson is that Paanwala does not sell betel nuts (supari) or fennel seeds (sounf). He offers customized solution through a tailor-made paan depending on taste of his customer. Similarly, there is no logic for MFDs in offering products like large cap, midcap, value, BAF and so on. Instead, MFDs should focus on offering solutions.

Now look at a grocery shop. Here the situation is completely different. You pay a certain amount and take away groceries worth the same. You do not get anything extra in exchange for the efforts you put in walking or driving to the shop.

This is why online grocery delivery has taken off while paan shops have almost remained untouched.

The lesson: Online platforms can also do the selling. There is no point focusing on the product and pitching schemes to clients. You should be able to add value, by way of asset allocation, goal planning or whatever value proposition you might have.