Everybody has been shouting, cursing, writing about the The Big Billion Day Sale of Flipkart.
So let me add some more bullshit on this 🙂 Also after a 5 day weekend its anyways tough to focus on markets right away 🙂
I believe a lot of us have HDFC Bank Credit Cards. Every now and then you see cash back offers/discounts and so on to make you spend via the credit cards.
For the last few years they also have a 3 month payment holiday on retail transactions specifically over-lapping the festival/spending season.
Even Parag Parikh a seasoned investor wants to spend in this season. A nice article by him - This season is wasteful ( but fun)
This article by Livemint gives a good de-jargonizes the Payment Holiday Concept– Link
As a loyal HDFC Bank customer i have been using this facility to get an ego trip by redeeming some gifts and money from the bank.
How do i and other customers make money ?
-> Make all my purchases through credit card instead of netbanking.
-> Load up on a lot of redeemable reward points.
-> Keep a Fixed Deposit for the amount payable for 1-3 months.
-> Make the payment on time.
-> Redeem the reward points for some good gifts. ( If only they would add better things in the rewards catalogue )
How does the Bank make money ?
-> Customer makes a lot of purchases online with the discounts/cash back by the bank and even with Festival sales.
-> Customer forgets the payment.
-> Customer does not have a cash flow to make payments. Makes minimum payments.
-> Customer has no idea the interest rate is 3.25% per month.
-> Customer has some EMI payments which are not under the scheme.
There could be more in the terms and conditions – A older link to the terms
As we all know Flipkart loses money – Flipkart 2013 loss at 281 crores but HDFC Bank has a better chance of making profits if people use their credit card.
All the ecommerce companies are working on the same thought process that we Indians are a sucker for Discounts. We love to bargain and get an ego trip :). I have never seen a day when there is no sale on the ecommerce sites. At least the normal retailers keep sales only in festivals, end of season.
I am also an Indian and a sucker for discount buying. So i go to Croma check the laptop, come home and order it on flipkart/amazon or even the product website. ( i recently did so for an Intel Laptop for more than a 10-15% lower price online).
A lot of investors keep doing the same stuff in markets. Keep looking for discounts just by price and not by real value or risk. A stock down from 100 to 50 is cheaper than one which has gone from 100 to 150 irrespective of what the company is 🙂 . This i believe is a good way to lose money ( Aur kitna ghirega strategy)
Now how does Flipkart lose money and HDFC Bank make money ?
-> A good customer like me can make some money in the holiday period but the Annual Interest Rate for FDs is 8-9%.
-> HDFC Bank charges a nice 39% per annum , plus the late fee , plus compounding and so on.
-> Also i believe HDFC Bank makes some money from the vendors as payments or not instant but over weeks/months ( if you have the time do some work on it )
So even HDFC does not mind me skimming some of that money but all it needs is a few customers to forget or miss the payment.
Also they would love the flipkart/amazon/snapdeals to have such 600 crore days as HDFC Bank has a 20-25% market share in credit cards. Every such sale increases HDFC Banks chances of making money.
People can write all shit about how Venture Capitalists / P-E Funds and other people funding this ecommerce websites are stupid, bla bla. I believe its good for all us end users.
Some of us would learn how to spend a lot of money on bullshit and help grow the economy or will learn how to value things.
I love #HDFC Bank for giving me discounts/cash backs/ payment holidays.
I love #flipkart, #amazon, #Myntra, #Jabong, #snapdeal and every ecommerce website giving discounts and dropping my stuff home nicely packed with no extra charge.
I love the #VCs.#P-Es, #Angels who fund these e-commerce companies and hope they also make a lot of money in at least a few of them so they keep doing some bullshit consistently.
( The bold shows my love )