business news in context, analysis with attitude

by Michael Sansolo

Baseball legend Willie Keeler is widely remembered for a simple line of advice. “Keep your eye clear and hit ‘em where they ain’t,” he said. It’s as good a lesson for business as it is for baseball hitters.

Hitting them where “they ain’t” in baseball produces singles. For business it opens markets that others are neglecting to serve for a host of reasons. The Wall Street Journal Asia edition (spend a week in Japan and you see all kinds of new things) had a great take on this last week in a profile of an emerging part of the Indian economy. Now, most of the news we get out of India is focused on the burgeoning market power of the world’s second most populous country and its explosive business growth. This article was about the other India.

The other India is poor and simply looking to build a slightly better life. And in the spirit of true entrepreneurship, Indian business is finding a way to meet that need. As the article explained, engineers in India are finding ways to reinvent products by making them both simpler and more affordable to the poor. The products range from Tata Motors’ $2,200 car to a $43 water purification system or a $70 miniature refrigerator.

Not surprisingly, the products sell.

But hitting ‘em where they ain’t isn’t limited to the poor in a developing country; in fact, it’s a lesson in finding opportunity anywhere.

On Monday MNB reported on Aldi’s incredible plans for opening stores around the US. That’s a news item that no retailer or supplier should take lightly for one second. Because in so many ways Aldi is just like that simplified and cheaper refrigerator in rural India: It delivers what’s needed to a market that is usually overlooked.

For far too long the food industry has struggled with opening stores in low-income inner city neighborhoods, despite some extremely well-intentioned and well-publicized efforts to do so. The reasons for the struggles are very real and those who have overcome them deserve a huge amount of credit. But the bottom line is that there are far too many places in the US that remain underserved by food stores and those markets present a staggering opportunity.

A number of years ago, Harvard Business School did a study on the buying power of poor neighborhoods noting that frequently those areas are competitive diamonds in the rough. In poor neighborhoods, population density is higher and since food is the first item purchased, the spending potential per square mile is actually extremely high, but the retail choices are low. That study was done well before the onset of our current economic conditions, in which the relationship between price and value has become more tightly linked than in decades.

And that’s where Aldi comes in. One has to imagine that Aldi looks at these underserved areas and sees opportunity. Just like those engineers in India, Aldi has a simpler and more affordable offering that might fit the needs of a community very differently. Obviously, they’ll do it with a lot of private label.

But the questions this raises are big. Will anyone in addition to Aldi (and perhaps before Aldi) target these shoppers with stores and products? Will anyone else consider this, like those engineers in India, and start addressing the problems of poor neighborhoods and the growing emphasis on frugality? Will anyone start looking for dramatic changes to the current offerings or will we merely see incremental shifts?

And five years from now, will everyone be wondering how another “alternative format” managed to come in and seize such a large share of sales where no one else was looking?

It’s not like this hasn’t happened before.

Michael Sansolo can be reached via email at .
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