WROTE THIS IN 2013 July.

Not long ago (1993) we saw the death of the jobbers, the small sub-brokers, the persons who would do share transfer by filling in the transfer forms….

Then it was the turn of the small brokers…the cost of compliance, salaries, IT, ….coupled with lower margins in the business. The big brokers with greater budgets, idiotic technologies (and the ability to spend a few million dollars to correct the mistakes) were the new Czars of the brokerage business.

I know of 2 equity brokers who had more than a Million Dollars earmarked just to ‘correct mistakes’….so the big broker was now being smashed. Over the last 3 years the big brokers have been bleeding, and bleeding hard. The volumes have gone out of the market – and vanished from the big broker. The small broker who has nothing else to do is now taken back a big part of the business that he had lost!

Now talk about  about taxi, book shops, publishing, the small stand alone shops are vanishing. In cities like Mumbai real estate costs are pushing the ‘feasible’ business to a ‘dad’s unnecessary hobby’ as one of the kids described it to me.

Imagine a 64 year old man running a restaurant in a posh Mumbai locality. His hotel earns about Rs. 25 lakhs a year…pre tax. This is far more than what the family needs…so what is the 25 year old son cribbing about?

The real estate price! The hotel if sold today – it has a market value of Rs. 7 crores. A 10% return would Rs. 70Lakhs….Son says ‘why run the hotel, riddled with headaches?

Well, taxis are no longer individual owned – they are under an umbrella called Meru. Or Cab Tab. Does not matter what, the small guy is gone. We are seeing this in case of doctors too! Suddenly you will find dentists, opthmals, …etc. consolidating under a banner and offering similar services for a particular price! So you will find ‘xyz smile specialists’ – a dentists shop with 334 branches all over the country. Remember for them to set up so many clinics they may employ, say 1300 dentists! So about 1300 dentists would have SOLD their business to a hospital….

The small broker, small hotel, small kirana store, small barber………….all are in their last leg. Even the small CA, dentist, gynaec, mutual fund distributor will be under threat in 10 years if not 5. Most of the existing professionals would have tied up with a big banner. They will CONVINCE you that you cannot survive alone. So they will consolidate – willingly or unwillingly.

Enjoy while it lasts. 10 years later they will be Facebook pages….no point in ‘liking’ them then.

Remember, we killed it?

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  1. Agree with you that small business are losing out.
    You have mentioned the fact that small is going out but I would like to know what are the repercussions of this phenomenon ?
    What are the pros and cons of it ?

  2. Innovation is usually driven by the small upstart because the big guys are stuck in bureaucratic quagmires,but being small is not inherently a virtue. Big gives you economies of scale and in todays’s politicized economy -the ability to lobby with those politicians.

  3. A comment by a senior doctor who had merged his practice with a corporate chain and then fought to get separated a few years years later –

    ~Today you give them shelter tomorrow they take away your roof…~

    – says it all.

  4. Sachin

    this is called camel in the tent story…i think it is there somewhere on the blog…im feeling too lazy to search it for u…

    doctors or CAs who are selling their practice to a bigger player need a lawyer of international repute (very few Indian lawyers will have this expertise) ..to negotiate. Remember once it is a job, hey it is a job!

  5. Amardeep Vasant Shinde

    As you said earlier in 2050 article there will be many small personalised brokerages offering portfolio solutions(part of financial plan) to customers and interacting regularly.

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