October 2020


Behavioural finance is a very interesting stream of economics that studies the irrationalities of human behavior when it comes to financial decision making. It also explains why most investors lose money in the financial markets and / or under-perform the market.

Behavioural Finance: A few basic tenets of irrationalities

Mental Accounting

 If we earn USD100 from gambling or windfall gain, we are more likely to spend it for giving party to our friends. We tend to create different buckets in our mind (Hard earned money / windfall gain / inheritance etc) as to the source of money and it drives our end use. Money however has the same color and carries the same purchasing power irrespective of the source. An electronics store doesn’t question the source of money when the customer approaches to buy goods. 

It also has an implication on our investing behaviour in Behavioural Finance. We are likely to be less conservative in our investments if in our mind the source of money is other than hard earned money. We are more likely to invest the money in risky assets and therefore probably lose it. 

Loss Aversion

Various psychology tests have concluded that the pain from losing USD100 far outweighs the joy of earning the same sum of money. When we are earning a positive return on an investment, there is also a temptation to book profit lest we lose the money that we have earned. It explains why most of the scrips in the portfolio of an investor are loss making scrips (Read – poor investments) and therefore underperform the market.

When we are losing money on an investment, we tend to hold on to the scrip as we are averse to book losses. Scrips which are delivering profit are sold off and we are left with a less than an optimum portfolio.

There is an old saying that amateur investors book profits while professional investors book losses.

Herd behaviour

There is a tendency of retail investor to follow the latest trends and / or fancies of investment ideas. A very good example was during IT bubble of year 2000 when dot com companies were losing money / burning cash but were the darlings of the markets. Portfolios which would stick to time tested principles of picking companies with strong cash flow and low valuations were under-performing the market. Recession is invariably preceded by euphoria in financial markets and not surprisingly the world went into a tail spin with the collapse of IT Bubble in 2000. Similar euphoria in stock markets was visible in 2008 when the world was beginning to see signs of financial crisis 

Parallels today can be drawn in the valuation of E Commerce companies like Amazon, Flipkart which keep burning cash but carry exorbitant valuations. 

Herd behaviour in Behavioural Finance is what Warren Buffet cautions in his famous saying “investors should be greedy when markets are in a state of panic and panicky when markets are greedy”.

Price Anchoring

When we buy a book and find it to be not so interesting, we tend to complete it just because we paid for it. In the process we ignore, the cost of book is a sunk cost and the time could be better utilized in something more productive. When we spend heavily on the maintenance of our vehicle and end up encountering another maintenance issue which requires more expenditure, that we have spent already on the maintenance of our vehicles drives our decision to spend more than replace the vehicle.

Similarly, we get anchored to certain price points which could be the purchase price of our scrip, the high that it made yesterday etc. We end up not buying a scrip as it has moved few rupees where it was trading the day before and lose several times the money.

Investors need to train themselves to ignore the cost of purchase / other price anchors as sunk cost / missed opportunities and be oblivious to them in their investment decisions

High Self rating

A survey concluded that 80% of the drivers rate themselves as above average drivers. Most of the investors rate themselves better than others and their over confidence on their abilities as an investor drives the under-performance of their portfolio.

Our mind tends to process information and give a lot more credibility to data points / news that in sync with our investment philosophy. It strengthens our self-esteem and re-inforces our belief in one self.

We are unwilling to accept and process information that is not in sync with our themes and we discount it as just another view or a stray opinion. It makes us over-look important data points and ignore mistakes which leads to holding of sub-optimal investments. We also end up adding more money to “average cost” in case of price corrections in such scrips to re-inforce our belief in self. It is like putting good money behind bad money. 

If we are over-excited about an investment, we are more likely to lose money as we have over-looked risks associated with the scrip. 

The most difficult thing is to manage our emotions which influence our decision making, move against the herd and carry conviction in our investments with the humility that we are not infallible and prone to mistakes. These are the hallmarks of a great investor. 

Don’t forget to read Real Life Emotional & Cognitive Biases simplified for a Retail Investor


We have learnt during our school days to solve problems in mathematics or physics or chemistry by applying the right formula.  Yes, the right formula aptly applied, solved several problems.  The same formula applied on to a wrongly perceived problem would land us in trouble. 

The same thing holds good in infant feeding.  

Nature’s way of nurturing the newborn or younger children is by providing customized breast milk.  The “customized,” needs to be emphasized here, which means, the breast milk is not only species specific, but also baby specific.  Breast milk is secreted according to the situation of the baby.  For example, a baby born premature needs a different composition milk, which is taken care of at zero cost.  Composition of breast milk is so unique that the initial part helps in quenching the thirst of the baby whereas the later part provides necessary energy and nutrition, thereby providing a full package with no additional need for water.  Breast Milk is the best gift any mother could give to her child. 

There are only a few problems where the formula (Powdered Infant Formula – PIF) is indicated viz., certain metabolic disorders, some of the maternal infections, genuine lactational failure etc.  Here too, formula aptly applied can solve the feeding issue. Thanks to powdered infant formula milk in such cases. For wrongly perceived problems, the same formula may pave way for several issues.

In simple terms, Powdered Infant Formula or PIFs are humanized cows’ milk, manufactured as close as possible to match the human milk.  There are specialized PIFs viz., soya-based formula, extensively hydrolyzed formula, amino acid-based formula, thickened PIFs, lactose-free formula feeds for certain situations like metabolic disorders, cow’s milk protein allergy, regurgitation or lactose intolerance and so on.  Formula feeds are also available as RTF (Ready to Feed) bottled milk.

Let us look into certain perceptions where in the formula is wrongly applied and understand the facts which would help in avoiding that.

Perceptions and Facts:

  1. Perception:  Especially the first time mothers would walk in saying “not enough breast milk.  Can I give formula feeds or any other breast milk substitute?”

Fact:  If the baby feeds around 8-12 times per day for about 20-40 min; gulping sound while on breast; gaining adequate weight, sleeping well, stooling 3-5 times or after each feed and voiding clear or pale yellow urine 6-8 times would indicate adequate lactation. Most of the time, proper counselling would solve this issue of “not enough breastmilk!”

  1. Perception:  “My baby is losing weight.  Should I start top feeds?”

Fact: Almost all breastfed babies lose weight during the first week of life (upto 10% of birth weight) and regain birth weight by the end of the second week.

  1. Perception: “My baby is passing stools once in 3-4 days.  I think the milk is very less?”

Fact: Adequately breastfed babies may pass 3-4 or more stools/day or once in 3-4 days.  As far as the weight gain and urine output are good, nothing to worry even if stooling is delayed up to 7 days.

  1. Perception: “Baby is crying always.  My parents are saying to give some bottle feeds.  Should I?”

Fact: Only language the baby knows during initial months is “cry.”  Look for the other causes like wet diapers, abdominal discomfort, insect bite, some injury etc., before concluding on inadequate breast milk.

  1. Perception: “He keeps sucking at his fingers or the moment we put our finger.  I guess he is hungry in spite of frequent feeding?”

Fact: Sucking is a natural reflex.  Even when fully fed or while asleep, the baby sucks at the finger or pacifier.  That doesn’t always indicate hunger. 

  1. Perception: “My sister’s baby is quite chubby and my baby is tiny.  Both were born on the same day.  Can I start formula feeds?”

Fact: Each baby is different and their rate of weight gain too.  If the weight gain is within the normal limits (as indicated by the growth curve chart), no need to worry.

  1. Perception: “My friend says that at least 2-3 bottle feeds (PIF) would help in gaining weight faster.”

Fact:  Faster weight gain doesn’t always mean healthy.  

  1. Perception: “I need to go to work from next month.  Should I start formula feeds from now itself so that the baby will get used to it?”

Fact: Breast milk is the best at any given point of time during the first two years of life during which time the maximum brain growth happens.  If direct breastfeeding is not possible, the next option would be to feed the expressed breast milk (which can be kept at room temperature for 4-6 hrs and in the refrigerator up to 72 hrs.)  

  1. Perception: “Breastfeeding is more stressful.  Bottle feeding is more comfortable, easy and I can know how much my baby is taking. I can also make sure that my baby takes the exact recommended amount of milk every time.  Please suggest which formula is the best?”

Fact: I understand your concerns.  But, everything comes with a cost.  The bottle feeding can cause dental and palatal abnormalities over time.  It can also make the infant prone for ear infections.  Most of the formula feeds cause constipation.  The cost of each tin or packet of formula feed adds on to the financial burden.  Moreover, the preparation error while adding water may lead to more diluted feeds thereby less calorie and protein intake.  Contamination is another issue, which can lead to respiratory and gastrointestinal infections.  Though formula feeds are prepared to closely match human milk, still it lacks certain unique features of breast milk such as immune boosting, gut priming, protection towards asthma and allergies in later years etc.,

  1. Perception: “By giving formula feeds, I can take breaks and be free as anyone else can feed the baby.  I can afford the best formula in the market.  Please suggest?”

Fact:  Motherhood is a unique gift by nature. You can take breaks even while breastfeeding by expressing and storing the milk.  One of the biggest advantages of breastfeeding is the development of bonding between you and your baby which may not happen with formula feeds.  

  1. Perception:  Encountered mostly with first time mothers.  “I’ve tried my best to exclusively breastfeed.  Maybe I’m having lactational failure.  Shall I start formula feeds?”

Fact: Many a time the lactational failure is not genuine.  Simple corrections like proper positioning, rectifying nipple issues (painful or cracked nipples due to improper feeding techniques) with the help of trained lactational consultants would solve this.  These retracted or flat nipple issues could have been taken care of during pregnancy itself.

Approximate price range for Powdered Infant Formula milk (Regular milk powder stage 1)

PIF milk brand Indian Market (400 gm/tin) US Market (12.7oz/tin)
Brand A  Rs. 350  USD 7
Brand B Rs. 750 USD 15
Cost comparative table

Average number of tins (400 gm or 12.7oz) consumed by a baby per month may range from 4-5 tins in 1st month (Rs. 1,750 – 3,750 or USD 35 – 75) to 10-12 tins by 6th month (Rs. 3,500 – 7,500  or USD 85 – 180).  Note:  Cost of specialized formula and maintenance (bottles/accessories/containers/spoons/sterilizers etc.,) are not mentioned. 

“If your only tool is a hammer, then every problem looks like a nail (Abraham Maslow)” whereas “a problem well stated is a problem half solved (John Dewey).”

Also Read Antibiotics – Diligent Restrained Use For A Secure Tomorrow Part – 1 and Part – 2


Earlier this year, when the cinemas were still operational, one of my friends who is a lawyer had filed a suit in the Delhi High Court against a Bollywood biopic that was produced by a large production house.  The Production house had consulted her during the making of the movie but did not credit her for the same in the title card. She ultimately won the case and the Court directed the production house to add her name to the Credits in all the prints. While the addition was carried out in India, she asked me to check whether her name was added to the credits in the International prints. I was sure that it is logistically impossible to do this for a physical hard drive print, in the international market. I still headed to the cinema and met the manager who showed me the physical hard drive of the movie and mentioned the reason why any additions cannot be made to already censored movies due to logistical issues. This reminded me of the days when I saw the representatives of the movie distributors, who would carry film reels in their scooters from one theatre to another as one print was shared by many theatres prior to 2005, when Digital Cinema made its foray into India.

Sometime in the aftermath of the Y2K euphoria, a silent revolution in movie exhibition was taking place in the United States of America, today we know this medium as Digital Cinema.

Though the idea was mooted way back in 1972, by eminent Computer Scientist Nasir Ahmed, the high costs of storing and compressing  data took another 26 years, before the first full length feature Digital Cinema was made in the year 1998 and exhibited in five theatres in the US with the help of Texas Instruments.

By the end of the year 2000, there were around 30 theatres in the world which had adapted this technology, however it took another 3 to 4 years and many technological improvements and enhancements for this technology to go Global.

As on this day, there are close to 200,000 digital screens worldwide, half of them in the Asia-Pacific region. India has close to 10000 screens, out of which 30% constitute multiplex screens and the rest being single screens.

While large multiplex chains have their own projection equipment, the economics of changing the projection equipment to digital ones was not economically viable for the single screens and smaller multiplex chains. To fill this gap, producers encouraged owners of these theatres to install digital projectors, for which the producers paid a Virtual Print Fee (VPF), which costed a fraction of the cost of film prints. Digital Service provider companies like Qube and UFO acquired these equipment either on their own or jointly with the theatre owners and installed them in these cinemas for which they charged a fee termed as a Virtual Print Fee from the producers. This Fee took care of cost of projector, periodical maintenance and upgrades, mastering, duplication and delivery of the Prints and Key Delivery Management. Virtual Print Fee is shared by the theatre owners and Digital Service Providers.

Digital medium is not only for the feature films, but also applicable to in-cinema advertising. The advertising revenue for Multiplexes is around 15% of their Gross Revenue.

Since 70% of screens depend on Digital Service providers (DSPs) for distribution of prints either physically or via satellite, they play a very significant role in the Indian movie industry. Their income is mainly from Virtual Print Fee and Advertisements.

Computerization and online ticket bookings to a large extent have made earnings more transparent. However still a lot of theatres depend on walk in customers and pre-printed tickets. There is a lot of room for illegal sale of tickets and leakage in revenue. DSPs have started installing a software called ‘icount’ where high resolution cameras are installed in the theatres. These capture the pictures of the audience and send it to a computer where Intelligent Machine Vision algorithms count the audience in each theatre. This visual count is later tabulated with the number of tickets sold and discrepancies are reported.

This also helps curtail unscheduled shows, illegal movie recordings and helps monitoring of different screens from a central location.

Since its been almost a decade or more since the producers are paying the VPF, they feel that they have been paying for these projectors beyond the cost of the equipment. The DSPs however argue that what they charge is hardly 15% of what a film print costs, whereas the international VPF is nearly 85% of the cost of film prints as there is a sunset clause (a clause that stops the producers from paying VPF once the cost of the equipment has been paid for). Due to this, the era of VPF is coming to an end in the UK markets by the end of 2020. Since the cost of VPF in India is still a fraction of that in the International markets, they may stay on for a while but will gradually reduce over a period of time.

The argument by DSPs is that their business model is typically like the Cab operators, where in if the passenger feels he has paid enough to own a car, he cannot ask for ownership transfer of the car.

With Samsung soon spreading its wings across the world with their ‘ONYX’ technology, projectors will soon become extinct and they may collaborate with DSPs on a revenue sharing basis once there is a sizeable market. These innovations have made cinemas go projector less after 120 years, thus making  the future of Digital Cinema exciting.

Trivia: – The first commercially released feature film in digital format is “The Last Broadcast” which released in the year 1998 in the US.


Who should file ITR and When? – These questions have been hitting our inbox for some time. There are many misconceptions among taxpayers regarding ITR filings. We have tried to clear such misconceptions in this article.

But before getting into the topic “Who should file ITR? And When?”, let us try to understand the benefits of filing income tax return. Let us see some of the benefits:

Benefits of filing ITR:

  1. Income Tax Return (ITR) is a well-accepted proof of your income and wealth
  2. Loan/credit card can be approved easily based on your income
  3. Quicker visa approvals
  4. Timely filing of return allows claiming losses incurred if any on account of capital gains, business/profession, and house property
  5. Can claim a refund of excess TDS deducted if any 
  6. To comply with the land of the law and avoid interest and penalties.

Who should file ITR:

  • Every individual based on his/her age and whose total income is more than the specified limit as per the below table must file the income tax return every year with the department.
Age limitTotal income threshold limit
Below 60 yearsMore than Rs. 2,50,000/-
Above 60 but below 80 yearsMore than Rs. 3,00,000/-
Above 80 yearsMore than Rs. 5,00,000/-
Individual taxpayers – income thresholds

For calculating the total income threshold during the financial year, one should consider all the sources of income and exclude the deductions relating to capital gains and chapter- VIA deductions such as LIC, tuition fee, PPF contribution, repayment of housing loan and etc. However, section 10 exemptions can be excluded like agricultural income, share of the profit from partnership firm, income from mutual funds, etc.

However, in the following cases it is mandatory for an individual to file tax returns even his/her income is below taxable income;

  • If he/she deposits more than one crore rupees in cash during the financial year in one or more current accounts maintained with a banking company or a co-operative bank.
  • If he/she incurs expenditure which is more than Rs. 2,00,000/- towards foreign travel during the financial year.
  • If he/she incurs expenditure which is more than Rs. 1,00,000/- towards the consumption of electricity during the financial year.
  • Resident individual who is a beneficial owner or otherwise, who holds any asset (including financial interest in any entity) which is located outside India
  • Resident individual who is a signing authority in any account located outside India.
  • Resident individual who is a beneficiary of any asset (including financial interest in any entity) which is located outside India.
  • Non-resident individual is liable to file the return only when he earns income in India which is more than the specified threshold limit as given below;
Age limitTotal income threshold limit
Below 60 yearsMore than Rs. 2,50,000/-
Above 60 but below 80 yearsMore than Rs. 3,00,000/-
Above 80 yearsMore than Rs. 5,00,000/-
Non-resident income thresholds

Let us see this with some illustrations for better understanding:

  • Mr. Ram, a resident individual aged 52 years has earned rental income of Rs. 2,40,000/- during the year and he does not have any other income other than rental income during the financial year. With the accumulated savings, he travelled to US along with family. He spent an amount of Rs. 4,00,000/- towards travel expenditure. Is Mr. Ram liable to file the Income Tax Return?

Ans:  Yes, Mr. Ram is liable to file income tax returns. Though his total income is below Rs. 2,50,000/- he is liable as he spent more than Rs. 2,00,000/- towards foreign travel. 

  • Mr. Gopal is a resident individual whose age is 65 years earned agriculture income of Rs. 10,00,000/- during the year and he does not have any other income during the year. Is Mr. Gopal liable to file the Income Tax Return?

Ans:   No, Mr. Gopal is having only agricultural income, which is excluded from the total income threshold, hence he is not liable to file the income tax return.

  • Mr. Varma is a non-resident individual whose age is 45 years & has earned Rs. 2,30,000/- from the house property situated in India and earned salary income of Rs. 35,00,000/- from a US entity during the year. Is Mr. Varma liable to file the income tax return?

Ans:  No, as Mr. Varma is a non-resident and his income earned in India is less than Rs. 2,50,000/-, he is not liable to file the income tax return.

When ? ITR – Due Dates

  1. Every individual who is having income from business/profession and subject to tax audit, the due date for filing income tax return is 31st October.
  • In any other case (other than tax audit), the due date for filing of income tax returns is 31st July.

However, due to COVID-19, for all the cases due date for filing of income tax returns has been extended to 30/11/2020 for the financial year 2019-20.

Consequences for non-filing/late filing of IT return:

Late filing of IT return

Belated return can be filed till 31st March of next financial year. However late filing fee will be levied as per the below table.

DateLate filing fee if total income is below Rs. 5,00,000/-Late filing fee if total income is more than Rs. 5,00,000/-
Before 31st DecemberRs. 1,000/-Rs. 5,000/-
After 31st December but before 31st MarchRs. 1,000/-Rs. 10,000/-
Penalties for late filing
  • Along with the late filing fee, if you are having tax liability then, interest under section 234A will be levied at the rate of 1% p.m.
  • Apart from the above late filing fee and interest, business loss and capital losses cannot be carried forward.

Non-filing of IT return

If you fail to furnish the IT return before 31st March, then the consequences are as follows:

  • Fee (penalty) anyway will be levied up to Rs. 10,000/- based on total income.
  • If you are having taxable income and if you fail to file the return, that can be treated as concealment of income and the penalties will be higher and it may go up to 300% of your tax liability along with interest.
  • You cannot claim the refund of taxes (excess TDS deducted, if any).
  • You cannot carry forward the losses.

Also read Selection of Correct ITR From & More Pointers in filing IT Returns

There isn’t any judgement here. Nor any opinion. It’s just plain observation of how things have changed and are changing – an observation of changing tunes of Globalization. Growing up in the 80s, as any other young adult the world-news that was available in the traditional news outlets then, left much to be desired for. India was closed economically, culturally (no MTVs, Channel Vs yet) and news wise too. The World this Week by Prannoy Roy and bits & pieces on DD news was all there was. International trade was not high on a teenager’s agenda when it came to news segment. Nevertheless, I was too curious to not to gobble up any piece of news those days. “Super 301” was one such rhetoric that was heard many times. That was a weapon, a threat wielded in the face of an “economically closed” countries like India by US. Protection to domestic players was high on priority for most under-developed/developing countries and India was no exception. A discussion on merits and demerits of it can be saved for another day. Refusal and restrictions on US multinationals to operate and sell their goods in India was not liked by any US presidency whether it was Democrat or Republican. I believe it is the same even now.

Open markets was the mantra every western government preached and pushed. Globalization was western societies’ pet child.  Pure capitalism at the global level was the justification given for such a stance. And such capitalism was expected to benefit one and all. It also meant their markets were open to rest of the world – but mind you with plenty of fine print. First one would be quality, then child labour, then human rights and then environmental protection clauses and the likes of such would effectively make many products produced in developing countries ineligible for US imports.

Globalization – Production Efficiency Theory

According to Production efficiency theory, which is the premise for free trade, each nation should produce which reflect the most efficient use of its resources. For example, country A can produce bicycles and grow mangoes, and so can country B. Question is should both countries produce/grow both products? As per this theory – answer is NO. Let us say Country A is bestowed with fertile land but limited manufacturing skill sets and set up. And country B has excellent manufacturing skill sets but not so fertile agricultural land and very little water resources. So, A should use all its resources to grow mangoes and B should focus on manufacturing bicycles. A can export mangoes to B and import bicycles from B. In essence, each country should stick to its core strength and produce that reflect the most efficient uses of resources. Country B trying to grow mangoes may not be the most efficient way to go about it and Country A will waste its resources if it tries to produce, inefficiently, bicycles.

Section 301

Section 301 under US Trade Act of 1974 gives the President the power to retaliate against a foreign government if he/she feels US business is facing unfair disadvantage and it is detrimental to their interests. He can do by increasing import duties (tariff based) from that country, block the goods from entering US. Trump used this very clause to impose restrictions on Chinese exports to US. ( Section 301 Tariffs: US-China Trade War Worsens).  

Since China embraced capitalism in 1979 its main agenda, in addition to replace US as sole superpower, has been to lift its billion plus people out of poverty. It became factory of the world and countries like India, Philippines became places to body shop for software services. US companies embraced every idea of outsourcing whether it was manufacturing or software development. Jobs left US as they got “Bangalored” every day. Both Democrats and Republicans stayed put for the past three decades – as US MNCs’ profitability seemed to have overshadowed loss of US domestic manufacturing capacity and jobs (around 6 million such jobs were lost in a decade between 2000 and 2010).

Why Trump won?

Much before 2015, when Trump was toying the idea of running for POTUS, he made it clear of his agenda. Less outward looking and more inward looking. Less of global leadership and more of fixing things internally. Probably he is the first US President to speak against globalization. He sounded like a head of state of an under-developed/developing country.

“Why Trump won?” is an interesting topic that every political analyst worth his salt has tried to answer with his own angle. Most democrats blame it to the rise of the racist white America. But analysts & media on the right credit the win to a whole set of other reasons.  Prager University is one such American conservative media outlet on the right. Their video “Why Trump won” has former PM of Canada Stephen Harper as anchor. The video among all, says Globalization has not worked for Americans. With jobs shipped overseas, incomes of ordinary Americans have declined decade after decade. The laws and regulations are “influenced” by Global Institutions. Nationhood is no longer at the helm of society.

This argument is echoed across all sections of rightwing media. Without getting into fact checking of such claims, if the argument itself is presented, as plain text – removing all references to country and author, would look like a claim made by the likes of George Fernandes or Swadeshi Jagaran Manch (George Fernandes was instrumental in kicking out Coke from India in mid-70s.)

Remember conservatives are vehement proponents of “Open market” and Laissez-faire policy. Market forces are free to decide the prices, quantity of production and everything else.  But same conservatives are singing a different tune now – they want tweaked version of Globalization. Country first is the cry & hence MAGA!

Globalization – A full circle journey!

So, does that mean “Globalization” has come full circle, with the most powerful country on the face of the earth voting yes for protectionism openly. Putting national interests above international trade pacts like NAFTA and WTO. Exiting Paris Accord. Or has it always been selectively used to propagate political influence in the guise of business? Will this end if Trump loses 2020 elections?

What do you think?

Remember a time when salespeople used to go door to door selling products? From then on, technology has grown leaps and bounds only to make buying products convenient, affordable, and cost-saving for consumers. No doubt, all 3 play a crucial role in making our busy lives more comfortable. While on the one hand, we should thank technology but on the other, are we aware of how this is impacting us? Are consumers exploiting the technology, or is technology influencing the consumers? Is AI technology – a boon or a bane? Read on to see if you can arrive at a decision.

In the first series of the article, we understood what AI technology is and saw a quick glimpse of how retailers leverage AI technology using consumer buying patterns. In this article, let us explore the consumer side of the story. How are the e-commerce platforms impacting consumers like you and me?

Research by the World Retail Congress organization ( says 35% of google product searches by consumers turn into a transaction in 5 days. India is expected to see the highest online growth rate between 2018-22.  Out of the top five countries with the highest online shoppers, four are in Asia. The E-commerce industry is a hotbed for building wealth in the upcoming years.

Did our Jeff make fair use of it? What happened to his online store? Did Seema move to the online platform to buy milk? If you don’t follow anything I just said, read the first part of the series Artificial Intelligence powering the golden era for Retailers – Part – 1 real quick!

 Trust me. You will enjoy this article much better! 🙂

For those who have read part 1 of AI technology, you would remember how Jeff leveraged the AI technology and built his pricing strategy. Let’s see what happened to Jeff, Seema, and Dinesh in 5 simple scenes like the first part!

Part 1 Conclusion: What happened Jeff after he launched his online store?

We ended part 1 with Jeff launching his promotion campaign for his new online store.

jeff's action plan to implement Artificial Intelligence

Seema grabbed the opportunity and took up a 1-year subscription. Within a month Jeff’s promotion went viral in the neighborhood. Although Jeff sold milk at a lesser price than the price, he sold at his store. His customer base grew to an average of 3,000 active subscriptions. At the end of the year, his sales shot through the roof, and he ended the year earning nearly five times more. At the same time, Dinesh, who was not inclined to move ahead with technology, lost his customer to Jeff, and his sales nosedived to the bottom.

Outcome of Amaze Store New Business Strategy

Did you know? Flipkart website receives around 1.5 billion visits per month and reported a 45% growth in monthly active customers.

Scene 1:  Sunday – Fast forward three years since Jeff opened his online store for selling milk

On a fine Sunday morning, Seema opened the newspaper while going through the technology news section. She was amazed to see “Amaze Online Platform” valued at 100 million dollars, and there it was Jeff in a crisp suit beaming with pride about his flourishing business. Seema took some time to come to terms with what she had just read. The person who sold milk in a small convenience store is now on a newspaper headline with the title “Upcoming Businessman.”

Seema had moved to a different city a year after Jeff opened his online store. After that, she had not followed Jeff’s story until she saw him on the newspaper cover. After reading the newspaper, she got very curious about how Jeff made this happen. She opened her laptop and searched for “Amaze Store Online.”  She discovered that the Amaze store now not only sells essential commodities, but the categories had expanded to electronics, apparel, daily household, and the list went on.

Amaze Online store 3 year journey

Did you know! Flipkart started with 4 lakh funding in 2007 and was valued at 1 Billion at the end of 3 years.


Scene 2:  Sunday- Seema curious to explore other categories to buy online

Seema remembered the convivence of buying milk online. She was eager to check out what “Amaze Online Store” had to offer now. She quickly browsed through some categories, and some dresses caught her attention. She was impressed with the collection and variety “Amaze Online Store” had. She promptly created her login through Facebook ID and added few to Wishlist, hoping to buy them.

After the initial excitement subsided, she pondered over the quality and fit of the dress. No matter how good they looked in the picture, she was not entirely confident about moving the dresses from Wishlist to the cart. She was tired fighting this thought, and finally, she decided to close the browser and get on with her day.

Seema curious to explore other categories to buy online

Did you know!  The E-commerce industry tracks the number of times a person abandons the cart. On average, 7 out 10 people abandon the cart during checkout. 56% of shoppers abandon carts due to hidden costs.

 Retailers and E-Commerce brands lose over $18 Billion in sales revenue each year because of cart abandonment

Scene 3: Monday – Introduction to Nudge theory and Seema typical working day

“A ‘nudge’ is a term used to describe any change in the environment which steers an individual’s behavior predictably while preserving their freedom of choice. It is not a push, nor a shove, but a gentle nudge.”

The following day Seema went back to her work. She had completely forgotten about the dress she wanted to buy.  She opened her g-mail to check her emails, and there she finds an email from the “Amaze Online Store,” asking if she would like to finish her shopping, and in bold, there was a callout saying a 15% discount on the first purchase. There was also an underlying message on her Wishlist products, “Selling Fast.”

Seema was “Nudged” twice if you noticed.

  • 15% Discount to lure her back to the site
  • “Selling fast” message to create a sense of scarcity (Remember, we always value scarce things).

These nudges were enough for Seema to open the site again and move a product from “Wishlist” to the cart. Just when she was about to check out and pay for the dress, she was surprised to see additional add-on costs such as “shipping,” “tax”. These costs were equivalent to discounts provided. Seema was just not convinced about buying the dress. Despite an additional nudge of “10 People looking at the dress” flashing. Seema just abandoned the cart.

Introduction to Nudge theory and Seema typical working day

Did you know dedicated apps from a company called Shopify provides several apps that promise to “Bring Back Shoppers” to complete abandoned transactions?  Some of them allow editing your abandoned cart order and adding in “Free benefit” to reach out again via email reminder.

 Another mind blogging app called “Facebook Pixel Integrator” adds abandoned products from cart to the Facebook tracking list which can be is used by brands and retailers to run Facebook ads to remind the user constantly about the exact item they abandoned.

Scene 4: Tuesday – Seema can’t get the dress out of her head

As compared to the casual browsing on Sunday, Seema had invested a lot of time on Monday thinking she would buy the dress. Unable to completely let go of the thought, Seema opened Instagram casually and was scrolling through the updates. Just when she thought she had forgotten about dress; she sees an ad for the same three dresses with the message “flash sale” Buy 2 to get 30% off! This is a classic “Nudge” tactic to create a sense of “Limited Time Offer.”

Finally, 4th nudge did seem to work. Seema again launches the website to purchase the dresses and be done with it! But there was another message called out on the website shop for “Rs 4,999 and get an Rs 899” worth of dress free + avail free shipping!

Seema was now just Rs. 1,779 away from getting another Rs. 899 worth of free products. She had one more dress in her Wishlist that was “Rs. 1,800”. Precisely the difference amount she needed to get an additional Rs. 899 worth of products.

While Seema was processing all this information, there was “Nudge 6”, Amaze store now was showing all “Affordable Fashion Products from Celebrities” that were available to be shopped within Rs. 1,700/-.

Seema can't get the dress out of her head

Did you know:  Instagram offers e-commerce platform ability to showcase  Ads based on “Location” (of consumers), Demographics, Interests (ads that user might have liked while browsing), Behaviors (based on the activity users are interested), Lookalike Audience (this is scary! Find people like existing customer base) Phew! With our every click, Retailers are hunting us down to find us anywhere from Instagram to g-mail to Facebook to keep showing us the products “we had wished to buy”

Scene 5:  Wednesday – Seema choice validation by peers, influencers, and celebrities

Seema was still feeling overwhelmed by the information and promotion. She decided to put shopping off for a while as she had a birthday party to attend. To Seema’s surprise, her favorite dress that she was thinking of buying, one of the guests was wearing the same dress. She noticed that everyone in the room was talking about her.

The following day, she opens Instagram to see all the photos from the party uploaded to Instagram. Guess what, the girl wearing the dress Seema had liked, received the maximum likes. The comments section was overflowing with compliments.

Seema could not decide if the dress made the girl look beautiful or the complete set of accessories, matching shoes, make up that she was wearing! Social validation is also a kind of “Nudge”. Some other types of these “Nudges” are reviews by influencers, likes, and comments by friends, celebrity endorsements.

Today e-commerce platforms are paying tons of money to Celebrities, to people with the highest numbers of followers, influencers to flaunt their products, and repeatedly keep tagging the brand and posting images of the products on social media.

Seema choice validation by peers, influencers, and celebrities

Did you know: According to the list, Priyanka Chopra Jonas, who, as of July 1, 2020, has 54.3 million followers on Instagram, earns $289,000 (₹2.18 crore approximately) per post. 

So, does Seema finally gives in and shops for the whole look, or does she wake up and realize before she spends more money than she has? If a brand or e-commerce platform can pay Rs. 2.18 crore for a single post. You can only imagine how many people on Instagram, seeing the post by celebrities, are ending up buying the product.

In Summary, the e-commerce industry is thoroughly using consumer behavior data coupled with AI technology to ensure every ad, every nudge message, every promotion on the site gets customers one step closer to sale. And it is working, the reason I say that is because today Amazon has valued 1 trillion dollars, Flipkart at 24 billion dollars, and Jio Retail at 55 billion dollars. The list can go on.

But what about us as consumers, is our earnings growing exponentially? Are we spending more than we are earning due to the e-commerce industry? Are we shopping more than we did a decade ago?  The answer to all and more in the final part of the series! Stay tuned to know how AI technology is driving your purchasing patterns.