Monthly Archives: November 2016

Architectural Heritage Building of the Oriental Research Institute, Mysore

History of the Oriental Research Institute, Mysore

History of the Oriental Research Institute, Mysore

Oriental Research Institute is a prominent establishment having a fertile and precious compendium of Sanskrit manuscripts. It is the depository of over 50,000 manuscripts. The Institution was founded in 1891 by the then Government of the Maharaja of Mysore with the purpose of collecting, editing, printing and preserving old Sanskrit and Kannada manuscripts. It was commenced in the type of a library at the Maharaja’s College, one of the respected colleges in the then Mysore State, and afterwards, when the current building was built to mark the golden jubilee of Queen Victoria in 1897, it was moved to the present-day building. The building is located behind the Maharaja’s College, near the University secretarial headquarters, the Crawford Hall.

In the start, the library was under the directorial management of the Department of Education. The Department of Archaeology was also contained in the same building. Later on, it was detached from the Department of Education and the Department of Archaeology was also transferred from there, making it an absolute depository of old manuscripts collected from different parts of India.

Due to the earnest efforts of great scholars like Mr. Kasturi Rangachar, Prof. D.L. Narasimhachar and Prof. T.N.Shrikantayya (Tee.Nam.Shri.), perpetual overseeing work was done and the edited works were published in two series – Bibliotheca Sanskrit and Bibliotheca Kannada. It accomplished worldwide fame when Prof. R.Shama Sastry, celebrated scholar, traced from among the collection the monumental work, ‘Artha Shastra’ of Kautilya and published it. Since then, the Institute has brought out the abundant material available from among its collection in a number of prestigious publications.

When the Mysore University was started in 1916, the library was placed under its management to empower research and study of the manuscripts by Sanskrit and Kannada students and scholars of the University. A supervision committee with the Vice-Chancellor as Chairman and reputed academics was constituted. By 1918, the library was well arranged with an office and four sections:

  1. manuscript collection
  2. publication
  3. printed books, and
  4. research.

In 1943, the name of the library was changed to Oriental Research Institute. In 1954, the post of the Director was created. To preserve and safeguard the palm leaf and paper manuscripts, microfilm facility was installed in 1954. When the Institute of Kannada Studies was established in the Mysore University, the collection of Kannada manuscripts was shifted from the Oriental Research Institute to the Institute, located in Manasa Gangotri campus, in 1966.

In addition to publishing the ancient manuscripts by comprehensive research and study by scholars involved for the purpose, the Institute has also brought out a descriptive directory of Sanskrit manuscripts.

The Heritage Building of the Oriental Research Institute, Mysore

The Heritage Building of the Oriental Research Institute, Mysore

The beautiful building housing the famous Oriental Research Institute attached to the Mysore University is located amidst heritage buildings such as Athara Kacheri (Deputy Commissioner’s Office), Crawford Hall and Maharaja’s and Yuvaraja’s Colleges in Mysore. Actually, it was built in 1891 in commemoration of the Golden Jubilee of Her Majesty Queen Victoria and hence it was popularly known as Victoria Jubilee Institute.

The building is a rare specimen of European classical style of architecture combining Gothic, Corinthian, and Romanesque elements. The building faces north and is built on a podium, which gives the advantage of height to the structure. Flights of steps at east and west lead to the center of the structure, which is a spacious hall.

The most attractive part of this hall is the dome, which is of Mansard or curb type roof having slope on all the four sides. The topmost portion has a square flat roof. On either side are colonnades with series of double Corinthian pillars with north-south sloping roof. On either side of the colonnades are two rectangular halls with four Corinthian pillars supporting low triangular triforia. These triforia is ornamental with cut moldings.

Architecture of the Oriental Research Institute, Mysore

In keeping with the contour of the triforia, the roof of this rectangular hall is in east-west orientation. At the ground level of this hall is an arch-shaped balcony, which enhances the grace of the structure. Thus in one small building three different types of roofs are accommodated.

Another notable feature of this building is the addition of Hoysala sculptures brought here from a ruined Hoysala temple. In the same way, many stone inscriptions also have been brought and kept in the garden opposite the building along with some Hoysala sculptures.

At present, this building houses the Oriental Research Institute attached to the Mysore University. This is a vast repository of ancient palm leaf manuscripts and is a research center publishing ancient works. In fact this Institute is famous internationally because of the discovery of the manuscript of Kautilya’s Arthasastra by the great scholar R. Shamashastry. Thus, it is famous not only for its architecture but also for the palm leaf manuscripts. This institute is visited by hundreds of research scholars interested in Indology, not only from India but also from many other countries.

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Posted in Travels and Journeys

Buddhism: Philosophy or Theology?

Buddhism: Philosophy or Theology?

In glorious works of art and literature we behold this transformed Buddhism with its elaborately sensuous pantheon interposed between the believer and Nirvana. The question arises: What has all this to do with Buddha? And we answer: In the world of the gods, the innumerable rites and cults, the institutions and sects, and the free monastic communities, a vestige of the philosophical origin remains discernible; something of the spiritual light first embodied in Buddha is reflected even in the most primitive figures of later Buddhism.

Buddhism proposes an ultimate reality. Some forms of Buddhism may call this nirvana, others buddhahood, and so forth, but all schools and sects of Buddhism do have a notion of ultimacy. Religion, conversely, regularly provides us with answers to life’s big questions from the start. We learn what to think and believe, and our job is to live up to that, not to interrogate it. If we relate to the Buddha’s teachings as final answers that don’t need to be examined, then we’re observing Buddhism as a religion.

In all Buddhism there remains a trace of his wonderful self-abandonment, of the life that lets itself be wafted into eternity. There remains the Buddhist love which partakes in the suffering and joy of all living beings and refrains from violence. Despite all the terrible things that have happened in Asia as everywhere else, an aura of gentleness lies over the peoples that have been touched by Buddhism. Buddhism is the one world religion that has known no violence, no persecution of heretics, no inquisitions, no witch trials, no crusades.

For something to be a religion, there must be a personal transformation that results from the individual’s experience of ultimate reality. This is most usually showed by a positive change in morality and/or ethics, expressions of compassion, kindness, or similar forms of conduct. If we apply this description, it’s clear that Buddhism is a religion.

True to its origin, Buddhism has never known a cleavage between philosophy and theology, between free reason and religious authority. The question of such a distinction has not heen raised. Philosophy itself was a religious activity. And this fundamental principle has remained unchanged: knowledge itself is liberation and redemption.

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Charlie Munger’s 10 Rules for Investment Success

Charlie Munger's 10 Rules for Investment Success When Charlie Munger talks, people listen— particularly if they want to know how to invest their money.

Munger, who is the vice-chairman of Berkshire Hathaway, has delivered instrumental guidance to Berkshire’s renowned founder, Warren Buffett, and many others. By means of what Munger identifies as “elementary world wisdom,” Munger’s technique weighs risk and reward, make the most of fact-based data and abating emotion.

Keeping it simple, Munger declares, “I observe what works and what doesn’t and why.” Like Buffett, Munger pulls much of his motivation from post-Great Depression era investor Benjamin Graham, a “value investor.” Graham sought “mispriced assets” with values greater than people think.

Charlie Munger has some advice for investors.

  1. Measure risk: All investment evaluations should begin by measuring risk, especially reputational.
  2. Be independent: Only in fairy tales are emperors told they’re naked.
  3. Prepare ahead: The only way to win is to work, work, work, and hope to have a few insights.
  4. Have intellectual humility: Acknowledging what you don’t know is the dawning of wisdom.
  5. Analyze rigorously: Use effective checklists to minimize errors and omissions.
  6. Allocate assets wisely: Proper allocation of capital is an investor’s No. 1 job.
  7. Have patience: Resist the natural human bias to act.
  8. Be decisive: When proper circumstances present themselves, act with decisiveness and conviction.
  9. Be ready for change: Accept unremovable complexity.
  10. Stay focused: Keep it simple and remember what you set out to do.

Munger has argued that if “you’re investing for 40 years in some pension fund, what difference does it make if the path from start to finish is a little more bumpy or a little different than everybody else’s so long as it’s all going to work out well in the end? So what if there’s a little extra volatility.”

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Brick Jaina Basadi in Talakad, Karnataka

Brick Jaina Basadi in Talakad, Karanataka

Talakad on the banks of the river Cauvery was famous as the capital of the early Western Gangas and continued as an important cultural centre till the times of the Wadeyars. Now it is famous for its amazing sand dunes and the panchalinga darshana. Archaeological excavations were conducted here and they revealed many brick structures of antiquity and the present Jaina temple is one such structure excavated here.

The Western Gangas were great patrons of Saivism and Jainism as evidenced by many inscriptions and structures. They are known to have built a Vijaya Jinalaya at Talavanapura or Talakad itself and perhaps the excavated Jaina temple may be the same as the one referred to in the inscription. Unfortunately only the foundation of this temple could be traced but not the superstructure. The entire temple was built of well-burnt bricks.

The brick temple consisted of three garbhagrihas in a row horizontally, an antarala and a mukhamandapa with a provision for pradakshinapatha. All these structures are enclosed within a prakara wall also of bricks. The main garbhagriha is square (3.25 mts) with two rectangular sanctums on each side (3.25 x 1.80 mts). In front of these sanctums is a small oblong porch (2.8 x 11.00 mts). All the three garbhagrihas have separate doorways in the front opening to the common porch.

Tirthankara Parsvanatha with five hooded serpent and an umbrella and Padmavati Yakshi in Talakad The separate mukhamandapa in front of the sanctums is square with thick foundation walls. The entire structure was built over a basement or a plinth consisting of various types of mouldings. Perhaps some pillars were used at different points. Perhaps these and other wooden pillars supported wooden framework of the roof above. Thus the brick construction was strong as well as elegant.

Very close to the garbhagriha was found a stone image of Tirthankara Parsvanatha. It is in high relief. He is standing with a five hooded serpent and an umbrella above. There is a sculpture of Padmavati Yakshi at the left holding an umbrella over the serpent. This is a rare sculpture. This was the image which adorned the main garbhagriha of this temple. Thus this brick temple provides evidence for Ganga patronage to Jainism at Talakad itself.

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Posted in Faith and Religion Travels and Journeys

The Majestic Gopuram and other Architectural Highlights of Sri Ranganathaswamy Temple, Srirangapatna

Architectural Highlights of Sri Ranganathaswamy Temple, Srirangapatna

Srirangapatna, very near to Mysore city, is on the banks of the river Kaveri and is thought of as one of the holy places in Karnataka. It formed a part of Ganga, Hoysala and Vijayanagara kingdoms and afterward it became famous as the capital of Tipu Sultan. However, it is famous as a sacred place because of the river Kaveri and the Sri Ranganathasvami temple.

Sri Ranganathaswamy temple at Srirangapatna is one of the larger Dravidian temples in Karnataka. Customarily famous as the Gautama Kshetra, it is said that a Ganga feudatory by name Tirumalayya built this temple in 894 CE, and named this place as Srirangapura.

Ranganathaswamy: Vishnu reclining on the huge coils of Adishesha with seven-hooded head. Temple in Srirangapatna.

The garbhagriha has an immense image of Vishnu lounging on the huge coils of Adishesha with seven-hooded head. The God is shown as sustaining his head on his right hand while his left hand is stretched over his body. He wears a tall crown and other ornaments. Near his legs are images of Kaveri or Lakshmi and sage Gautama. This is one of the most beautiful reclining images of Vishnu. The sukhanasi has well designed ceilings with lotus in the center. The navaranga is a fine structure and contains round bell-shaped and eight-pointed star shaped pillars. On two sides of the navaranga doorway are two gigantic dwarapalas.

In front of the navaranga is a large pillared courtyard with an opening near the dhvajastambha. Most of the pillars in this courtyard are of Hoysala workmanship, of different designs such as square shaped, star shaped, cylinder shaped etc. It is believed that later some of the Hoysala pillars have been used here to restructure the pillared courtyard and perhaps the navaranga also. There are some minor shrines housing Manavalamuni and Srivaishnava Alwars. On the south-west is a shrine of Lakshmi as Ranganayaki, the consort of Ranganatha, a sculpture of the Vijayanagara period. Some of the pillars have 24 forms of Vishnu with labels.

Garuda is the mount (vahana) of the Lord Vishnu, Sri Ranganathaswamy Temple of Srirangapatna

To the east is the pillared large mukhamandapa of late Vijayanagara period. All these are enclosed within the vast prakara wall, which has an striking mahadvara with a stucco gopura of five tiers with kalashas. Thus, the Ranganathaswamy temple is a temple multiplex built in various periods, and is famous all over Karnataka for the fine reclining Ranganathaswamy image.

History of Sri Ranganathaswamy Temple, Srirangapatna The oldest inscription regarding the temple dates back to 894 AD. It is believed that Tirumalaya, a secondary king of the Ganga dynasty, built the shrine and named the town Srirangapura. Supplements to the temple were made during the successive centuries by Hoysala kings, Vijayanagara rulers and Wodeyars of Mysore.

Ranganathaswamy Temple is built in Dravidian style and faces east. A seventy foot tall gopura envelopes the gateway. The main murti worshipped in the temple is that of Sri Ranganathaswamy in a reclining posture on the coils of seven-hooded serpent Ananta. Goddess Lakshmi, who is known as Ranganayaki, sits near his feet. There are two huge dwarapalaka sculptures guarding the doorway to the assembly hall, which has neatly cut granite pillars typical of Hoysala architecture. There are abundant secondary shrines in the temple which houses murtis of Sri Rama, Krishna, Narasimha, Gopalakrishna, Sudarshana and Lord Vithoba.

Architectural Highlights of Sri Ranganathaswamy Temple, Dravidian style

The significant festivals in the temple are Lakhsha Deepotsava or Makara Sankranthi Brahmotsava in Pushya month (January), Ratha Saptami Brahmotsava in Magh month, Magh Purnima, Sriranga Jayanti in Vaishakh month, and Uyyalotsava in Ashada month.

Sri Ranganatha pilgrimage sites along the river Kaveri The temple attracts a large number of visitors all through the year. It is one of the five important pilgrimage sites along the river Kaveri for devotees of Ranganatha. These five sacred sites are together known as Pancharanga Kshetrams in Southern India. The other Pancharanga Kshetrams are the famous Sri Ranganathaswamy Temple (Srirangam), Parimala Perumal Temple, Sarangapani Temple, and Sri Appakkudathaan Perumal Temple.

The other attractions in Srirangapatna consist of the Gumbaz / Mausoleum of Tipu Sultan, Daria Daulat (The palace of Tipu Sultan,) Water Gate, Garrison Cemetery, Scott’s Bungalow, Lord Harris’s House, Tipu Sultan death memorial, and Sangama (the amalgamation of the three holy streams that create the island of Srirangapatna.) The Srirangapatna fort is a big monument. The total length is 5 km and renovation needs huge funds and large number of skilled workers. Restoration work on the fort has been pending for a long time, but has not been undertaken due to lack of money. Not only the fort, other major monuments from the period such as gun houses, the rocket launch site, and the remains of Tipu’s palace in Srirangapatna are in bad shape too. Prominently, the remains of Tipu’s palace in front of Sri Ranganathaswamy temple needs to be preserved and popularized among tourists. The sites have a huge tourism potential if preserved and presented well.

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Posted in Faith and Religion Travels and Journeys

Caste System in India

Caste System in India - The division of society into four hereditary social classes

The caste system, also known as the varna system, is a hierarchical social structure prevalent in the Hindu nations of India and Nepal. Its origins trace back to the Vedas, the oldest scriptures of Hinduism, produced in India between c. 1500 and c. 500 BCE, and it is a central theme in the 700-verse Bhagavad Gita (c. 1000 CE).

The division of society into four hereditary social classes. The great Indian mystic poet Kabir said, “Now I have no caste, no creed, I am no more what I am!”

The caste system divides Hindu society into four hereditary social classes. Highest are the Brahmins, who are priests and teachers. Next come the Kshatriyas, who are political leaders and warriors. Third are the Vaishyas, who manage agriculture and commerce. The lowest are the Shudras, who work as servants for the other three castes. Those who are cast out of the varna system are known as “Untouchables” because contact with them was thought to defile the other castes.

Four factors contribute towards caste dominance: 1) land ownership 2) numerical strength 3) political power and 4) high ritual status in the social hierarchy. The dominant caste may not be ritually very high but enjoy high status because of wealth, political power and numerical strength. Caste pockets create locally dominant caste. People who belong to a particular caste prefer to settle in a particular area. Caste is often specific to a particular village or area or region. Local dominance can translate into regional dominance. Best example of the principle is the concentration and domination of Vokkaligas in south Karnataka in the old Mysore region and of Lingayaths in north Karnataka in the districts bordering Andhra Pradesh. These dominant castes are accorded high status and position and have control over all the fields of social life in that area.

Hindu texts justify this system based on karma and rebirth. A person’s actions in this life determine their gunas (qualities) in the next: Brahmins are characterized by sattva (intellect), Kshatriyas by rajas (action), Vaishyas by both rajas and tamas (devotion), and Shudras by tamas alone. These gunas predispose a person toward certain types of work, and society functions best when people do the jobs to which they are suited. Each varna has its own spiritual discipline: Brahmins follow jnana (knowledge), Kshatriyas pursue karma (action), Vaishyas practice both karma and bhakti (devotion), while Shudras undertake bhakti. In the twentieth century, Mahatma Gandhi criticized the social injustice of the caste system, and it was reformed as a result of his protests.

Caste Dominance and Caste System in India

It is the unity and cohesion of the caste as a group that makes the dominant caste more pronounced in village affairs. The dominant caste is dominant not because of any single factor but because of the combination of several factors. Land ownership is a crucial factor in establishing dominance. With the introduction of adult suffrage, numerical strength has become a crucial source at the disposal of a caste. A caste should have numerical strength if necessary to use physical force against the challenge of other power castes. But numerical superiority alone is not an important factor. In some of the surveyed villages the dependent castes have numerical strength.

The Supreme Court of India has ruled against preferential treatment for medical students belonging to schedule castes (SC), schedule tribes (ST), and other lower castes, who were aiming for specialist medical training. The ruling, which could have widespread implications in India, stated that such favouritism was “contrary to national interest”.

While India’s 1950 Constitution abolished the notion of untouchability, many peoples’ attitudes remain unchanged, although the 200-million-plus Dalits represent a powerful voting bloc.

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Posted in Faith and Religion Music, Arts, and Culture

Is Costco threatened by Amazon?

Is Costco Wholesale threatened by Amazon?

The North American retail landscape appears entirely different today than it did even ten years ago. The method that consumers make purchasing decisions has radically changed: they stand in stores, using their smartphones to match prices and product reviews; family and friends instantaneously chip in on shopping choices via social media; and when they’re ready to buy, an ever-growing list of online retailers deliver products directly to them, occasionally on the same day.

Brick-and-mortar retailers such as Costco simply focus on selling items that Amazon can’t beat them on. Some products do not lend themselves to package delivery since they are too big, heavy, cheap, fragile, or reliant on fitting properly. Likewise, lawn chairs, boots, thumbtacks, bags of cement, frozen shrimp, and thousands of other items are difficult to move via ecommerce channels.

Paradoxically, Costco is not one of the many companies that accuse Amazon for uninspiring growth or stagnation. Amazon can easily take bites out of the edges of Costco’s market share, and that’s all it takes to flatten out comparable sales, an important metric in the retailing industry.

Costco is remarkable at staying in stock on the goods it sells, but when it comes to general merchandise, you have to mostly grab what they have. Want Fancy Feast cat food? They’ve got it, but only in one specific flavor combination packet. If your cats don’t like it, so it goes. However, you can get precisely the flavors you want from Amazon, without waiting in lines.

Then there’s items like deodorants. While I’m happy to buy in quantity, I was unsure if Costco sells the brand I like. I ordered a four-pack from Amazon and it was here when I got home. Same with shaving cream. Women won’t find “Edge” shaving cream to have anything like a feminine smell. I bought it once. That was that: another item, gone to Amazon.

Costco established the warehouse club retail model, which depends on customer-friendly average markups on branded products (in the low double digits, compared to the high teens at WalMart and the mid-20s at most grocery stores), high throughput, bargaining power, a no-frills shopping environment, and supply-chain effectiveness.

Costco-Amazon Competitive Analysis

I still like Costco, and I’ll definitely continue re-upping my membership. The treasure hunt can be fun and the moveable feast is great. But quantity purchases of exactly the household items I want aren’t available often enough. It sells one kind of almond butter, two kinds of detergent. These are items that have forever left my Costco basket, and have actually caused a reduction in trips, as well.

Costco has lots of options left available to it. It rarely advertises. It can change that. It has been a real laggard in omnichannel retailing…any relationship between items on the website and items in stores is purely coincidental (or opportunistic). I think the company has to change that. There are some items that have to be touched and seen, even if the sale consummates on-line.

The company’s business model remains sound, but the assortment on certain items and sundries might have to broaden. No one wants to go on a treasure hunt for deodorant. That’s a seriously risky proposition.

In May 2016, UBS analyst Michael Lasser and team argued after Costco’s quarterly results that the quarter was so good that it “refutes the bear case that centers on the potential that Costco is losing customers to Amazon.com”:

We think this provides evidence that refutes the bear case that centers on the potential that Costco is losing customers to Amazon. Further, Costco’s op. margin was in line w. our expectations showing how well it’s managing in this tough environment. A lower than expected tax rate added ~$0.01 to EPS. While Costco’s sales slowed in 3Q, we think the deceleration was largely due to the pending transition of its credit card. We believe its sales will pick back up once the transition occurs on June 20. This provides a visible NT catalyst. Plus, there’s a secondary catalyst next year when Costco is likely to raise its membership fees. We think buying shares ahead of these catalysts is a prudent move.

Grocery One of Coscto's Advantages in comparison to Amazon

In July 2016, UBS analyst Michael Lasser and team explained why shares of Costco Wholesale soared after the company reported same-store sales for June:

While there was no mention of a disruption from the credit card transition, we believe it had some impact. So, the result would have been even better without this effect. Further, it’s probably too early for the shift to Visa (V) to have that much of a benefit. The gains should build in the coming months, driving an acceleration in Costco’s US comp. Even so, the company still generated a 3% increase in its global traffic. This type of performance warrants a premium valuation, in our view.

With the credit card switch in effect, spend/member is likely to pick up as private-label credit-card customers take advantage of the new card’s more attractive reward structure (2% cash back at Costco vs. 1% prior). Also, we think Costco’s reliance on grocery & gas sales (~2/3 of total sales) helps insulate it from Amazon.com (AMZN). These factors support our forecast of 4% core US comp growth in July, which would match its highest growth rate since Nov ’15.

Costco has long been known for giving higher wages and presenting more liberal benefits than its competitors —and producing superior sales per square foot, too. The benefits of the good old days are unreasonable because of rising costs and an aging population. Lifespan job tenure is obsolete and most people embrace workforce mobility. Yet in a consumption-based economy, workers must be able to afford more than the basics, and they deserve a certain measure of security.

Citing a recent report from Cowen’s Internet analyst John Blackledge, Cowen analyst Oliver Chen wrote that Amazon Prime members are expanding their shopping well beyond books, clothing and movies. Data shows that 22% of those Amazon Prime members shopping on the web site 3.5 times each month buy groceries on the web site.

As detailed in the Ahead of the Curve: Amazon Dominates “Prime” Time 50-page report by Cowen’s Internet Analyst John Blackledge), AMZN’s aggressive growth of Prime is both impressive and has wide ranging competitive implications given broad HHI, permeation across media and appeal among young consumers. How can bricks-and-mortar retail compete?

  • The key competitive weapon remains transformation towards a consumer-led supply chain which integrates physical stores to drive convenience—Buy online pick up in store, return in store, ship from store, and car pickup along store need to be utilized across chains;
  • proprietary relationships with vendors and vertical integration such as owning factories and direct sourcing capabilities;
  • frequency of store traffic based on inventory turns and product assortment;
  • emotional, brand-lead lifestyle contact;
  • categories which are not easily replicated online (jewelry, physical fitness); and
  • fashion & curation leadership.

Citi Costco Credit Card Citi’s new Costco Anyway card is significantly more appealing than Amex’s TrueEarnings Costco card. Costco’s management has stated that the terms Citi offered were too compelling for Costco to stay with Amex; to protect/ insure continued customer service levels in transition to Citi, there are significant and specific requirements associated with the portfolio.

Amazon.com Prime Compared to Costco Membership

Morgan Stanley’s Simeon Gutman and team conducted a survey and suggest five reasons that Costco Wholesale should remain Amazon.com-proof:

  • Amazon.com (AMZN) and Costco Are Not Mutually Exclusive. Of the 23% who are Costco members (628 respondents), 45% (285 respondents) are Amazon Prime members as well, which suggests the two retailers fulfill different consumer needs. Of the 33% surveyed who are Prime members (893 respondents), 32% (285 respondents) are also Costco members…
  • Grocery One of Coscto’s Advantages. 12.5%/11% of Costco members call out increased spending on packaged/fresh grocery, well ahead of the 5%/2% of Prime members….
  • Only 8% of People Shopping at Both Costco and Amazon Plan to Shift Dollars Away from Costco. Of the 14% (285 respondents) who shop at both, only a net 8% (32 respondents) plan to shift shopping away from Costco towards Amazon. This represents just 1% of total consumers surveyed.
  • Sticky Members with Higher Spend…with Amazon Scoring Higher on Multiple Qualitative Factors. 94%/95% of surveyed Prime/Costco members intend to renew their memberships, which speaks to high loyalty and low churn. Further, 49%/26% of Prime/Costco members indicated shopping more frequently over the past 12 months and 85% of surveyed members attributed “Retailer I Trust” to Amazon and Costco. It is also notable that Amazon scored materially higher than Costco in perceived prices, selection, convenience, quality of checkout and ease of navigation…which will be important to monitor going forward as these advantages could tilt Costco members’ toward Amazon over time.
  • Costco Members Younger than Perceived. The average Costco member is 49 years old vs. 44.5 for the average Amazon Prime member. This four-year gap seems insignificant, in our view, and is counter to the bear case that Costco does not resonate with millennials…

Implications: The survey results should be a positive step in alleviating the greatest investment debate for Costco, that the club model/Costco is at risk from Amazon.

Given that membership fees represent about 70% of Costco’s operating profit and renewal rates stand at about 90% in the U.S. and Canada, Costco’s long-term revenue and profit growth could stagnate. There is little room for additional household penetration because Costco by this time has around 80 million members; historic sales and earnings growth predictions may not be maintainable. Also, new club openings in current markets could cause cannibalization of sales from older locations. Not to mention of challenges in acquiring appropriate real estate choices for 140,000-square-foot warehouse clubs in urban regions.

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Posted in Business and Strategy