A look at the Economics of Boycott!

Calls for economic boycott has become a favorite tool for online protestors. Two reasons: it allows people the satisfaction of having done something irrespective of the impact, and in case of those who do follow through, it is easy to actually do. In reality, economic boycott is complex. The success of a call for boycott depends on the following factors: who are you boycotting [player], what are you boycotting [product], what % of the player’s money comes from the said product [leverage], and what % of the total product in the market is supplied by the player [market share]. The outcome is also affected by the general public’s ability to not pay the player for the product [essentiality].

In most cases, these myriad of factors lead to an toothless boycott. In extreme cases, it makes no sense to even boycott some players because everyone knows that they can’t live without. For example, despite the role of Middle Eastern nations in fanning fanaticism across the world, no one called for boycott of petroleum products and strike at their financial health. This is what visible monopolies of essential commodities achieve. You can’t even talk about boycotting them. However, many people ignore the not so obvious monopolies – like the one exercised by Unilever in personal care products. If a Unilever ad hurts your sentiments, you may think you can boycott them – but in reality, you can’t. Hence, that becomes an empty threat. Another form of empty threat is the boycott of Halal. Halal has almost become synonymous with meat in many economies since having Halal certified meat is no more costlier than normal meat – and covers a bigger proportion of meat buyers. Threats to boycott Bollywood or Netflix too, is an empty threat. There are no alternative industries producing Hindi movies at that scale and frequency. Entertainment has become a need – and people would rather forego their food than give up their favorite TV serial. Thus, in many cases in the past, threats to boycott have fallen flat.

However, the recent call for Tanishq boycott has the elements of a successful boycott! For one, Tanishq controls neither the supply of gold nor the supply of jewelries in a country as vast as India. Second, in a market where gold is associated with auspiciousness, people are likely to buy gold from a jeweler known to be “lucky”, than to go for a branded entity. Moreover, BIS standards make it possible for gold to be traded across sellers as liquid currency. Given the design depth of many goldsmith guilds – it is difficult for a brand like Tanishq to differentiate themselves in a market that is driven by its need for gold. What this means to the buyer in Chennai is that one can buy gold from NAC or GRT or Prince Jewelers or at OKJ, just as well as they can buy from Tanishq. This lack of uniqueness can hurt Tanishq. In fact, if played right – enough numbers can be diverted from Tanishq to other locally reputed jewelers and small scale goldsmiths, and that would be sufficient to put a serious dent on Tanishq’s balance sheet.

From a successful boycott, we can learn lessons. We can critically see what worked and what didn’t. We can see how the lessons can be transferred to other domains. However, a simple fact remains: a successful boycott is a movement of finding alternative supply chains. Understanding that people will not forego needs or wants is critical to devising a successful strategy for boycotts.


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