Destination Retail

The retail sector in India has witnessed a revolutionary growth over the past few years. It was estimated to be at $325 billion in 2006 and has been declared as one of the fastest growing sector of Indian economy by Springboard Research. The Springboard report further stated that after real estate and human resources, IT was the highest investment area for most large and medium sized retailers.

Vendors are no doubt falling all over themselves to secure a spot in the hearts and wallets of customers through glitzy retail outlets in malls and other high-density localities. With the entry of big names like the Tata Group's Corus, HCL's Digi-Life, Sahara's IT Junction or Pantaloon's e-Zone in the IT retail arena, it is evident that retail is now fair game for anyone who can afford to invest in real estate, inventory, manpower and handle overheads over a period of time.

Some of the players in this game are the channel partners. They might not be able to match up to the likes of the giants, but as the recent World Cup underlined, the minnows can sometimes beat the sharks. This is precisely what is happening in the retail business. A lot of business is being routed through the smaller retail shops run by the channel, especially in smaller cities. In fact Sanjay Agarwal, Director of Kolkata's Berlia Compu Systems feels that retail is the future of IT trading. “The market dynamics are changing undoubtedly and the need for retail has developed. The vendors have also become more aggressive and are encouraging retail sales. The whole-selling or similar trade models are going to fade away gradually. There will be only manufacturers and retailers in future.”

Whether his ominous prediction will come true or not remains to be seen. But Agarwal's peers share a similar belief that retail is the place to be. Kamlesh Jain, CEO of Bangalore-based Premier Computers noted that retail as a sector is poised for an even more rapid growth in future. Probably even more than what Springboard Research predicts.

Early birds

One reason why retail business has taken off in India in the past couple of years is because the average disposable income has increased and customers are now willing to pay a price to own a brand of their choice. Keeping up with this outlook, IT vendors have also dropped prices to
play catch with the improving demand. This has further propelled customers to buy IT products and set the ball rolling for retail business.

And several partners saw this emerging business early and invested in it to gain the first-mover advantage. Mohit Hegde, CEO of Bangalore's Creative Infotech is well-known in the city's IT circle as one of the oldest retailers in the business. He noted, “The recent surge seen in IT retail sector is due to the increased buying power of the Indian consumer, besides an increased demand.”

Taking pride in the fact that he was one of the pioneers in the retailing arena in his region Jain said, “We began our retail business nearly seven years back and today we stock well-known brands of PCs, digital cameras, fax machines and all-in-ones.”

Ashish Aggarwal, Director of Delhi-based Aanchal Computers too opened his first retail showroom of IT hardware in 1996. He claimed, “Though the IT retail concept started taking shape around 2001, we were actually the initiators of this concept as far as East Delhi is concerned.”

Aggarwal has retail counters in New Delhi as well as in smaller cities. He feels that both these markets have their distinct advantages and disadvantages. “In spite of the fact that the market has grown in smaller cities, there is less competition here than in the metros. If you are well organized, then the region of your business does not make any difference. You can generate good results without many issues,” he said.

Ravikant Gupta, Proprietor of New Delhi-based Comhard Systems, got into the retail business quite unexpectedly. He became a distributor of IT hardware in 2002, but never gave a thought to retail. But destiny had other plans in store for him. With the sealing drive by Municipal Corporation of Delhi (MCD) last year, he started looking at retail as an alternate business opportunity.

“Though we started LG Shoppe in Delhi in May 2006 we never had plans to shift from distribution to retail. Seeing the scope in retailing we plan to continue with this business,” he mentioned. Currently, 30 percent of Comhard's business comes from retail while distribution contributes the rest. Over time, Gupta is planning to reverse this ratio.

The company is now planning to open one more multi-brand showroom in Noida or Nehru Place, as well as a Lenovo Exclusive Store. Gupta is also on his way to start an exclusive corner for Acer in his multi-brand retail outlet.

Peripherals Solutions (PSPL) too had gotten onto the bandwagon. Pawan Walecha, the company's director, shared that PSPL had opened a retail outlet in 2006 and was now planning to open one more in East
Delhi. “Spread over an area of 1,200 sq ft, our Noida outlet is a multi-brand retail outlet displaying Lenovo, Toshiba and Acer laptops and desktops, and it showcases peripherals of all the major brands such as Samsung, Epson, HP, Logitech, Microsoft and Creative,” he claimed.

What is interesting to note here is that most of these people believe that the scope of retail business exists not just in the metros, but in smaller cities as well. Partners in these cities are trying to understand the customer's mindset and behavior and then come up with a viable service model.

A growing base of upscale, upwardly mobile consumers have similar needs and desires as that of their metro counterparts. This is why retailers in metros are now seeking to make inroads into tier-two and three cities.

Retail vs distribution

PSPL, which was started in 1994, was earlier into distribution. It was on sensing the evolving market trend that Walecha switched to retail a decade later. Sharing his experience he said, “The concept of retail has drastically shifted to multi-brand retail outlets, because the customer wants to feel and study the difference by seeing all the major options under one roof. Thus, vendors today have also understood the trend and don't mind if their own distributors open multi-brand retail outlets.”

An advantage of the retail business is that the rotation of money is faster and margins are better then in distribution Pawan Walecha, Director, Peripherals Solutions, New Delhi

He added that another plus for doing retail trading was that the rotation of money was faster and margins were better than in distribution. At present, PSPL of Delhi is still more inclined towards distribution vis-a-vis retail and corporate sales. But this is expected to become equally balanced between retail-corporate-distribution.

The reason for not completely switching to retail in spite of its many benefits and attractions is because vendors lend full support to those partners who are generating demand for them in volumes, which is possible only through distribution and not only through retail.

Even big distributors have not been able to resist the allure of retail and we have national players like Rashi Peripherals who have taken aggressive initiatives in this sector for example, the Sony World showrooms that they launched.

Vendors are also lending a helping hand to their retail partners. This is because a retailer interfaces directly with the end-customer and therefore is in the best position to drive sales. He can also influence the buying decisions of corporate customers for digital lifestyle products.

Noted Gupta of Comhard Systems, “Advertisement support from vendors acts as a major attraction when it comes to spreading the word among

end-customers. This is where the vendors can help us best.”

What sells

Trendy gizmos like MP3 players, digital devices and pen drives are virtually flying off the shelves of retail shops. One reason for this is that customers are willing to spend more on lifestyle devices. Vendors are also investing a large portion of their marketing spend in pushing these products.

Agarwal of Berlia Compu Systems shifted from distribution to retail business in 2005. And with the rise in sale of devices like MP3 players and even laptops, he is a happy man.

“Till 2004 we were only into large scale distribution business. In January 2005 we opened a showroom and since then we have grown manifold. I could foresee limited growth in the wholesaling business. Also margins have decreased drastically and competition has become higher. Therefore, this was the right time to diversify,” expressed Agarwal.

Debasish Biswas and Asif Khan, Technocrat, Kolkata	PL Suhasaria, Director, Caltron, Kolkata
TECHNOCRAT INFOTECH	CALTRON
Since inaugurating its multi-branded showroom a year ago, Technocrat Infotech has not looked back. The well-decorated and sprawling IT mall, situated in the heart of the IT bazaar of Kolkata, was opened with a purpose to give customers a feel of the latest products in the market. Showcasing a wide range of IT products, it provides end-users a live demo of all products on display. USP: For Asif Khan and Debasish Biswas, the duo behind Technocrat, the biggest attraction of their showroom is the nature of service offered to customers. “This is a feedback which we have received directly from our customers. Apart from this, the touch and feel experience of products that they get in our showroom has helped us to get good word-of-mouth publicity and repeat sales,” stated Khan.	With two retail outlets-Caltron and Macromax-Caltron Info Trade has got a good clientele to boast of. The sprawling 3,500 sq ft premises at 65 GC Avenue christened 'Caltron House' accommodates both the company corporate office as well as an extensive display area with focus on branded PCs, laptops, mobile phone, digicams and related accessories. This lavish 1,200 sq ft showroom has helped the company establish a strong retail base in Kolkata, which in turn has increased both its topline and bottomline business. USP: “We offer our customers the best possible price in the entire market in all products we sell,” said Suhasaria, Director, Caltron. The showroom displays entire range of products of all the brands that it deals in.

Hegde of Creative Infotech felt that retail sales are characterized by home and SOHO customer purchase. And these clients do not want
high-end products, which still remain the purview of the solution providers. They want something they can use on a daily basis and even flaunt. Which is why they go for gadgets and gizmos instead of just computing devices.

While these set of customers are willing to spend money to acquire IT products, they are very particular about the kind of post sales services they get from retailers. This is why most smaller retailers do not perceive big brand like Big Bazaar, Vijay Sales, e-Zone, Sony Mony, MobileNxt Teleservices, Plug In etc, as a threat. This is simply because their clientele is far limited than the biggies and therefore they can offer better service.

The big retail chains do not offer much personalized services and for any after-sale support, customers have to get in touch with the specific vendor. This does not happen with the smaller retailers, who need to engage their customers for life and therefore go out of their way to offer better service.

“As far as the big retail outlets are concerned they won't be able to offer much competition to players like us, because we provide personalized selling, which they lack. We can provide customers with what they want whereas they can provide customers what they have,” stated Walecha of PSPL.

Retail vs reselling

Now the big question that lies ahead is what is going to happen with reselling business? With partners taking keen interest in retail, will the reselling business get neglected?

According to some partners, the wholesale and reselling business models will gradually slow down and then fade out, leaving only manufacturers and retailers in the scene. Others think otherwise and believe that though retailing is doing well, the wholesale and reselling business will never get wiped out.

Sunil Bhukania, CEO
of Kanpur-based Bhukania
Com­putronic said, “Though retail has a great opportunity it will not be able to displace reselling. Indian customers have a mindset to adhere to a particular dealer on a personal basis and get back to him for any query. Retail business cannot turn India into US and hence the market behavior will remain the same.”

Other partners agree with him and feel that customers often develop a relationship with their dealers and ask for customized services, whereas in retail this is not possible so customers tend to move away from them.

“Apart from retailing we are continuing our reselling business within the same premises. This way our expenditure is controlled and customers can bond with us at a level they are comfortable at. They can pick up whatever service they want,” expressed Agarwal of Berlia Compu System.

Speed breakers

Though retail is a good opportunity for partners, it comes with its set of challenges. These include having the right location, utilization of space, managing overheads, getting good manpower and offering prompt service.

While investment in real estate is the biggest hurdle, the next in line is making use of every inch of space and even getting paid for it from vendors. Skilled and specialized manpower required for selling at retail counters and infrastructure difficulties can also act as speed breakers to growth at times.

Partners also have to be in touch with market needs so that they can predict what is selling best and what they need to push accordingly. They also need to understand the shopping style of their customers and cater to it accordingly. A hurried shopper who knows what he wants does not want the details of several products thrown at him. Similarly a confused buyer has to be guided through the features of the product he wants to go for and then helped into making a purchase decision.

“We need to evolve ourselves and continue doing good work and win customer confidence. Besides, stock maintenance is a big job. Providing good service to customers is important for which we are choosy about our manpower and we also conduct time-to-time sales and product trainings for them,” said Agarwal.

Another set of challenges that partners face is calculating profit margins.
Because every market has its own style they need to calculate all the major pros
and cons. No doubt a lot of cost is incurred in the set-up and maintenance of a
lavish retail showroom but in the long run the investment is going to pay back.

Though we started LG Shoppe in Delhi in May 2006 we never had plans to shift from distribution to retail. Seeing the scope in retailing we plan to continue with this business Ravikant Gupta, Proprietor, Comhard Systems, New Delhi

Focus area

With increasing competition, every outlet is making an effort to become the first choice of customers. In the race, they have to be at par with the standardized service that actually gives them a distinguished identity. Service plays a major role in enticing customers because that is the ultimate thing that they look for. That also includes delivery across the counter, which has to be fast as customers have become time conscious. Moreover, service is not limited till the counters and it gets extended to after sales support for which customers are very demanding.

With the mushrooming of retail stores, options have increased for customers to choose from and hence brand has become a major deciding factor. Brand building plays a great role in popularizing and differentiating a retail store from another. Any failure to create differentiation is likely to result in shrinking customer traffic and evaporating margins.

Space also plays an important role in attracting customers as it helps in explicitly showcasing a large range of
IT products and accessories
of different brands that offer
the customer with manifold options.

Channel partners need to keep their focus extremely sharp so as to gain a better position among customers. There are various elements that partners play with to give an identity to their services like price of the products, location, experienced staff, quality and service. They also need to adhere to the practice of ethical business,
as that is the best way to
grow anywhere.

Indian consumer will finally see a plethora of retail store options in IT. And this trend
will be across all formats including specialty, department store, supermarket, discount hyper­market, cash and carry, direct-to-home through multi-level marketing or Internet and other formats.

To put a conclusion, all businesses including retail must put an aesthetic and purposeful effort to develop their own trademark and go for a sustained investment in terms of effort, finances and management attention to ensure that there is a continuous enrichment of quality service.

AMRITA TEJASVI

(With inputs from Piyali Guha in Kolkata, Subbalakshmi BM in Bangalore and Syeda Beenish Khalid in New Delhi)