Enter, Digital retail

India is among the ten largest global retail markets and is witnessing a sharp consumption boom. Industry estimates that India’s retail market is worth $ 320 billion of which organised retail accounts for $ 7.5 billion and is expected to grow to $ 21 billion by 2010.  

The Indian retail industry is today experiencing the emergence of new retail format stores in the form of digital retail stores that caters to the latest electronic gadgets, technology and entertainment products and services. This market for consumer durables, including entertainment electronics, communication and IT products, is estimated at Rs 32,000 crore, and is expected to grow at 10 to 12 per cent annually, reaching Rs 60,000 crore by 2008. The urban consumer durables market is growing at an annual rate of 7 to 10 per cent and the rural durables market is growing at 25 per cent annually. The consumer durables market seems to be the next big category in retailing in the country.  

Consumer durable retail                                                                                                                             

Enter the new world of digital experience stores. Large numbers of digital experience stores are emerging across India. These stores invite you to experiment with the new range of digital devices before you actually make a decision to buy it.

According to Mr Ajit Joshi, Managing Director and CEO, Infiniti Retail, “There is no impulse buying in consumer durable goods. A customer pre-plans before buying an electronic gadget.”

Today, retailers have realised that the most significant factor in convincing people to buy any gadget is to let them experiment with it first. Digital retail has been a highly fragmented sector in India till date. But today it has become more organized. “It is not the revenue that is attracting the retailers to this segment rather it is the huge potential and if you look at the current players in the market there is hardly any one of a significant size. The current market is not very huge,” opines Mr Joshi.

India is $ 5.6 billion durables market. The domestic consumer electronics market is dominated by brands such as LG, Samsung and Sony though they are getting tough competition from home companies like Videocon and BPL. Consumer durable is definitely going to be the next big category in retailing in the country with global players gearing up for India entry. Mr Manoj Kumar, CEO, E Zone and Electronic Bazaar, Home Solutions Retail, a Future group venture,adds, “The consumer durable industry is one of the fastest growing industries in the country. The overall contribution of the Indian consumer durable sector in the Indian Retail Industry is estimated around Rs 25,000 crore.”

As for the inspiration behind E-Zone, Mr Kumar said, “Indian customers were not provided the right experience and ambience which is available abroad; we wanted our people here in India to have the same international experience along with the touch and feel of all the products we sell. E-Zone would be a common platform to provide the best experience of electronics under one roof to all our consumers.”

When asked about the market size in organised retail, Mr Joshi, commented, “We don’t have the exact figures as we don’t have an organized retail body which can provide us with some kind of information. In US or Australia or the western world the exact information is available. However, the market is approximately 25,000 crore.”

Prominent Digital Retail ventures

It all began with Dhoot’s Next, and today with all the top retailers including Mukesh Ambani’s Reliance Digital , Kishore Biyani’s E-Zone, Tata’s Croma, digital retail seems to be the buzzword for the Indian retail industry. “Digital Retail is all about giving or providing the customer the ‘experience’ which we would always do,” said Mr Kumar. Multi-brand consumer durable retailing in the country is still fragmented. The only large organised player is Viveks, which operates a regional retail chain in the south. Barring Viveks, consumer durable is the mainstay of city-based retailers. However, big corporate names are planning to establish national chains.

Next:
Currently, the biggest player in digital retail in India is Dhoot-promoted ‘Next’ which operates on a franchisee network and has more than 100 stores. Started in February 2005 when Videocon Group entered the organised retail sector, the diversified group having exposure in consumer durable, sugar, infrastructure and petroleum formed a venture under Emart India that is setting up multi-brand consumer electronics retail chain under the flagship brand ‘Next’.
Next is India’s first electronics retail chain with a national footprint. Apart from consumer durable products, the chain also stocks mobile handsets. Emart tied up with a few major brands including LG, Onida, Philips, Nokia, Samsung apart from the home brand Videocon and is in the process of tying up with others. Plugin, owned by Raymond and some partners with minority stake, also came under the umbrella of Next which is a private concern of PN Dhoot, one of the co-promoters of the Videocon Group. Next, a multi-brand electronics retail chain owned by PN Dhoot, has emerged as the front-runner.

Reliance Digital

The latest to enter the sector is Reliance Retail Industry. Mukesh Ambani-controlled Reliance Industries Ltd (RIL) entered into digital retail sector with ‘Reliance Digital’ a pilot consumer electronics concept mega store recently been revealed by Reliance Retail at Shipra Mall, Indrapuram, Ghaziabad, covering an area of more than 15,000 sq.ft and offering over 4,000 products spread across 150 brands.

As for the investment in these retail outlets is concerned, Mr Ajai Baijal, President and Chief Executive, Consumer Durables, IT & Telecom, Reliance Retail, said, “We have not yet decided over it. The company has planned to invest around Rs 25,000 crore for the Reliance Fresh. At present, we have decided to invest between Rs 5 crore to 10 crore per big store. The group is claiming to achieve a turnover of Rs 20,000 crore from its Reliance Digital venture in three years.”

Reliance Digital is a one stop shop for all technology solutions in the field of consumer electronics, home appliances, information technology and telecommunications. Pioneering a service trend in the country, Reliance Digital introduces ‘RelianceresQ’, an end to end solution related to all technology products. RelianceresQ, through a network of in-house service centres will provide the consumers with pre sales and post sales support services.

Regarding the expansion of Reliance Digital stores in the country and especially in north India Mr Baijal opines, “We have planned to open 150 specialised shops in 90 cities across the country within next three years. The company plans to open 20 to 30 outlets in NCR by 2010, one such store in Jaipur, one in Lucknow by year end while another 8 to 10 stores would be operation in UP by 2010.”

E-Zone:

Home Solutions Retail (India) Ltd, a group company of Pantaloon Retail, launched E Zone, its first consumer durables and electronics store in Indore in April 2006.

Explains Mr Kumar,“ E Zone as a format is a stand alone store. Today, we have our E Zones across the cities like Indore, Delhi, Mumbai, Lucknow, Kolkata, Pune, Bangalore, Hyderabad, and Baroda. Many more cities like Agra and Chennai would have E Zones where we would increase presence alongside opening more outlets in the current cities we are present.”

At present Pantaloon has around 15 E Zones operating and the company plans to open around 30 in total by this year end.

Recently, the largest retailer in the country, the Future Group, through Home Solutions Retail India Ltd (HSRIL), signed two separate MoUs with Videocon. The MoUs were based on leveraging Videocon's manufacturing strengths to source electronics and appliance products for its in-store brands of Sensei and Koryo, which would be retailed exclusively through retail formats such as E-Zone and Electronics and would get preferred status (due to the higher margins) to stock and sell Videocon products at the outlets.

Croma:
The first Croma store was inaugurated in Mumbai in October 2006 by Group Chairman Mr Ratan Tata and Mr Roger Corbett, Independent Consultant, Woolworths. The store offers more than 6,000 products across eight categories. Infiniti Retail, a 100 per cent subsidiary of Tata Sons, has a national chain of multi-brand outlets of consumer electronics and durables. These mega stores, branded 'Croma' offers the country's widest range of products across categories and brands. The 'Croma' store is a large-format store spread over 15,000 to 20,000 sq.ft. Mr Joshi opines, “We have been quite scientific in our approach as we have a company called TSMG (Tata Strategic Management Group) which did a complete study on Indian market. On the basis of that study we realized that there is huge potential, so we decided to venture into the digital retail segment. With 'Croma', Infiniti Retail has entered into a technical and sourcing agreement with Australian retail giant, Woolworths, which currently operates more than 2000 stores across Australia in 12 different formats. The newly formed 100 per cent Tata-owned company Infiniti Retail will own and run the retail operations in India, while Woolworths will provide technical support and strategic sourcing facilities from its global network. The company expects to have seven new stores by this fiscal end. It will open 30 more stores in the next fiscal and have 100 plus stores in all by FY2010 covering 20 major cities. “Croma can be present on the high street, or, it can be present in a mall. Right now we have our stores both on high streets and in malls. I would like to have the store wherever it is convenient to the customer,” said Mr Joshi.

All the Croma stores are leased properties, no franchising, as Infiniti retail is managed and owned by Tata group. Tata sons own this venture.

Croma expects 45 per cent of its revenues to come from IT and digital convergence products. On visiting Croma, a person will realize that the USP of this digital lifestyle store is its huge size and capacity to store more than 180 national as well as international brands. More than 6000 products are on display, allowing customers to get a touch and feel of a product before actually buying it.

Jumbo:

The most recent in the row is UAE-based Chhabrias of the Jumbo Group. Two years after it exited most businesses in India, UAE-based Chhabrias of the Jumbo Group are now re-establishing their business interest in the country. The group is entering the retail market, through their UAE-based flagship company Jumbo Electronics and is all set to unveil its multi-brand electronics retail chain called Jumbo. The first such store is expected to be in Delhi in the next three months.

Jumbo would be involved in only electronics audio/video, telecom and IT. It would not sell appliances such as refrigerators, air-conditioners and washing machines. Its medium term plans include opening about 20-25 stores in the next 1 to 2 year.

In addition, a few international players are also exploring ways to enter the market. Jumbo would be the first national player with a specialised electronics retailing pedigree.

Agreement with digital retail stores

Everything from flat screen televisions to LCD displays covering brands such as Samsung, Panasonic, Philips, Sony, LG and Hitachi, all are available here.

Samsung India has now turned its eyes to the digital lifestyle segment and is in the process of unveiling a range of new products to cater to this space. Samsung India Electronics’ IT and Telecom division have decided to divide operations into two different segments—‘volume business’ and ‘value and lifestyle business’.

HP India views alternate retail as a big opportunity. HP has tied up with HyperCity, Croma, E-zone, Metro Cash & Carry, and Reliance Retail. The company is likely to take a product segmentation approach, pushing the Pavilion and Presario brand while its Media Centre PCs, high end laptops, LCD/TFT screens, and iPAQs through alternate retail. The vendor expects the large-format stores to contribute up to 25 per cent over the next three to four years.

The growth of Videocon is truly a manifestation of its strategic vision characterised by the groups foray into diversified areas such as acquisition of Thomson and Electrolux and launch of Hyundai Electronics. 

Challenges and competition

Apart from the product sourcing, it will be manpower sourcing which might pose an impediment to the growth of the consumer durable retailing in the country. Another is building of robust supply chains and logistics system especially in case of overseas players. But the entry of the global players will not be that easy as the successful local chains such as Viveks and Vijay Sales, from a `want to be present' perspective, every sizeable player in the world has his eyes on this segment. It is only time that will decide how successful they would be as it needs huge investments, prime focus and a thorough understanding on `how to adapt' to the terrain.

It is not the Reliance or Bharti's stores that will pose an immediate threat, but the consumer electronics retailers like E-zone and Croma.

“As Tatas, we believe competition always make you better and put you on your toes. I have no issue facing the competition,” said Mr Joshi.

“E Zone has a Wi Fi environment where a person can browse with our large range of Laptops. There are over 50 LCDs/Plasmas on display of different national and international brands. With cameras one can click photographs and take print outs.  Constant up gradation of latest products /technologies and the best brands would be our prime objective as to a customer when he thinks electronics, he thinks E Zone”, says Mr Kumar.

When asked about the competition that these MBOs are offering Mr Joshi, said, “Good retailer provides a common platform for brands to perform. It is already happening in department stores or large format stores like Lifestyle or Shopper’s Stop. Ultimately, the customer has a choice here in MBO’s and he is not required to go from one store to another for a survey.”

Digital retail stores future

The market is very large and there is room for everyone. Home grown regional chains will survive, it is the smaller players who would be under pressure if they do not get organised and more transparent with their consumers.

Mr Joshi believes, “Future is going to be fantastic. As Indians we are very fast learners and adopt to the new technology extremely well. I see great potential in all the cities in India.”