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Nov, 20 2009

Consumer durables market gears up for more action

Presently valued at Rs 24,000 crore, the consumer durables market is gearing up for more action by introducing new products and mulling expansion. Rise in living standards, easy access to consumer finance and wide range of choices has lead to the rapid ri

Presently valued at Rs 24,000 crore, the consumer durables market is gearing up for more action by introducing new products and mulling expansion. Rise in living standards, easy access to consumer finance and wide range of choices has lead to the rapid rise of this industry. TFW delves into detail to find out a franchisee’s role in carrying out expansion in this segment.

Expanding boundaries

Gaming, music, movies, the virtual world that is what a consumer demands today while being on the move. Serving this frantic yet ever-changing customer’s demand, consumer durables makers are devising new strategies to make the most out of it. In order to grab more market share and serve the festive season with more vigour, consumer durable companies are high on expansion mode. Be it companies like Dell or Lenovo getting into retail segment with their first exclusive stores this year or HCL re-branding its retail outlets, it’s time for consumer durables sector to ring in the festive mantra.

As per a recent report by research firm RNCOS on ‘Booming Retail Sector in India’, organised retailing of mobile handset and accessories is expected to reach close to US$ 990 million by 2010. Consumer durables market is expected to grow at 30-45 per cent by 2012. Emergence of double-income families, fall in prices due to increased competition, government support, growth of media, availability of disposable incomes, improvement in technology, reduction in customs duty and growth in consumer base of rural sector are some of the factors that project a good growth in the future too.

Recent rise in consumerism has given rise to new formats of retail, which include companies selling electronic goods of various brands all under one roof. These kinds of stores carry a diverse range of products, irrespective of belonging to one brand. The speciality retail format in consumer durables is more popular in hypermarkets where all kinds of products are put on display in a section dedicated to electronic goods. A speciality store is not brand sensitive. In fact, it tries to provide products of various shapes and sizes from different manufacturers.

Riding high on the festival season and then the wedding season boom, the consumer durables industry is taking a joyride this season. As witnessed by all the leading consumer durable firms, footfalls have already gone up by 30-40 per cent. The improved consumer sentiment this season has made the consumer durable companies back in expansion mode.

A recent report by Ernst and Young and Assocham says the Electronics and Appliances industry is expected to grow to $40 billion by 2012, witnessing a compound annual growth rate (CAGR) of 11 per cent for the period of 2009-12.

Riding on retail boom

Leading manufacturers like Samsung, Sony and LG are focusing on the retail. As part of its marketing exercise, HCL has re-branded all HCL Digilife stores nationally. Based on the findings of a survey carried out by research firm IMRB on today’s consumer, HCL has launched a new marketing campaign ‘ME’ to establish a more youthful and vibrant image of the brand to ensure a stronger connect with NextGen consumers. All HCL Digilife stores and retail outlets will also be re-branded as part of this strategy.

NEXT, a leading electronics retail chain has expanded close to 500 retail showrooms pan India. The idea behind starting this kind of retail chain is to store products from leading consumer durables and IT companies. Talking about the competition at electronic chain stores and Xcite’s differentiator, Srikant Gokhale, CEO, Xcite Retail, says, “Each brand has its own positioning. We differentiate ourselves with the shopping experience we have for our customers. Ours is very different experience in terms of retail design.”

An Xcite Retail store houses all electronic items, including mobile, IT products, home appliances, washing machines and other white goods. These are all sourced from well known brands like Sony, Samsung, Panasonic, including the company’s own private label, Wansa. The company undertakes new promotions every month. This month, it is called the great electronic loot. Accordingly, the visual merchandise of the store also undergoes a change.

Geek IT store offers many economical products such as mp3, bluetooth, mp4, digital mp3 sunglasses, white goods segment such as fridges, washing machines, toaster, dryers, dish washer, home entertainment system, which addresses the complete need of an Indian consumer. Geek has its manufacturing base in Taipei, Shenzhen and India.

Another leading electronic major, Intex, one of the fastest growing IT hardware, mobile phones and electronics companies, has grown from Rs 32 crore for year ending March 2002 to Rs 466 crore in March 2009. The company has been growing at CAGR of 46 per cent. Brand Intex offers 26 product categories spread across more than 350 items, including mobile phones, PCs, TFT-LCD Monitors, DVD players, computer multimedia speakers, computer UPS, cabinets, headphones, web cameras, keyboards, add-on products, to name a few. Intex has a network of 300 + service touch points pan India. This comprises company-owned and operated service centres, authorised franchisee centres and resident service engineers.

Intex's manufacturing domain comprises two manufacturing units belonging to the group, located at Jammu and Nalagarh (HP). These are operational since 2004 and 2007, respectively.

Besides companies retailing white goods, there are companies which provide security solutions through their exclusive retail shops. Micro Technologies is a leading global developer, manufacturer and marketer of security devices. Its product line includes the much-needed security devices, life-support systems and web-based software. Micro Technologies has ensured that all its products are available through their retail outlets, the Micro Shoppe across India.

Fast forward with franchising

Franchising is a way not only for retail companies to make their penetration rate faster but to make first-time entrepreneurs a part of the organised retail industry.

Micro Retail Ltd (MRL), a wholly-owned subsidiary of Micro Technologies, works on a franchise model and each retail outlet is equipped with state-of-the-art infrastructure. It promises security products, acting as a comprehensive security service provider.

IFB’s service arm provides cutting edge after sales service to a million customer base with a team of 156 service franchisees and 800 plus qualified engineers spread across the country. As part of its expansion, the company requires service franchisees with strong entrepreneurial sprit and sound financial background and commitment towards excellence.

Talking about expansion of its stores, Amit Nayak, CEO, Geek IT Stores, says, “We are targeting a franchise network expansion up to 100 stores by 2012, which will provide us a pipeline network to each home/ consumer in India.”

But how successful is the concept of opening an exclusive store of consumer durables.

“The Indian customer demands options and variants, washing out the concept of single brand store. An exclusive store like Geek, furnishes all the requirements from a USB to a fridge, ensuring high margins to franchisees and creating a neighbourhood of IT stores,” he adds.

Nidhi Markanday, AGM-Retail, Intex Technologies, says, “Exclusive retail stores strike the right chord with the consumers as they do not like to spend time roaming from one shop to another.  Customers today prefer to shop in a sparkling clean, bright environment bustling with lots of value-added offers and a wide range of products under one roof.”

With malls sprawling up across the length and breadth of the country, there has been a rise in such kind of stores. Earlier, only consumer electronics items used to occupy a majority of the shelf space, but now we are seeing the emergence of retail stores dedicated to both the IT and consumer electronics products. They provide huge visibility, create a lot of awareness and present the buyers with a wide range in a single store. Also, with value-added offers, they have the entire set of elements to create a desire into a purchase.

On training and support front, Micro Shoppe franchisees are provided with basic technological understanding of the functioning of the products. In terms of support, Micro Technologies undertakes full promotional costs. It also ensures regular training and information programmes so that the franchise partners are aware of the latest trends, and can guide the customers correctly.

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