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Feb, 03 2011

Riding on a new wave

Automotive franchising is in the fast gear. Now, it's not about merely buying and selling, it's also about tyre retailing, car detailing or selling car batteries. The sector is pulling in lot of investors, who are ready for a whirlwind drive into a little

AFTER showing great potency across varied sectors of the retail industry, franchising is exploring new avenues to supply the demand generated by conglomerates and entrepreneurs in the automotive sector too. Today, the much-talked about automotive industry is not limited to only selling or buying of vehicles. it has taken a big leap by also selling products and car accessories, car detailing (which involves both inside and outside cleaning, polishing and waxing of a vehicle) and other services, including tyre selling, servicing, repair and wheel balancing and alignment. Even though consumers in India are not ready to splurge money on buying latest car models, they undeniably prefer to squander money to give appropriate maintenance to their existing vehicles.

There was a time when the importance of sustaining the quality of ensuring contentment to the consumers was never realised. As the industry started burgeoning with the organised players offering qualitative services all under one-stop shop; it started alleviating guaranteed returns to the franchisees.

Influence of foreign markets

Lately, few niche concepts in the automotive sector were introduced and the industry transformed into an organised one with the coming of trends from foreign brands. Internationally, the automotive industry is in good form. As far as India is concerned, majority of consumers are not willing to spend big bucks on buying new vehicles or costly batteries, but they undoubtedly scout for personalised services, including products, repair and maintenance and after-sale service stores. This is what makes automotive an extremely promising industry for aspiring entrepreneurs to invest in. Car detailing/grooming in automotive industry is the fastest growing sector.

Yatin Chadha, Vice-President (Network & Business Development), Mahindra First Choice Wheels Ltd, says, “I started the business of pre-owned cars to offer a wide choice of pre-owned cars to the consumer, to professionally organise the pre-owned car industry in India, to give new car industry experience in pre-owned car industry and bring about transparency, trust and peace of mind in the Indian pre-owned car industry.” Adding further, he informs, “At the international level, the pre-owned cars business is very organised and conducted in a transparent manner, thus, giving consumers a value for money.”

According to Anckur N. Sama, Managing Director, Carz Spa, (A division of Fortune Multiple Services Pvt. Ltd), “Unorganised players are mushrooming everywhere, this is making enough space for organised player to grow and expand. We foresee growth of some 5,000 outlets that will be operational in the next five years.”

As per Piyush Jha, PR Incharge, Harison Motors (P) Ltd, “All Terrain vehicles are very well accepted, sold and used all over the world. In few countries, it's an on-road vehicle, in few it's an off-road vehicle. As it is a combination of fun, thrill, utility and transportation, it is very useful. Especially in Indian farm conditions, this product will prove a boom with attachment of accessories.”

How franchising fares

The automotive sector in India generally works on a business model of dealership but since franchising is thriving at a rapid speed, it provides worthwhile opportunities to invest into. The business caters more to the after-sales service than the product retailing.

To meet the soaring needs of consumers from different walks of life, the automotive industry is riding high with the entry of conglomerates such as Mahindra First Choice, Carnation, Carz Spa, 3M, Harison Motors, Steel Wheels, an extended arm of JK Tyre distribution network, Ceat Limited and Amara Raja Batteries Limited.

As starting from the scratch is difficult for first-time entrepreneur/investor, it's vital for them to tie up with the franchisor. Laying down the foundation of well-planned dealership network along with franchising is imperative to market the company's products in a right manner. Sama says, “It is a service industry, we feel self-made entrepreneurs fit in this kind of business, and franchising is the best way to expand car detailing business, as one needs to connect with the customers at a personal level and constantly monitor service levels and quality.  Someone who owns the business can do it in the best possible manner.”

Jha informs, “We wish to reach pan India and for it, franchisee/dealer is the ideal medium. This will not only create profits for company but also for the franchisee/ dealer (where he can take profit equal to 100 per cent investment in a year). We are working with a philosophy that customer is most important part of our business and our dealer is a medium, without whom we can't think of surviving. So, we create a win-win situation for our customer, dealer and off course for us. Everyone is associated with the business.”

Believing that franchising is a good option to enter the booming business of pre-owned cars, Chadha opines, “Owing to their knowledge of local conditions, franchisees can greatly help in areas like personal involvement, sales promotion, manpower planning and retention, etc. It is for this reason that we chose to expand using the franchise route.” At present, Mahindra First Choice has four company-owned outlets and 106 franchised outlets. “The company plans to add another 23 outlets in 80 cities. We are also planning to expand in all tier II and III towns across India,” says Chadha.

On expanding their brand's reach, Jha, says, “We believe in sharing profits and responsibility. Hence, we wish our franchisees should sell products in all segments like individual, institute, hotels, resorts, colonies and so on. We have plans to open minimum 100 dealerships / franchised outlets before March 2012. We have focussed district places of growing in India.” As of now, Carz Spa has two company-owned and 32 franchise outlets. Moving further, Sama adds, “We are looking towards tier II and III cities in pan India.”

Tackling intricacies

Since it's a retail as well as service-based business, major difficulty lies in satisfying the customer's demand, hiring and retaining the manpower, giving assurance on the quality of cars, verifying credentials, providing awareness about the newer concepts of car detailing and competition from the local garage owners. Piercing into any business is trouble-free but making it successful requires some research and groundwork. The way out to overcome such challenges is by building promotional activities to create brand awareness and rendering training and support to franchisees to build a successful network of franchise distributors. For instance, Carz Spa offers complete induction and conducts operational and sales training programmes. It also provides in-store marketing designs and materials with regular seasonal schemes. To assist franchisee in day-to-day business operations, Mahindra First Choice provides training in terms of business orientation, pricing, car procurement, refurbishment and car selling skills. Training in showroom management is also given to the dealer-owners.

As these concepts have gained fair amount of share in the markets globally, in India too, the prospects for investors are abound. And franchising is a way forward to widen the brand's reach to flourish exponentially in the market.

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