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May, 05 2014

Chase, connect & cherish retail

Both telecom and electronics retail sector in India are growing with a swift speed. With more telecom companies entering the franchise arena, prospects for franchisees have definitely augmented in India. Big names in the telecom and electronics industry a

The telecom sector in India experienced a rapid growth over the past decade on account of regulatory libralisation, structural reforms and competition, making telecom one of the major catalysts in India's growth story. With over 900 million telephone connections, India remained the world's second largest telecommunications market in 2013, improving from the rough ride the year before. As far as the electronics retail sector is concerned there is no doubt about the fact that the consumer electronics industry in India is booming. With a well heeled middle class and seeing the country's economic growth, the consumer electronics industry is also experiencing high growth.  The industry is expected to have a market value of roughly $5.4 billion by the end of 2014. Be it TV, laptops, mobiles, refrigerators or personal computers, the market holds demand for each of the consumer electronic items. Big names like Philips also plan to maintain focus on consumer electronics in India.

Driving forces

EMI has been a game changer bringing across a considerable shift in the market and has enabled drive Smartphone sales over the last year. Offers and discounts clubbed with a quality shopping, and experiential selling also plays a major differentiating factor from the local vendors. Pre-booking for the upcoming handsets has also become quite a craze for customers. As per The MobileStore, experiencing a Smartphone before buying is the next big thing and for this the brand has also launched The MobileStore Lounge where customers can touch, feel and experience mobile phone technology before buying with the assistant of Tech Buddies. Many factors have helped push the mobile telecom industry. Reduction in fee for cellular service providers and increase in the stake of foreign players was one of the major reforms. Because of all these factors, the service fees finally reduced and the call costs were cut greatly and many private operators, such as Reliance Communications, Tata Indicom, Vodafone, Loop Mobile, Airtel, Idea etc., successfully entered the high potential Indian telecom market. The huge off load of Chinese mobile in the India market (approx. 30 million Chinese mobile phones - about 8% of all mobiles in the country) in mid-2008, all enabled every common middle-class family in India to afford a cell phone. Bengaluru based, Sangeetha Mobiles Pvt. Ltd. retails wireless communication products like handsets, accessories, CDMA products, and MP3 players in the business and gaming mobiles and multimedia categories. Started in 1974 as a Music shop, selling gramophone records, the brand pioneered in consumer electronics and shifted to Mobile Phones in 1997.Sangeetha Mobiles has company owned stores across south India and in the rest of the country, it plans to expand through the franchise route as that offers a win-win model for the local entrepreneur and also gives a faster reach for the brand. US$34 billion personal technology company, Lenovo is serving customers in more than 160 countries. Currently, there is about 8 per cent PC penetration in the country. This offers scope for vendors to penetrate new and youth centric markets. The ever-increasing consumer demand for sleeker and smarter products is another key driver. Manufacturers are meeting this demand head on, by offering innovative and high-performance gadgets that help in multi-tasking. The demand for mobile technologies is yet another key factor. Companies are lining up ultra-mobile PC+ form factors with a longer battery life, in order to meet the unique needs of diverse consumers.

Benefits through franchising

Mobile accessories business is growing at a lightning speed of 85 per cent. Every brand plans to expand faster. Lenovo, through its franchisees is able to bring in retail innovation and build the brand as a smart connected devices player. Club Laptop was started in 2009 after a lot of research and seeing the big need gap for quality laptop service and accessories. The brands strategy of highlighting themselves as laptop specialists and relating it directly to the doctors as specialist gave them a kick start much required. Subhash Chandra L, MD, Sangeetha Mobiles Pvt. Ltd says: “Modern trade is a successful phenomenon only in south India, where as other parts are still largely the unorganised retail sector and hence it throws a huge opportunity for the entrepreneurs across the country to become our franchisees and be a part of the every minute growing mobile industry.”

Formed by Lenovo Group's acquisition of the former IBM Personal Computing Division, the Company develops, manufactures and markets reliable, high-quality, secure and easy-to-use technology products and services. Lenovo has over 1400 exclusive retail outlets. For Lenovo franchising offers many benefits to build a retail brand. Franchisees across the country help the brand to take the products to the local market. UniverCell operates over 450 stores across retail formats dominating Southern and Western markets and moving fast towards becoming a national retail chain. The brand's current customer base stands at 10 million. The brand strongly believes that there is a huge potential in the market across geographies including tier II and III cities. It plans to have company-owned outlets in the metro cities. The opportunity in tier II and III cities is driving the brand to hop on the franchise bandwagon. On the other hand, Lucknow-based Dr. Mobile took the franchise path to develop a brand of young entrepreneurs who are not monetarily sound to start big business ventures that too with guaranteed returns. Aslam U Nayyer, CEO and Founder, Dr Mobile eTech Solutions & Services says: “The idea to franchise this concept came to my mind when I thought about the growth matrix of telecom industry and the Indian approach towards getting things repaired especially when they are out of warranty.” The MobileStore took the franchise path as it brings across equal partnership in this increasingly booming segment and enables them to drive with enthusiasm to take these services to every part of the country. Having its supply-chain, marketing and goodwill in place, the three most essential elements for franchising, has also helped The MobileStore to take this leap into the franchising model.

Trends and strategies

Telecom retail and electronics retail sectors in India have fast changing trends. Growing annually around 10 percent, the Indian electronics industry is projected to touch $94 billion over the next three years. Every brand, big or small has opted certain strategies to excel over the other. Nayyer of Dr. Mobile says: “Customer mindset has completely changed over the last one decade. They prefer brands over non-branded.” UniverCell considers parameters like model clarity, sound supply chain, marketing support and choice of franchise while setting up a new store.  Alkesh Agarwal, CEO, Club Laptop says: “Being technology, this industry is always evolving. Off late, the concept of bigger companies looking for centralised solution for better control of consumption and thus expenditure is coming in trend. Such trends will definitely benefit the players like us with wide presence and network.” The MobileStore ensures sufficient stock is supplied to the franchisees in order to avoid a stock pile-up or a stock-out. They are also backed with aggressive marketing, offers and discounts and competitive pricing to help them increase sales.” Himanshu Chakrawarti, CEO, The MobileStore Ltd says: “Price fluctuation is one of the biggest challenges faced in our industry. Franchisees need to maintain up to date quality inventory in order to withstand price fluctuation. Extra inventory can result in losses in a scenario of a price-drop of a particular SKU.”

India, a potential market

Most brands see India as an imminent market for growth. With every second international brand approaching in India, the growth prospects get even higher. Recently, Obi Mobiles, a smartphone brand promoted by Singapore-based Inflexi-onpoint, a company in which former Apple Chief Executive, John Sculley is an investor, launched operations in India. 

Nayyer of Dr Mobile agrees: “Most international brands have their own service centers to cater to primarily in-warranty repair. Their out-of-warranty repair is normally costlier and time taking. Price savvy customers tend to go for savings in terms of price as well as time.” There are not many Indian born brands to compete with international brands like Siemens, Avvaya, Cisco etc in the space of IP based enterprise communication. This situation provides a unique opportunity for brands here to stand out. Sangeetha Mobiles has 7.5 million + happy customers and sees a lot off potential in India. Sathish Babu, Founder, UniverCell strongly agrees that India holds a lot of potential. He adds: “India has more than 160 million Internet users, of which 86 million access Internet using their mobile devices. People in India are already spending close to 1.5 times the value of their previous handset and smart phones amount to over 57 per cent of the total mobile handset sales. Interestingly, smart phones account to 18 per cent of the total volume and this is likely to hit 50 per cent by 2015. These statistics clearly state that there is a good market to be tapped and it will not take much time for India to surpass China in terms of smart phones user base.”

Lenovo also finds Indian market with a tremendous growth opportunity. Ashok Nair, National Sales Director, Lenovo India states: “The PC+ industry in India is a massive $200 billion market and offers considerable opportunity for profitable growth. According to Deloitte, the number of smartphone users in urban India will cross 104 million in 2014 compared with 51 million users in 2013. This provides a huge market potential for mobile gadgets. To tap this market, on an average, Lenovo will introduce 10-15 new devices every quarter in India.”

Training and Support

The Mobile Store prioritizes the training of its franchisees as well as the staff about the product in order to differentiate from the local vendors as well as the competitor. A streamlined supply-chain system incorporated by The Mobile Store is crucial for the franchisees to function smoothly and most importantly, in profits. UniverCell provides business related training to its franchisees which involves setting the store and running it. Its HR team and a head trainee visit the stores and ensure that the employees- from store managers to sales managers are trained properly in terms of being in line with customer needs and behaviour and able to properly explain the products and its features. Mobile Retail Chain, Sangeetha Mobiles follows a multi unit franchise model and offers every possible support like marketing, training, store set up etc. Lenovo has its own proprietary training platform  LenovoPro. This is delivered online as well as face to face. The training covers all aspects of product, customer handling and store management. Dr. Mobile imparts full technical training to two designated engineers of the franchisee.

Way Forward

With increasing avenues in the Indian Telecom and electronics Industry, brands are making strategies to expand fast. Dr. Mobile plans to add 100 outlets this year. The Mobile Store's focus this year is to have 20 per cent of its stores through franchise route focusing the tier II cities. Hence this year, the brand plans to add approx. 100 new franchisee stores, taking its pan India franchise store count to 190. Lenovo is focusing tier II and III cities for expansion, as these markets offer huge potential in terms of consumer demand owing to the low PC penetration. Plan is to planning to convert 250 stores into the new format of 'smart connected device' stores this year. UniverCell is currently focusing more on expanding in new markets like Mumbai and Pune and in the tier II and III regions of South India through franchisees. The brandz plans to roll out 100 franchise stores this year. Club Laptop is spread well over 100 locations in India and targets to open another 40 stores in the year to come. Sangeetha Mobiles that also offers Insurance, EMI and Exchange Offers, doorstep after sales service on mobile phones looks onward to expand in the rest of India other than south India.

 

Challenges

= Every sector has to face certain challenges during growth and expansion phase. Brands like Videocon, Samsung, and Philips too faced certain challenges before making it big in the India market. 

= Skilled Technical manpower is a challenge

= Changing trend in customer behaviours

= Price fluctuation

= Availability of products

= Margins and ever complex inventory management.

= Sales team's awareness on the various product features and its differentiators.

= Rural penetration

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