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Economic Slowdown Will Not Impact B2B Segments
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At a time when the Indian economy is in some trouble, companies will move more towards automation, increasing the opportunities for business solutions.
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Monday, June 18, 2012:
At a time, when import costs have gone up and the rupee is in a dwindling mode, companies are looking at cutting costs and hiking prices across segments. Even the consumer electronics companies are seeing poor sales and are forced to hike prices across verticals to evade losses. In such a scenario, Hemendu Sinha, sales head, B2B LG Electronics India Ltd, says that the industry will see a good growth as organisations will try to increase efficiency through automation and reduce expenses by actually reducing the dependence on manpower. We speak to him to know how the industry is poised to grow and also about the business and distribution network of the LG B2B division.
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What is the range of products that are included in the B2B Solutions portfolio?
The B2B Solutions portfolio of LG comprises a range of commercial display and hospitality solutions. Commercial display portfolio is quite wide and big. It covers all kind of digital signage solutions and in addition to that we have the hospitality specific solutions. Primarily, we talk about four product line of solutions:-
1. The commercial display which covers the signage part of the solutions
2. The hospitality solution which is for hospitality segments like hotels
3. In security, we have the CCTV range of solutions
4. The projectors.
These are the four categories of solutions which we have under the B2B umbrella. In addition to this, we also have institutional sales of the legacy products like consumer electronics and white goods which are in the overall LG portfolio.
The year 2012 has not been good so far for the consumer electronics industry and companies have been hiking prices across segments. How is the market faring for B2B products in such a scenario?
All this speculation that we hear about is emanating from different sources primarily because of the recession and also as the purchasing capacity of people is going down because of inflation. In such a scenario, any business that looks to increase efficiency needs to trim down the expenses. The only way for doing so is to automate and reduce the dependency on manpower and increase the deployment of automation or machines. These kind of tough conditions offer better opportunities for B2B automation solutions. So, I foresee that most of the organisations will try to increase efficiency through automation and reduce expenses by actually reducing the dependence on manpower.
I don't foresee the business going down in this particular category of the industry. Even when we look at hospitality and talk about organisations cutting down travel expenses, they go for other kind of solutions which opens up lot of opportunities. I don't think the economy slowdown is going to impact B2B segments. Yes, it will affect the consumer definitely as inflation is rising and consumers have different priorities rather than spending on consumer electronics and white goods. B2B will definitely foresee a good growth.
What is the kind of growth rate that the market is expected to see this year?
It is difficult to estimate the entire B2B segment because B2B is not just one segment but consists of various verticals and various solutions segments. For instance, if you talk about security, it is poised to grow at 20 to 22 per cent compound annual growth rate (CAGR) which is quite healthy. Similarly, signage solutions will grow at 15 per cent. For hospitality, we are talking about 25,000 rooms getting added this year in five-star and five-star plus category hotels. Each segment will grow differently, so we don’t have a consolidated data to talk about the B2B industry as a whole. If I see a fair estimate, it will be around 10 to 15 per cent growth for the entire segment, but again it will be quite fragmented. I see a good growth and most of these segments are expected to grow at a fair pace.
What is the kind of market share that LG has when we talk about B2B solutions?
As I mentioned, it is difficult to get the data for B2B as such, as it consists of various segments and various verticals. In each segment, the data could be different. In hospitality, we will have different percentage, signage will have different and security will also have a different percentage. Overall, we are looking at around 20 per cent of the market share in the entire category.
How have you grown in this market since you entered the B2B domain?
LG was present in the B2B domain since a long time. It is just that last year we concentrated on our initiatives in B2B and created a different segment. We were actually doing business in a very fragmented way. Last year was the first year when we went into the market in a consolidated way as a B2B company. We have done quite well from then as initially the reference was zero. Now we are reporting force in every category of B2B today.
Can you give us an idea of the current revenues or profits of the B2B segment for LG?
As things were consolidated last year only and the datum is just set, so may be in 2013 we will be able to measure our performance vis-a-vis this year. It is difficult to quantify at this moment because we are more in consolidation, market addressal and expansion mode right now. We are not measuring our performance in terms of revenue this year as 2012 is the first year when we are in the market with full force and all elements in place. Next year, we will be able to measure our revenue performance and profitability and then come out with a figure in 2013.
Can you tell us more about your marketing and expansion plans?
Other than above the line (ATL) activities which keep happening across different segments, last year we started with a road show where we went to six cities and had a two-day affair in select places where we showcased our entire range. This is the first activity we focused on in the second half of 2011 and we want to carry it on this year as well. But this year, our footprint will be larger and we will be covering more cities. We will go to eight to 10 major cities of the country like Delhi, Chennai, Mumbai, Kolkata, Ahmedabad, Bengaluru, Pune, Hyderabad and a few more. We will have a trade show where we will showcase the entire range of products to our partners as well as to our end customers and meet them directly. This will be a very extensive activity covering the entire country.
We will begin this activity in July and try to complete it in a month's time. We will make our partners, end customers and also potential customers aware of the offerings in our portfolio through this activity.
What is the kind of marketing budget you have for such kind of activities?
We get the marketing budget from the entire LG spend. A separate amount is not ear-marked for the B2B division. We have hefty budgets for the entire LG organisation out of which we get a major share to spend on our activities. Since we are incubating within the organisation, these things don't matter much for us. We give our plans to the top management and get approval from them. We will have a fixed budget for marketing from 2013 when we will start counting our profits and our revenue performance.
Tell us more about your partners.
We have three kinds of partners – national distributors, regional distributors and at places we have city-based distributors, after that we have the system integrators and then the value added resellers. This a purely B2B channel. We have different levels of interactions with these people. We conduct trainings for them and keep doing a lot of small activities with these partners. Like we recently did in Jaipur, Bhubaneshwar and Ahmedabad, where we called the entire partner fraternity and actually trained them to enable them and equip them with the technology that we have to offer. This is the first level of interaction. In addition to it, our sales team goes to the end users and also shares with them what we have to offer. These are the two kinds of main activities that we do across the country.
What is the approx number of distributors that you have for the entire B2B segment?
For the commercial display segment, we have Neoteric Informatics as our national distributor (ND) at this moment and around 10 large system integrators. For the security range, we have 150 distributors and for projectors we have one ND and close to 30 city-based distributors. For hospitality, we have around eight to 10 system integrators and no distributors since in hospitality most of the products are imported directly by the customer. If I talk about the overall partner faculty, we have close to 200 people on board, which is a mix of system integrators, and city-based distributors, regional and national distributors.
So, for every product line, we have a different strategy. As far as NDs are concerned, we are not going to add any in recent future but yes, we will keep adding in other categories.
Do you function through retail as well?
Not retail. When we talk about B2B, it is through distributors and direct as well. Most of the projects we do are direct. So, it's either direct from LG or through our distributors.
However, when we talk about city-based projector distributors, they may be giving the products to some retail chains, but we don't go directly to any retail chain.
What is LG B2B's contribution to overall LG business?
It is not in double digits right now. We don’t contribute much towards the revenue or the overall turnover of LG as we initiated things last year only. As I said, we are not measuring ourselves in terms of revenue and profitability. Last year was an year of consolidation for us and in 2012 we are targeting around 10 per cent contribution to LG's business.
Upasana Rajpal, EFYTIMES News Network
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