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Retail In India Is Highly Competitive, Fragmented: Viveks Retail
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Taking most of the share from the market right now is key to survival as consumer electronics retailers need to survive on very thin margins.
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Monday, July 09, 2012:
Viveks Retail, the first organised retailer of India, got into organised retail of consumer electronics in 1995 and in the past 17 years, it has seen the consumer electronics industry grow to offer enormous options to buyers. Keeping up with the growing demand, the retailer recently repositioned itself from just a consumer durable (CD) retailer to a CDIT retailer. A Chennai-based company, it now has 14 showrooms in Chennai, nine showrooms in Bengaluru and 24 more showrooms in 16 other cities of Tamil Nadu and Karnataka. It also has six warehouses sprawling across 65,000 sq ft in cities like Chennai, Bengalauru, Madurai and Coimbatore. EFYTimes spoke to B A Kodandarama Setty, CMD, Vivek to know more about the retailer's business, the ongoing trends and major challenges in the consumer electronics retail.
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You have been in the consumer electronics business for the past 47 years. When did you get into organised retail?
We have seen the market and competition since the time when there were no televisions, refrigerators or washing machines in the country. We started off in 1965 when only small consumer electronics items and kitchen appliances were available and other things came in much later. People had to get in television sets from neighbouring countries like Singapore or Dubai. Around 30 years ago, a duty of 320 per cent was levied on imported electronics goods. But today, all international brands are available just at the neighbouring retail shops. Most of the leading brands have manufacturing facilities here. Today we have more than than 100 refrigerators at our retail showroom. In those days, refrigerators were available in only two sizes - 165L and 285L. Now, there are options of 800L or even four-door refrigerators. Customers have many options available when it comes to model, size, colour, etc. Consumerism has undergone a change and we need to move along with the market and trends.
We got into organised retail in 1995. That time we felt that there was a need to change as the consumer was changing and even the market trends. Being a family business, it is difficult to expand and get funding but by April 1995, we started as a Limited company. We are the pioneers in organised retail, followed by Shoppers Stop.
You started way back in 1995 as an organised retailer for consumer electronics. Why have you been limited only to Tamil Nadu and Karnataka, even when other organised retailers like Croma, Vijay Sales and the likes came in much later but have presence across India?
Retail is detailed. Our country is called a nation of shopkeepers even today. Modern retail has not exceeded more than 7 per cent till date. Ninety three per cent business is still done by families. Retail is highly competitive and fragmented, so if you want to run a stable and profitable business in retail, you need to have size, scale and market share wherever you go. You need to see the potential and penetration. What is the point of having one or two stores in each city? We can have 47 stores in 47 cities but it is not going to work at all. When we have so much business here, we should capture here and then move step by step. That is how large retailers in the world have grown. They did not open 1,000 stores across cities in an year’s time. It took 50 to 60 years for them to spread out across places.
What is the approximate area covered in the 47 stores?
It will be over 2.5 lakh sq ft. On an average, a store area is 5,000 sq ft. We have showrooms which have area as large as 10,000 sq ft and others having an area of 3,000 sq ft.
In Chennai and Bengaluru we have stores covering 10,000, 8,000 and 7,000 sq. ft. An important thing in retail is the availability of real estate in the market. Also, the location should be suitable for retailing. The three most important things in retail are – location, location and location. If it is a wrong location, you can not survive.
What is the kind of turnover and profit margins you have?
Viveks has an annual turnover of Rs 427 crore for the year ending March 2012. Regarding profits, I can say we are profitable. We have grown nearly 20 per cent year-on-year in turnover in 2012. Also, our profits have increased nearly 25 per cent with respect to last year.
You are talking of profits in a scenario when the consumer electronics industry has not grown as per expectations?
Certainly we have had profits. So much inefficiency has been setting in retail, we need to correct it. How one stocks his inventory, takes care of the turnaround time, focus on growth and promotions. All these things are very important, so we are working on them. We are also adding new showrooms.
How has the overall retail business gotten affected owing to the recent rupee depreciation and market conditions?
The market conditions are totally different right now but new markets are also available. How much market share you are taking from the market is very important. How many new markets you are going to is also equally important. Some segments like LCD, LED, cellphones, laptops and computers are growing in double digits. Customers are upgrading their products and thus large-sized refrigerators and washing machines are being sold now.
Which category is the prime contributor to your business?
Refrigerators and washing machines contribute the most to our turnover. LCDs and Plasmas are next in line.
As for air conditioners, that is seasonal business for us. In three to four months' time, we get 80 per cent of our turnover from the AC segment. We see sales throughout the year, but the main contribution comes during Diwali and New Year.
How are you different from other organised retailers?
Our differentiating factor is that we have a very good service network like no one else in the country. We have our back-end operations and we provide entire range of solutions to our customers. We have nearly 400 people working in the service centre. We even offer an extended warranty to our customer beyond the guarantee period. We also give an Annual Maintenance Contract (AMC) to our customers as part of our after-sales service.
We provide one-stop solution to our customers as we are also the authorised service centres for the brands that we deal with.
What are the major challenges in consumer electronics retail?
Real estate affordability is one of the biggest challenges for organised retail. There is also a lack of trained manpower in the retail segment and another issue is retaining the employees. As there is a shortage of manpower, the attrition rate is also high in this industry. It is also a very highly competitive business. We need to survive in very thin margins.
Upasana Rajpal, EFYTIMES News Network
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