Destination retail

The retail sector in India has witnessed a revolutionary growth
over the past few years. It was estimated to be at $325 billion in 2006 and has
been declared as one of the fastest growing sector of Indian economy by
Springboard Research. The Springboard report further stated that after real
estate and human resources, IT was the highest investment area for most large
and medium sized retailers.

Vendors are no doubt falling all over themselves to secure a
spot in the hearts and wallets of customers through glitzy retail outlets in
malls and other high-density localities. With the entry of big names like the
Tata Group's Corus, HCL's Digi-Life, Sahara's IT Junction or Pantaloon's
e-Zone in the IT retail arena, it is evident that retail is now fair game for
anyone who can afford to invest in real estate, inventory, manpower and handle
overheads over a period of time.

Some of the players in this game are the channel partners. They
might not be able to match up to the likes of the giants, but as the recent
World Cup underlined, the minnows can sometimes beat the sharks. This is
precisely what is happening in the retail business. A lot of business is being
routed through the smaller retail shops run by the channel, especially in
smaller cities. In fact Sanjay Agarwal, Director, Kolkata's Berlia Compu
Systems felt that retail is the future of IT trading. "The market dynamics
are changing undoubtedly and the need for retail has developed. The vendors have
also become more aggressive and are encouraging retail sales. The whole-selling
or similar trade models are going to fade away gradually. There will be only
manufacturers and retailers in future," he said.

Whether his ominous prediction will come true or not remains to
be seen. But Agarwal's peers share a similar belief that retail is the place
to be. Kamlesh Jain, CEO, Bangalore-based Premier Computers noted that retail as
a sector is poised for an even more rapid growth in future. Probably even more
than what Springboard Research predicts.

Early birds

One reason why retail business has taken off in India in the past couple of
years is because the average disposable income has increased and customers are
now willing to pay a price to own a brand of their choice. Keeping up with this
outlook, IT vendors have also dropped prices to play catch with the improving
demand. This has further propelled customers to buy IT products and set the ball
rolling for retail business.

And several partners saw this emerging business early and
invested in it to gain the first-mover advantage. Mohit Hegde, CEO, Bangalore's
Creative Infotech is well-known in the city's IT circle as one of the oldest
retailers in the business. He noted, "The recent surge seen in IT retail
sector is due to the increased buying power of the Indian consumer, besides an
increased demand."

Ashish Aggarwal, Director, Delhi-based Aanchal Computers too
opened his first retail showroom of IT hardware in 1996. He claimed,
"Though the IT retail concept started taking shape around 2001, we were
actually the initiators of this concept as far as East Delhi is concerned."

Ravikant Gupta, Proprietor, New Delhi-based Comhard Systems, got
into the retail business quite unexpectedly. He became a distributor of IT
hardware in 2002, but never gave a thought to retail. But destiny had other
plans in store for him. With the sealing drive by Municipal Corporation of Delhi
(MCD) last year, he started looking at retail as an alternate business
opportunity.

Peripherals Solutions (PSPL) too had gotten onto the bandwagon.
Pawan Walecha, Director, PSPL shared that the company had opened a retail outlet
in 2006 and was now planning to open one more in East Delhi.

What is interesting to note here is that most of these people
believe that the scope of retail business exists not just in the metros, but in
smaller cities as well.

Retail vs distribution

PSPL, which was started in 1994, was earlier into distribution. It was on
sensing the evolving market trend that Walecha switched to retail a decade
later.

Even big distributors have not been able to resist the allure of
retail and we have national players like Rashi Peripherals who have taken
aggressive initiatives in this sector for example, the Sony World showrooms that
they launched.

Vendors are also lending a helping hand to their retail
partners. This is because a retailer interfaces directly with the end-customer
and therefore is in the best position to drive sales.

What sells

Trendy gizmos like MP3 players, digital devices and pendrives are virtually
flying off the shelves of retail shops. One reason for this is that customers
are willing to spend more on lifestyle devices.

While these set of customers are willing to spend money to
acquire IT products, they are very particular about the kind of post sales
services they get from retailers. This is why most smaller retailers do not
perceive big brand like Big Bazaar, Vijay Sales, e-Zone, Sony Mony,
MobileNxt Teleservices, Plug In etc, as a threat. This is simply because their
clientele is far limited than the biggies and therefore they can offer better
service.

The big retail chains do not offer much personalized services
and for any after sale support, customers have to get in touch with the specific
vendor. This does not happen with the smaller retailers, who need to engage
their customers for life and therefore go out of their way to offer better
service.

Retail vs reselling

Now the big question that lies ahead is what is going to happen with
reselling business? With partners taking keen interest in retail, will the
reselling business get neglected?

According to some partners, the wholesale and reselling business
models will gradually slow down and then fade out, leaving only manufacturers
and retailers in the scene. Others think otherwise and believe that though
retailing is doing well, the wholesale and reselling business will never get
wiped out.

Speed breakers

Though retail is a good opportunity for partners, it comes with its set of
challenges. These include having the right location, utilization of space,
managing overheads, getting good manpower and offering prompt service.

While investment in real estate is the biggest hurdle, the next
in line is making use of every inch of space and even getting paid for it from
vendors. Skilled and specialized manpower required for selling at retail
counters and infrastructure difficulties can also act as speed breakers to
growth at times.

Another set of challenges that partners face is calculating
profit margins. Because every market has its own style they need to calculate
all the major pros and cons.

Focus area

With increasing competition, every outlet is making an effort to become the
first choice of customers. In the race, they have to be at par with the
standardized service that actually gives them a distinguished identity. Service
plays a major role in enticing customers because that is the ultimate thing that
they look for. That also includes delivery across the counter, which has to be
fast as customers have become time conscious.

Space also plays an important role in attracting customers as it
helps in explicitly showcasing a large range of IT products and accessories of
different brands that offer the customer with manifold options.

There are various elements that partners play with to give an
identity to their services like price of the products, location, experienced
staff, quality and service.

To put a conclusion, all businesses including retail must put an
aesthetic and purposeful effort to develop their own trademark and go for a
sustained investment in terms of effort, finances and management attention to
ensure that there is a continuous enrichment of quality service.

Amrita Tejasvi


amritat@cybermedia.co.in

(With inputs from Piyali Guha in Kolkata, Subbalakshmi BM in Bangalore and Syeda
Beenish Khalid in New Delhi)