Doing business despite LFRs

The theme of the panel discussion held at Com-IT Expo 2007, which was
organized by Traders Association of Information Technology (TAIT), was 'How to
do business despite large format retailers or LFRs'. Needless to say, this was
the discussion that was widely awaited by a lot of dealers who have been
suffering from loss of business, thanks to the mushrooming of LFRs.

The panel discussion was moderated by Vinita Bhatia, Executive Editor, DQ
Channels. Voicing the concerns of the retailers was Naresh Popat of Checkmate
Computers and Shashank Dalal of Unicomp Systems, while Paras Shah, MD, Neoteric
Infomatique and Ashutosh Ghavi, Retail Head, Intel tried to come up with
workable solutions for this business dilemma.

LFR: A threat

For long, partners have been ruing that the advent of LFRs has signaled
diminished business for partners. This is because LFRs buy products in bulk from
vendors or distributors at lower price than the market-operating price at times.
In turn they can sell the stock at lower prices as compared to smaller
retailers. Plus, they offer a mall-like ambience which customers are
increasingly getting fond of.

But the lead question at the panel discussion was: 'Are LFRs truly a major
threat for the channel?' Shah admitted that LFRs are a threat to the channel
community, but rather than lament about their existence, it would be better for
the channel to gear up and deal with it. “Partners need to find their own niche
and develop their own specializations. We should not think of LFRs as a threat,
we should take them as an opportunity and develop business as per that.”

Agreeing to this, Ghavi from Intel added, “Partners now need to look into
innovations and create a differentiator between themselves and LFRs. They need
to see what is it that LFRs offer to customers and what is it that they can
offer better.” One good example he gave was that of urging partners to bundle a
few hours of PC usage training with every machine they sold. “This will be of
great interest to old people who often buy PCs to keep in touch with their
children abroad,” he added.

The panelists (L to R): Naresh Popat of Checkmate Computers, Shashank Dalal of Unicomp Systems, Paras Shah, MD, Neoteric Infomatique and Ashutosh Ghavi, Retail Head, Intel

Another example was of giving kids an opportunity to develop their own PCs by
giving them various assembling options. This can be followed with a certificate
that states that the child had personally designed the entire PC, which will
attract the youth to buy PCs from small time retailers as against the LFRs.

The retailers on the panel agreed with these suggestions and added that
specialization is the niche of the channel and this will hold them in good stead
in times to come. Popat, who owns a retail shop in Borivali added that it was
difficult for LFRs to employ skilled manpower but partners have skilled
manpower, which they only need to develop. He added that retaining people was
not easy when they were offered hefty packages by LFRs, but if the staff were
given conducive working environments and a scope for growth they would be
willing.

“In most retail outlets the back office job is done by the retailer himself.
He just needs sales people who can deal with customers very well and educate
them on the right products to purchase,” Popat added. Keeping this scenario in
mind, it was important to impart soft skill training to these sales staff so
that they are able to convert prospective customers to loyal ones easily.

Dalal also laid emphasis on constant investment into the business to grow it
and improve the quality of their work. This could be in training, marketing or
even word of mouth publicity. Agreeing to this, Popat added, “Positioning of
ones brand properly is a very important for partners. We now need to pose our
brands as a solution. We need to take on the retail outlets by giving value adds
to customers, like services on a call and engineers on a single call.” He even
suggested giving customers the option that if they want certain services they
ought to pay a nominal sum for it or go for packaged services at a discounted
price. “We have to rely on services more rather than box pushing, because that
is our key strength,” Popat noted.

The other challenge that smaller retailers face vis-a-vis LFRs is retaining
customers. LFRs can attract customers in droves with their marketing gimmicks,
which a retailer might not be able to do. In such a situation, a retailer should
strive harder to retain his existing base of customers rather than spend time
and money on acquiring newer ones. “There was a time when a customer would call
me asking for a product at a lower price, because another dealer had offered him
the same at a reduced price. I would then tell the customer to go to that dealer
if he wanted. Now, I make the customer understand that though I might be
offering the product at a slightly higher price, I would take responsibility of
the service and outline what other services I could offer him,” recalled Dalal.

All agreed that personalized services would distinguish the smaller retailer
from the LFRs and therefore the former ought to invest in it. Shah said, “The
most important for the channel now is to leave the traditional type of behavior
and be very polite and generous to the customers. This will help the channel to
retain the customers that it already owns and in turn this will be a win for the
channel against the LFRs.

One benefit that LFRs have over retailers is the breadth of products that
they offer under a single roof across a spacious outlet and in a comfortable
ambience. One suggestion that came forth from Shah to counter this was setting
up a hub for IT so that customers were given a wider choice of products in the
same area. This could be in the form of housing dealers in a single building or
in an area. While the thought was very good, the implementation is not as easy.
Speaking on behalf of TAIT, Umang Mehta an executive council member said, “We
have been thinking about getting a designated area where a lot of dealers can
operate from, just like Nehru Place. But this calls for a lot of investment,” he
maintained.

However, he added that this suggestion would be the ideal way to beat LFRs
because customers can touch and feel different models and brands in a single
place and make quicker purchase decisions.