admin
July 28, 2013
Raghavendra Kamath, Business Standard
Mumbai, July 28, 2013
Reliance Digital, the consumer durables and infotech (CDIT) retail chain of Reliance Industries, is becoming a challenger to Croma, run by Tata Sons-owned Infinity Retail.
Though Croma is the “first large specialist retail chain for electronics and durables” (as it calls itself) for electronics and durables with its Croma mega stores, small version Zip stores, kiosks and online vertical www.cromaretail.com, Reliance Digital seems to be doing everything to catch up with the pioneer.
While Croma, which set up its first store in 2006 in Mumbai, has 90 stores, Reliance Digital, which debuted a year later in Ghaziabad in the National Capital Region, has about 151 stores which includes 19 iStore in tie-up with Apple Inc.
Reliance opened nearly 46 stores in FY 2013 and 12 stores in Q1 of FY 2014 while Croma’s numbers are not known. It is looking to open 15 stores this financial year.
Retail experts say the renewed focus of Reliance on its digital formats has been prompted by the fact that this business has been the first to break even among all its formats. For the financial year 2013, Reliance Digital made a profit after tax of Rs 64 lakh on a turnover of Rs 2,166.38 crore. In FY 2012, it made a loss of Rs 55.13 crore on a turnover of Rs 1,234.04 crore. The digital vertical contributed 19 per cent to Reliance Retail’s Q1 FY 2014 turnover at Rs 3,474 crore and had a like-to-like growth of 17 per cent during the quarter.
In comparison, Croma, whose revenues were around Rs 2,500 crore in the last financial year, is looking at a 30 per cent growth this year. The retail chain saw break-even at the profit before depreciation, interest and tax level in FY 2013 and is looking at a net profit this year.
Retail experts say organised chains such as Reliance and Croma are eyeing the huge organised opportunity in the CDIT market, which is pegged at around Rs 125,000 crore, and organised trade is just 10 per cent of that. The total market is expected to double by 2016.
“There is no surprise that Reliance is looking at this segment so seriously. At their revenue target of Rs 40,000 crore- Rs 50,000 crore, CDIT will be the second biggest area after food,” said Arvind Singhal, chairman of Technopak Advisors, a retail consultant. “The market opportunity is so much that there is room for more players.” Pankaj Gupta, practice head, consumer & retail, Tata Strategic Management Group (TSMG), said,”The bigger competition is between organised and unorganised players.”
Business model
Croma entered the segment and tied up with Australian retailer Woolworths for sourcing and backend support. Subsequently, Croma bought the India wholesale arm of Woolworths. This partnership gave Croma a strong footing in sourcing, offering a wide variety of products and price advantage vis-à-vis others, and also helped them in private label development, said consultants.
Croma sells over 6,000 products and has 200 private labels in niche categories. The chain is looking at 7-10 per cent of its turnover to come from private labels.
Since the beginning, Croma followed a deeper penetration strategy in cities such as Mumbai and Bangalore where it is present. The early mover advantage gave Croma access to prime properties, strong partnership with vendors and good customer recall among others, retail consultants said.
Beginning with large format stores, Croma rolled out Zip stores and kiosks at airports, hypermarkets and so on and launched its e-commerce venture.
Reliance Digital, on the other hand, hired services of retail consultants and domain experts for the retail rollout and took care of its backend operations itself. For Reliance, forging a tieup with Apple for iStore was one of the plus points, though it also started focusing on smaller Digital Express stores later. These stores mostly stock high- tech connectivity and entertainment products Here, it brings in the services of ResQ, its multi-product service, to explain and inform about high-technology products.
However, Reliance insiders say unlike Croma, the company is not focusing much on the e-commerce. Croma, on the other hand, is expecting a Rs 2,000-crore turnover within two years from its e-commerce venture.
Reliance also launched durable and electronics private labels under the Reconnect brand which contributes five per cent of Digital’s revenues. The products are 20-30 per cent cheaper than national and overseas brands.
Reliance Digital says ResQ is its biggest differentiator, as no other retail chain has such a multi-product, multi brand and multi-location service network.
Though retailers such as Vivek’s in Chennai has tried out multi-brand service centres in the past, some consultants, however, say such ventures are challenging given the lower margins in the business, price sensitivity and fickle mindedness of consumers. “Service does not help you attract customers unless you get them through word of mouth,” said Devangshu Dutta, CEO of Third Eyesight.
On its part, Croma has a 24-hour call centre support besides the Croma Care Centre for its private label products.
