Purvita Chatterjee, The Hindu Businessline
Mumbai, October 7, 2013
In the late 1960s, when televisions were still unheard of in India, Nanu Gupta was busy setting up a store for consumer durables in the heart of Mumbai. Having worked with an Usha International distributor, he knew the nuances of the consumer durables business. He decided to strike out on his own by selling the same sewing machines and fans he had dealt with earlier.
Funds were limited and so was space. Gupta borrowed Rs 2,000 from family and friends to set up his first store in Mahim in 1967. To make room for customers, he had to keep a folding chair in the 40 sq ft store named Vijay Sales after his younger brother.
Gupta started off by taking goods on credit directly from manufacturers and paying them after sales. Direct purchases helped him save on dealer commissions and pass on the benefit to consumers in the form of prices lower than the competitors. The store was soon a hit and footfalls multiplied rapidly.
The outlet now measures 40,000 sq. ft. and has become a landmark in the island-city. Vijay Sales is now run by the second generation with Nilesh Gupta (son of Nanu Gupta) as the Managing Partner.
“It was not easy to get customers as there was tough competition even in those days. We kept all the TV sets on at our stores unlike competitors, who switched them off. This was a way to attract customers to our stores,” says Nilesh Gupta.
“Today, we try to beat the competition by bringing in branded flat panel and plasma TVs even before companies start advertising the new models,’’ he adds.
Vijay Sales stocks its goods in nine warehouses that supply to all the 54 stores across Maharashtra, Gujarat and Delhi — the classic hub-and-spoke model. That helps it maintain optimum inventory levels, without over- or under-stocking any item, besides reducing warehousing costs. “Logistics is very critical to our business and we maintain individual distribution centres in every city,” says Nilesh Gupta.
What has also helped the firm do better than competition is its willingness to buy out the inventory MNC players are saddled with at a discounted price and charge consumers cheaper rates. “That helps propel sales,” he adds.
Vijay Sales scaled up rapidly from 2006, sensing impending competition from biggies such as Reliance Retail, Croma. “Modern trade players actually challenged us to scale up and there were even some who wanted to buy us out. But that was the time we decided to expand our operations and entered new States,’’ said Gupta.
This expansion was not without its share of challenges. Being an unknown retailer in the northern market, there was the question of trust. “We asked consumers to call up just about anyone they knew in Mumbai to verify our credibility. That worked for us.” Outside Maharashtra, the firm is now better known as ‘Mumbai Wali Company’.
Devangshu Dutta, Managing Director of retail consultancy firm Third Eyesight, gives the company a thumbs up. “Vijay Sales has been able to transform itself, in a staged manner, from a family-run business to a modern trade format.”
The consumer durables business continues to run on thin margins, about three per cent of net sales, making it difficult for smaller players to scale up. But Vijay Sales does not want to exercise the franchise option to widen its reach. “We feel a franchise is unlikely to add any value to the business. The durable brands already have equity and the business will not be any different if it were to be run by a franchise,’’ says Nilesh Gupta.
While the firm claims it has been making profits consistently (Gupta says they were profitable from Day 1), sustaining them could be difficult in the current economic environment. “Expenses are on the rise. Companies are reducing the margins but if the cost increases are passed on to the consumers, it will result in a massive slowdown. Also, the rising dollar has affected our import-dependent industry,’’ observes Nilesh Gupta.
Given the uncertain business scenario, Vijay Sales is not in a hurry to become a pan-India player.
But its ‘slow and steady’ approach will ensure that it doesn’t have to lament over expansion at a later date. “We are not in a hurry; we have been around for the last 46 years and would want to last many more years,’’ says Nilesh Gupta.