“Club of Knowledge Hunters”

Retailers adopting innovative strategies for this festive season

Posted by retailigence on October 9, 2008

Early this month, consumer electronics and appliances retail chain Jumbo Electronics Co. included “wedding packages” as a part of its festive sales pitch. The idea was to cash in on the coming wedding season by putting together a basket of articles most likely to feature on every young couple’s wish list: a liquid crystal display (LCD) television set, expensive mobile phone, laptop, camcorder, MP3 players, digital camera… all squeezed together to fit budgets that range from Rs1 lakh to Rs5 lakh. Though heavy discounts are usually part of the festive sales pitch, retailers such as Jumbo are adopting innovative strategies and packages to cut through the clutter and grab consumer attention in a competitive market.

So, whether it’s customized electronics and appliances packages for newly-weds; an offer by Tanishq India Ltd for consumers to book their gold jewellery in advance; exclusive previews and sale of products at Tata group’s Croma retail chain; or Kirtilal Kalidas Jewellers Pvt. Ltd’s decision to partner with fashion designer Rohit Bal on a new collection for the festive season, retailers are leaving no stone unturned.

The idea is to get consumers to spend more during the festive season, traditionally considered a time when even families with the most modest means loosen their purse strings. With real inflationary pressure and a downturn on the stock market, retailers are worried that consumers may cut down or postpone discretionary spending such as buying jewellery and clothes during tough times. So, retailers are going out of their way to woo consumers with innovative offers, which are over and above the traditional offering of price discounts, freebies and easy payment options.

“India is one of the largest consumers of gold, so there is a tendency for upward fluctuation in gold prices during the peak season,” says Saumen Bhaumik, head of retail at Tanishq India, adding that up to 30% of gold purchased from Tanishq stores during the peak season is pre-booked through the company’s scheme. Croma, on its part, is offering consumers access to an exclusive preview and sale of certain products. “Not only does it help draw new customers and attract footfalls to our store, but it also helps position the brand in the onsumer’s mind,” says Ajit Joshi, managing director and chief executive of Infiniti Retail Ltd, the Tata subsidiary that runs the Croma chain.

Experts say that such innovations help retailers stand out in the crowd. “It helps attract consumers… Retail innovations such as these are a call to action,” says Gibson Vedamani, chief executive, Retailers’ Association of India. Retail chains such as Reliance Digital, the information technology and consumer durables arm of Reliance Retail Ltd, Salora Retail Ventures Ltd, Future Group’s Home Solutions Retail Ltd and Vishal Retail Ltd, among others, areeither offering products from television sets and digitalcameras to microwave ovens and refrigerators at a price lower than the maximum retail price (MRP) or bundling a number of products along with free gifts to attract customers.

Consumer durables retailers earn an average margin of around 10-12% across product categories, experts say.
Some categories such as mobile phones offer lower margins. Most of the retailers are bearing the cost of thepromotions and offers on the basis of the margins they get from manufacturers. Also, volumes help them negotiate a better deal when it comes to bundling different products together. “Retailers are building on the opportunity which the festive season offers, even if it means letting go the margins to some extent, since they deal with a lot of brands and huge volumes,” Anil Rajpal, vice-president of consumer goods and retail, KSA Technopak, a New Delhi-based retail consultancy, said. From the manufacturers’ point of view, the focus of the leading consumer durables brands will be to offer value for money instead of playing up the discount part.
“The industry is seeing a healthy trend where the consumers are opting for products which provide value for money. Most of the leading industry players are talking about features and the USPs (unique selling propositions) of the product, others will also follow soon,” said Suresh Khanna, secretary general of the Consumer Electronics and Appliances Manufacturers Association.

The first half of the year was difficult as increasing input costs put pressure on margins. Profitability suffered as retailers could not pass on the entire burden of high input costs to consumers despite price hikes. With new firms entering organized retail and existing ones expanding their operations, the total share of the organized consumer durables retailers is likely to double this year.

“Last year the consumer durables retailers had 7% share of the total market, which is likely to go up to 12-15% this year,” Khanna said. “The consumer durables industry’s turnover is expected to touch Rs30,000 crore this year.” Most retailers are also offering to the consumers on their private label items. “Consumers can look forward to a discount in the range of 10-35% across product categories on the MRP if they buy our private label (Z-line) items. We are also extending the discounts on the branded products as given by the companies,” said Kushagra Seth, head of marketing at Vishal Retail.

Retailers such as Reliance, Vishal and E-Zone already sell a wide range of electronics items under their own brand names. Croma is likely to soon jump on the bandwagon. Future Group’s HomeTown is all geared up for Diwali. “For Dussehra, Hometown is giving free gifts, which will be followed by cash-back offers around Diwali,” Mahesh Shah, chief executive officer of HomeTown, said.

Salora Retail’s Terminal is offering discounts of 29-35% on health care items, free gifts such as DVD players, printer and pen drives on purchases of laptops. Consumers can also look forward to getting a direct-to-home TV connection with installation free on purchasing an LCD television.
Source: Livemint


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