The next time you walk into your trendy branded mobile retail store you might come out buying an MP3 player, a Sony Play Station or even a laptop rather than a mobile phone.

Saddled with very low margins which are making the business not viable in many cases, mobile branded retail stores are now increasingly turning their focus on their non-mobile handset business.

Organised retail, which started off with a market share of less than 1 per cent two years ago, has now grown in stature with the big boys entering the fray, and currently has a 15 per cent share. Companies such as Spice's Hot Spot, RPG group's RPG Cellucom, Essar's Mobile Store, Subhiksha and Kishore Biyani's ConvergeM (which has three mobile branded stores) have all entered the business hoping to make big bucks.

And their share of the total business is expected to increase to 40 per cent in another two to three years. The retail market for mobile phones - handset, accessories and airtime - is valued over Rs 70,000 crore (Rs 700 billion) and growing at the rate of 15-20 per cent.

That is the good news. The bad news is that sales margins of mobile phones are being squeezed due to cut-throat competition from the mobile players who are playing the pricing game in order to gain market share.

Worse, prices of phones are being reduced continuously, adversely impacting margins of the retailers. And new players especially telcos such as Reliance Communications [Get Quote] are also planning to get into the business by leveraging their large retail reach through the Reliance Web World.

"Turning to other products that can be used on the move, including MP3 players, cameras and mobile accessories, is a natural evolution that's taking place in this market" said Sanjeev Mahajan, CEO, Hotspot (mobile retail arm of Spice Group).

He points out that while the profit margins in the mobile handset business is 3 -4 per cent, profit margins in mobile accessories are almost 40 per cent and in other music and gaming products, it is 15 -20 per cent.  So it makes sense to stack other related products too.

The company has already shown a tangible shift in this direction. Last year, the company earned 95 per cent of its revenue from the mobile hand set business, which declined to 85 per cent this year and is expected to go down to 60 per cent in the next few years.

Similarly, RPG Cellucom, a part of the RPG group, is aiming at balancing its mobile hand set business with its non-mobile business that includes laptops, mobile accessories and music devices.

"We get 75 per cent from our mobile business, 15 per cent from our laptop business and rest from other products. Our focus is on establishing ourselves as mobile service providers which includes other products other than mobile handsets," says Biswajit Pandey, head, marketing, RPG Cellucom.