|Rediff India Abroad Home | All the sections|
Branded chains swamp mobile retail market
Shuchi Bansal in New Delhi | May 26, 2008 12:15 IST
It's not difficult to see what's keeping Sanjeev Mahajan, CEO, Hotspot, the mobile retail chain of Spice Corp, on his toes. In the face of stiff competition from rival retail chain brands -- Mobile Store, Subhiksha Mobile and M Bazar, to name a few -- in the telecom products segment, he's turning aggressive to secure a leadership position for Hotspot.
So the over two-year-old chain is targeting 1,000 mobile phone and accessories' outlets under the Hotspot brand name by the end of the year. "We are opening an outlet a day and we already have 325 Hotspots in important cities," says Mahajan.
Interestingly, though, Mahajan is not the only one thinking big. Subhiksha Trading Services' Managing Director R Subramanian also intends to double his Subhiksha Mobile stores � both in the standalone format and the shop-in-shops -- from the current 740 outlets.
"In the last one year, Subhiksha Mobile has grown much larger than the others (read rivals) not only in terms of the number of stores but also in terms of volumes as well, to become the largest telecom products retailer," claims Subramanian.
Clearly, the mobile handset market is buzzing with new branded retail chains such as Reliance [Get Quote] and Aditya Birla Group entering the fray and the existing chains expanding their foorprint.
Take Pantaloon [Get Quote] Retail's JV with Axiom of Dubai, for instance. The company is re-branding its standalone retail chain Mport to Axiom stores, which is among the largest telecom products chain in West Asia.
The mass market products will continue to be sold under M Bazar, its shop-in-shops at the Big Bazar outlets, while the lifestyle products will find their way into Axiom. By the end of the year, M Bazar will grow from 100 to 428 outlets, while the company will open 35 Axiom stores by then.
The lure of the telecom products market is easy to explain. India's cell phone market adds eight million subscribers every month. The replacement market is close to 55 per cent already (in Delhi, the figure is 60 per cent). A BCG research says that by 2010, India's replacement market will be 70 per cent.
Put together, the size of the handsets market is about Rs 70,000 crore (Rs 700 billion) a year. Commenting on why Pantaloon entered telecom retail, its spokesperson says: "It is a bulk volume business. The margins are made on total volumes sold."
Needless to say, the opportunity is enormous. The industry has been dominated by the unorganised players -- nearly 500,000 mom and pop stores sell phones, recharge cards and accessories.
What's the USP of the branded chains that are rolling out nationally, compared to the neighbourhood shopkeeper stocking mobiles?
Hotspot hopes to beat competition by offering hi-end cameras, iPods and laptops at its 450 sq feet to 600 sq feet showrooms. This is in addition to mobile phones, memory cards, pouches and other accessories that it already stocks.
On the cards are other VAS (value-added service) products. While music videos were introduced two months ago, a full-length feature film on a chip will be the next big thing at Hotspot. "You could watch this film on your mobile screen. And the USP is that we are offering legal content," says Mahajan.
Subhiksha, meanwhile, is offering "only the lowest and best value on all handsets" at its stores. Subramanian says that the share of sale of VAS products and personal electronics in its portfolio is low "but over the next three to six months we hope to make significant progress in this direction".
Will the mom and pop stores selling phones shut shop as branded chains grow? "No. Have the 'kirana' shops closed down because of branded food chains?" asks the Pantaloon executive. "Besides many of them will become franchisee of the bigger brands," adds Mahajan.
Organised retail, which started off with a market share of less than 1 per cent two years ago, now enjoys 15 per cent share. This will swell to 40 per cent in another two to three years. Of course, once FDI in retail is cleared by the government, Sanjeev Mahajan's job could only get tougher with expert international retailers such as Crazy Jones and Eurosat setting their foot in India.