Croma to bifurcate large, small stores to take on e-tailers
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Mumbai: Electronics good retailer Croma, run by the Tata group, plans to set up a new network of small stores and enlarge existing ones to fight competition from online retailers like Amazon India and Flipkart.
Croma is working on converting existing small stores to large-format outlets of 7,000-10,000 square feet each, chief marketing officer Ritesh Ghosal said in an interview earlier this month. These stores will carry the entire assortment of consumer durables sold by the chain, including large television sets, refrigerators and other white goods.
“This also gives us space to provide shop-in-shops and branded kiosks, which help defray our rental costs,” Ghosal said.
Shop-in-shops are designated areas in a multi-brand retail store that are designed by a particular brand, which pays for the space.
Simultaneously, Croma is working on setting up smaller stores that carry a focused assortment of products. These include phones and fitness accessories that sell in high volumes but carry smaller price tags.
“The small store format, of 1,200-2,000 square feet size, is something we still have to crack,” Ghosal said. “We are looking at high-intensity, high-footfall, affluent shopping districts or office districts where the affluents work for (locating) these stores,” Ghosal said. He cited Fort in South Mumbai and DLF Cybercity in Gurugram in the National Capital Region as examples.
Ghosal said another likely candidate for the small store format is Croma’s existing network of airport stores called Croma Zip that sell mostly travel accessories. In FY17-18, the company will launch three small stores in Delhi and Mumbai modelled on the Croma Zip, Ghosal said.
Croma’s small store strategy comes at a time when specialist electronics retailers are trying to match rising online sales.
“Consumer appliances volume sales in India are dominated by electronics and appliances specialist retailers,” a Euromonitor report of November said. “However, sales of consumer appliances through online channels grew most strongly in 2016.”
Physical store chains like Croma accounted for 12% of consumer durables market, estimated to be worth $12.5 billion (Rs80,219 crore) in FY2016 while online retail marketing as a whole is expected to grow at a compound annual growth rate of 40-45% in 2014-18, the India Brand Equity Foundation (IBEF) said in a report published in April. The IBEF report estimates the consumer durables market will be worth $20.6 billion (Rs1.32 trillion) by FY2020.
“What has begun to happen is that shoppers will use physical retailers to check out the goods and then close the deal online,” said Dharmesh Kant, vice president and head of retail research at equities broker Motilal Oswal Securities Ltd. “The only reason to close (a sale) offline is because of the service and the touch-and-feel that a physical store offers.”
Euromonitor stated in its report that specialty physical retailers will have to move sales to the online channel too. “This has been happening around the world, and it will happen in India too”, Kant said. “Retailers like Croma will move to getting more sales from their online portals.”