Mumbai: A subsidiary of Reliance Communications Ltd (RCom), Reliance Webstore Ltd, will now sell mobile phones of various manufacturers through its stores and has signed up with at least 1,200 handset retailers and multi-brand outlets in 100 cities to act as a distribution centre.
Until now, Reliance Webstore, which operates a chain of 234 Reliance World stores, had been selling handsets designed for RCom’s wireless services. The telecom retail business currently contributes at least 50% to Reliance Webstore’s annual revenue.
“Customers will be having more choice in our stores that will be acting as hub or warehouse for multibrand handset retailers. Till this time, no retailer has become a distributor,” Reliance Webstore’s director and chief executive Sarup Chowdhary said.
To that end, RCom, part of the Reliance-Anil Dhirubhai Ambani Group, or R-Adag, will adopt a a hub-and-spoke model, where one store will supply to five-six handset retailers in the same region.
“The decision to sell multibrands and entry into distribution will yield three things. Firstly, it will lead to much larger throughput, (secondly) there will more people to sell our products.
Lastly, customers will be having great flexibility to get different models ‘just in time’,” Chowdhary said, using the phrase to explain how convenience of accessing inventory will provide more choices to buyers.
The move comes on the heels of RCom’s agreement with Coolpad Communications Pvt. Ltd, the Indian joint venture of Hong Kong listed China Wireless Technologies Ltd, to market and distribute its dual-mode smartphones in India. Dual-mode phones can access both CDMA (code division multiple access) and GSM (global system for mobile communication) networks.
According to research firm IDC India, for the 12 months ended June, mobile handset sales grew 6.7% to 101 million units in 2009. India has at least 440 million mobile subscribers, and is adding around 10 million a month on average, according to data from the Telecom Regulatory Authority of India.
Analysts say organized national retail chains stand to gain as the mobile handset retail space is very unorganized.
“Besides Nokia’s stores and the MobileStore, there are not many players with significant national visibility and reach, thus leaving room for new entrants to establish their presence,” said Prashant Singhal, telecom advisory head at the Indian arm of consultancy Ernst and Young.
Pricing will be a key differentiator and being a distributor would give RCom a “greater margin to play with”, Singhal said. “Being a distributor and having a national retail footprint will also help in reducing overall inventory costs.”
Operational efficiency would also make a difference as sales margins on handsets are “wafer thin”, he said.
Shares of RCom on Wednesday closed 2.08% lower at Rs169.35 each on the Bombay Stock Exchange, while the benchmark Sensex index closed 3.29% lower at 15.912.13 points.
On Tuesday, RCom said it is launching a pay-per-second tariff plan, a strategy some other operators have already rolled out to lure subscribers.