Facing high rentals, Skoda takes route to boutique showrooms

Facing high rentals, Skoda takes route to boutique showrooms
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First Published: Mon, Aug 03 2009. 11 21 PM IST

Prime location: Arshia Motors in Connaught Place, New Delhi. Since it opened last month, the Skoda showroom has already booked 23 orders. Ramesh Pathania / Mint
Prime location: Arshia Motors in Connaught Place, New Delhi. Since it opened last month, the Skoda showroom has already booked 23 orders. Ramesh Pathania / Mint
Updated: Mon, Aug 03 2009. 11 21 PM IST
New Delhi: When Mandeep Dhingra, a Faridabad-based dealer for Skoda Auto India Pvt. Ltd, wanted to expand into the Capital last year, he found his options limited by high realty costs.
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“Putting up a showroom in the heart of the city was out of the question,” he says. At best he could afford a place in the outskirts alongside his competitors’ dealerships.
Rising real estate costs are a problem that dealers often contend with. Unable to cope with these costs, there have been instances in the past of dealers shutting down. In city centres, it is only those dealers who already own real estate that are able to run viable businesses, according to the Federation of Automobile Dealers Association.
Realizing this, Skoda Auto decided to go down the boutique route and set up showrooms that had only one or two cars on display and focused more on advertising the brand. Luxury car companies such as BMW AG have also opened boutique showrooms, but Skoda’s is the first time a mass-market company has chosen to go down this route.
The boutiques are based on the exhibition format the company has adopted worldwide—white walls, movies on the company running on flat-screen television sets, company merchandise such as car models, hats and key chains for sale.
Last month, after working on the concept for several weeks, it unveiled Arshia Motors in Connaught Place, the Capital’s bustling central business district. On a recent afternoon it had two cars on display. Skoda is still experimenting with the concept and says that it might decide to have models, yet to be introduced in India, such as the Roomster, a four-door coupe, placed there to showcase its brands.
At between 1,300 and 1,500 sq. ft, the boutiques are one-third the size of a traditional dealership. Arshia’s rental stands at a manageable Rs3.5 lakh per month.
In the two weeks since it opened, the showroom has surpassed the company’s expectations. Already 23 orders for the Fabia, Octavia, Laura and Superb have been booked.
Its location gives prospective customers from offices in Connaught Place the chance to walk in during lunch hours or after work and test-drive their cars.
Prime location: Arshia Motors in Connaught Place, New Delhi. Since it opened last month, the Skoda showroom has already booked 23 orders. Ramesh Pathania / Mint
In a few cities, dealers are considering shifting their large suburban showrooms and opening small boutique showrooms in the city centres, which take only about 45 days to set up, says Ashutosh Dixit, senior general manager (sales and network development) at Skoda Auto.
In picking dealers for what the company sees as an experiment, Skoda has been careful. For one, the company plans to offer only tried and tested existing dealers the chance to set up boutiques.
This is because a dealer’s job doesn’t end with making a sale. Cars have to be serviced regularly and these workshops can only be set up on the outskirts of cities. Arshia Motors plans to service cars at its existing facility in Faridabad. And so, viewed through this prism, the boutique is a smart way of making an extension counter.
Maruti Suzuki India Ltd, the country’s largest car maker, has set up bare-bones extension counters in small towns across India.
For now, Skoda says it is very satisfied with the results of this experiment. It plans to set up five more boutique showrooms by the end of this year in cities such as Mumbai, Pune and Bangalore.
In Mumbai, for instance, the company says it could look at a boutique in Nariman Point, which has so far been a no-go area for car makers because of high rentals.
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First Published: Mon, Aug 03 2009. 11 21 PM IST
More Topics: Auto | Skoda | Boutique showrooms | BMW | Roomster |