As stores selling IT products mushroom at locations close to you, it’s obvious that retail will increasingly be the route for sales to the SOHO segment in India. Shipra Arora reports on this trend

Alok Bharadwaj says there has been a 30-40 percent growth in IT retail points in the last one year

Shopping for a printer or a monitor no longer means visiting some crowded alleyway in old parts of town (Lamington road in Mumbai, for instance), where the IT market is based. IT products and peripherals are now increasingly being sold in swank IT stores, white goods stores and even malls. With IT products getting increasingly consumerised, one fallout has been the growth of retailing in the IT industry. The nascent IT retailing market in Indian seems to be coming of age as players invest big bucks in this segment.

In spite of sluggish market conditions the last 1-2 years have seen a spurt in terms of IT retailing initiatives, especially in product categories like consumer hardware (home PCs, printers, etc) and Internet access packages. Companies like Canon India, Net4India, Samsung, Nokia or Vintron, whose retailing strategies are getting an upward boost, apart from the recent emergence of independent retail outlets like Agrani Switch, are pointers in this direction.

Sai Chandrashekhar says retail outlets are now looking beyond PCs to other IT products

Take for instance the case of Canon India, which has outlined an extensive thrust on retail as its strategy to effectively tap the SOHO market for its IT imaging products. The company has plans to have 500 retail points (including exclusive and shared outlets as well as small retail points) by the end of 2002, out of which 100 are already in place since January this year. Or consider the example of Net4India. The company has very recently added a whopping retail istribution channel of 10,000 outlets to the existing 1,500 outlets for its PC to phone calling cards. And this is not all as it plans to go beyond this to cybercafes. LG, which already owns brand shops in key IT markets in cities like Delhi, Mumbai and Bangalore is developing demo centres, in conjunction with retailers, for its IT products in A, B & C category cities across India.

Compaq will also be strengthening its retail strategy by concentrating on retail expansion in Tier 2 and 3 cities. The company will be investing on look and feel and ambience, besides subsidies on demo units. Agrani Switch, which accounts for 15 retail stores till March 2002, is targeting 64 stores by March 2003, an addition of 49 stores within a year’s time. Besides this, Switch Direct, which was launched in Delhi last year, will also be moving to Mumbai and Bangalore this year. According to Alok Bharadwaj, general manager, Consumer System Products Division (CSPD), Canon India, there has been a 30-40 percent growth in IT retail points in the last one year, thereby improving retail penetration within the IT industry.

R Manikandan says depleting channel margins have added to the need for branching out into retail

Even while IT vendors are setting up retail shops, the correct barometer to measure retail growth in IT, believe experts, is the extent to which business is happening through the retail route. Take Compaq. This MNC giant’s entire consumer business is conducted through retail. Canon, on the other hand is expecting a 40-45 percent contribution towards its IT hardware consumer business from retail in the next two years. These cases are pointers towards growth in this segment, especially in the last one year. Quoting IDC, P V Viswanath, country sales manager, Consumer Business Organisation, HP India, points out that the segment has been witnessing serial quarter-on-quarter growth of 10-15 percent. In terms of future prospects, companies and experts believe that the IT retail segment will continue to maintain a steady and stable growth.

Says Pankaj Mohindroo, CEO, Agrani Convergence: “If the CAGR of the IT segment is 35 percent, retail (home and SOHO) segment demand is expected to grow at the rate of 40-45 percent over the next five years.” According to Sai Chandrashekar, product manager, Desktop, Access Business Group, Compaq India, there are estimates of over 30 percent growth in next three years.

Factors for growth

Pankaj Mohindroo expects the retail segment to grow by 40-45 percent over the next five years

The primary factor governing all the other factors, point out experts, is the consumerisation of IT products. There has been a steady drop in prices of IT hardware consumer products, making them more and more affordable for SOHO markets, the primary driver for retail. While PC sales have plunged southwards in recent times, the market has been driven by the emergence of other products such as printers, scanners, Internet packages, cartridges, games and educational CDs, Web cameras, PDAs, UPS, accessories, etc.

“One significant impact of the prevailing situation is that retail outlets are now looking beyond PCs at an enhanced product range. The focus is increasingly on other IT consumer products as well,” explains Chandrashekhar. This factor, believe experts, is not only driving the Indian IT retail market towards growth but also towards greater maturity levels. Furthermore, Chandrashekhar points out that with zero duty coming in 2005 the concept will gain further momentum as it will significantly narrow the gap between the branded and the grey market.

“The tilting of a consumer’s preference towards branded IT products will open up the IT retailing market,” he adds. Currently, more than 50 percent of the pie is still with assemblers.

Another key factor driving the dynamics of IT retailing in India is increasing IT penetration and growing IT awareness amongst Indian consumers. This means that there is a wider range of IT products entering the spectrum of mass consumption. And the most effective way, points out Sodhi, of getting your product to the masses is through an effective retail network. Furthermore, growing awareness levels of Indian consumers means they have become more demanding in their IT purchases. Says R Manikandan, DGM (sales & marketing), IT Products, LG India: “With increasing awareness consumers are thus groomed to select and shop for their products. This fact further facilitates the need for brand shops, one-stop shopping, live demos, multi-brand/product option, value-added services, etc, for IT products.” In addition to this Manikandan also points out that depleting channel margins, owing to multi-tier distribution structures, is adding to the need for branching out into the retail segment.

However, despite favourable market conditions the question that comes to mind is whether the huge investments (owing to high real estate costs) into retailing initiatives are justified. Huge investments notwithstanding, the retailing concept does offer advantages in terms of meeting the pressing demand for increased value additions both from consumers and vendors, especially in sluggish market conditions. The value additions from the customers’ standpoint can range from a single point source for all computing needs, personalised service and support, special schemes and offers run by retailers, live demos, etc. “Retail gives the consumer the option to choose from a variety of products, try a live-demo, feel the product and finally make his decision. This process helps the consumer to differentiate the product on the basis of quality, with any brand that has excellent quality taking the lead,” explains Manikandan. And as Anand Iyer, country general manager of American Power Conversion points out, there is always the possibility of an impulse purchase.

However, there are still various issues and challenges marketing skills to draw consumer attention, proper display of materials, cost subsidy from brand owners, technical know-how and product knowledge of sales personnel, which need to be adequately addressed. These issues need to be resolved before IT retailing in India finally comes of age.