Tata Group’s consumer electronics retail chain Croma is in expansion mode. Apart from entering new markets, it has launched premium format stores for tech-savvy customers. Croma’s Avijit Mitra talks to Anirban Roy Choudhury about the different buying patterns of customers, the intense competition from offline and online retailers, and more. Edited excerpts:
When expanding Croma’s presence, how are store locations decided upon?
We have identified a set of cities. In India, the top 30 cities actually account for almost 50% of the Rs 2,000 crore consumer durables and IT (CDIT) business. If you take the top 100 cities, they account for around 65% of the total business. Then there are the next 300 cities that take care of the remaining 30-35%. Our key strategy is to open a warehouse and then set up a cluster of stores around it; because then our fixed costs (warehouse cost, advertising cost) get defrayed. Take advertising for example: if I advertise in Mumbai, 30 stores benefit, whereas if I advertise each store one by one, it becomes an expensive proposition.
What is more important: retaining customers or acquiring new ones?
In our mature stores, 70% are repeat customers, whereas the overall chain average would be around 50%. At the same time, we need to go into new catchments in the same cities or go to cities in newer geographies where we would get new customers.
Earlier, when our main category used to be computers — that were bought once in four years — customers would revisit once in 18 months. Now we have a range of smartphones on offer; and people buy smartphones once every six months for someone in the family.
What’s the TG for the Gadgets of Desire stores? Were they launched to compete with local stores?
Based on our research we found that most customers are aware of Croma; but they do not visit the store because it may be too far. So, if they are buying a television once every four years, it is likely that they will visit Croma. But, in the case of a smartphone, it less likely that they would travel so far. That is why we decided that we need to go closer to the customers. Moreover, online shopping has brought the store to the customer’s palm. Gadgets of Desire stores are typically for personal gadgets. We will also have a kiosk installed in the smaller stores which would make the entire Croma range virtually available to the customer.
What’s your competitive advantage over other retail giants that are operating offline?
Our fundamental advantage is the lifetime service we offer. Our relationship with the customer starts from the day of purchase and continues through the lifespan of the product and then through our e-waste disposal programme.
E-commerce players use precise data to target customers. What mechanisms do you use?
We too have a massive database — around nine million customers at this stage. We know exactly how customers behaved in the last six-seven years, in terms of what they have purchased and so on. What we do not want to do is disturb them, because this category is such that unless you are in the zone, you would not purchase a product. Our constant endeavour is to understand what it is that the customer wants and we do that in different ways. One of them is asking them directly. A customer can go to croma.com and place a wish: we give an offer on the product instead of bombarding them with irrelevant messages.
How is an online customer’s psyche different from the physical store customer?
Our experience is that if it is a higher ticket item, the customer would certainly want to see it somewhere, either at a friend’s place or in a store, before spending their hard-earned money. Where the customer buys from is a function of price and in-store demonstration. That is why, while pricing a product, we analyse all competitors, including online, to reach a fair price which may not necessarily be the cheapest.
How much do products from your private labels contribute to the business?
Private labels contribute around 6%. The effort is to give customers a premium product at a good price; therefore, we play only in categories where the technology is well tested and is likely to last, such as home appliances. So, in ACs, our private label contributes 20-30%; and in the mixer grinder, microwave and vacuum cleaner categories, it goes up to 40%.
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Source: Financial Express