The Essar Group, a $20-billion diversified conglomerate, is charting out a new retail blueprint for the entire group and expects 25 per cent growth annually in its newly-created retail company, Essar Retail.
Essar Retail has a combined turnover of $1.5 billion (Rs 6,750 crore), over half of which is contributed by steel retail followed by retail business in mobile and consumer durables, and information technology products and oil retailing.
Essar has brought all its retailing arms — The MobileStore (TMS) and The ElectronicStore — which retail mobile and consumer durables and information technology products, and Essar Hypermart, which retails steel and fuel retail operations of Essar Oil, under Essar Retail to draw synergies. Alok Gupta, the former director of Café Coffee Day, who recently moved job and city to join the group, is heading Essar Retail as its chief executive officer.
“This allows us to operate across the geographies — from metros, mini metros to rural India. We can talk across SECs (socio-economic classifications), age groups and consumers with diverse needs. We can offer life-time value for consumers, who use mobiles, energy and steel needs and keep coming to us for their needs,” Gupta said in an exclusive interaction with Business Standard.
He, however, ruled out venturing into any new segment of retail in the immediate future.
“For the next 12-24 months, we will continue to focus on our current verticals and within each vertical, we need to put new channels of retail, we have to explore the whole e-retailing and digital space,” Gupta added.
Essar Hypermart has 616 steel retail outlets and plans to increase the number to 750 by the end of this year. TMS, Essar’s telecom retail chain, has 1,000 stores and has 50 per cent share of the organised market . In the current financial year, TMS plans to add 250 stores, of which 75 per cent would be via the franchisee route. In fuel retail, Essar Oil runs 1,381 outlets, and an additional 254 are under various stages of construction.
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Gupta says all the retail formats are Ebitda (earnings before interest, tax, depreciation and amortisation) positive and he expects Essar Hypermart and TMS, its major retail ventures, to break-even by 2012-13. He did not give break-ups for the verticals.
Steel retailing business is getting readied for the second phase of growth.
Essar is collaborating with designers and fabricators to bring out better quality designs in products and sell these in its hypermarkets.
“If you look at steel products we use in our daily lives, their designs have not changed in the last 20-25 years. We believe there lies an opportunity. We are looking at pre-fabricated doors, equipment which we use in day to day life,” says Gupta. He says the company does not mind local retailers selling the products as long as they are produced by its manufacturing partners who tap designs provided by Essar and make everything with the steel made by the company.
Essar Retail also plans to make its steel outlets as a one-stop shop for construction-related products. Through Essar Hypermart and other formats such as Expressmart and Expresspoint (both are dealer-owned and dealer-run) it will sell cement, paints and other hardware under one roof.
Mobiles and IT products
Gupta says the company plans to aggressively sell consumer durables and IT products through TMS. It has already started selling durables and IT products in 50-odd stores in NCR and plans to take it to other cities.
He believes display and catalogue sales is possible in 40 per cent of TMS stores and the rest through catalogue sales.
“We believe the market is moving towards small-box formats, where consumer wants easy access. On an average, we do seven and eight million transactions in TMS across the categories. Our objective is to work with footfall and try and fit into consumer durables and IT,” he adds.
TMS has kept the assortment fairly tight and displays LCD televisions, laptops and cameras on display and rest like washing machines, refrigerators and so on are sold through catalogue.
But how confident is Essar of retailing durables through TMS work when a host of chains such as Croma, Reliance Digital and Next offer wide range of products at competitive prices?
“We offer sheer convenience, value and credibility customers do not mind buying a high value item in small box store. It is a matter of leveraging our current relationship and provide right value,” he added.
The company is also looking at retailing consumer durables and IT products through Essar Oil outlets.