Fortune on wheels

Has mobile retailing worked in India?

And ICICI Bank, which launched mobile ATMs in Mumbai and Kochi, isn't finding its ride all that smooth, either "" even after a year, the bank hasn't stepped up the expansion of its mobile ATM network.

Still, these stints behind the wheel have some valuable lessons for companies planning to ride the mobile retail bandwagon. Consider Apna Bazar. The Rs 140-crore department store launched its first mobile store in 1985, following a Central government directive to cooperatives to extend operations to rural areas.

Apna Bazar loaded 25 vans with about 100 low-value stock-keeping units (SKUs), compared to 500 SKUs in the stores.

The jingle-playing refurbished buses soon proved a hit with rural customers in Maharashtra: on an average, claims the organisation, each bus managed sales of Rs 3 to Rs 5 lakh a month. In 1995, Apna Bazar expanded its mobile strategy to cover Mumbai with 11 vehicles.

"We had a network of 30-odd stores in Mumbai, but we wanted to reach pockets where we couldn't be present," says Mahesh Kambli, additional general manager, Apna Bazar.

But to optimise revenues from each vehicle, the store had to fine-tune its operations. For instance, when it observed that running costs apart, staff costs""the buses were manned by a driver, a cashier and a salesman""were high, it trained one employee to perform all three tasks. Within three to four months, operating costs came down to 10 per cent of revenue, from the earlier 20 per cent.

Lateral thinking again came in handy when deciding the merchandise mix, especially as the number of SKUs increased to between 800 and 1,000 in the late 1990s. Also, different localities had different expectations from the mobile stores.

Echoes retail analyst Gibson Vedmani, "Mobile vans are largely for convenience. So there's no use stocking everything you have in a van. The SKU base has to be relevant to the markets visited."

Order forms were, therefore, distributed to get area-specific feedback on what customers wanted. However, the store realised that, given the variation in household consumption patterns, actual demand at specific times need not necessarily match the customer responses it gathered on a monthly basis.

Also, consumer surveys revealed that customers shopped at the mobile outlets mainly when they had run out of something.

Accordingly, by the late 1990s, the store began using the buses for home delivery too. "Daily sales jumped from Rs 8,000 to Rs 9,000 to as high as Rs 20,000 for some vehicles," says Ashok Chavan, deputy general manager, Apna Bazar.

Still, that wasn't enough to tackle competition from neighbourhood grocers and depreciation costs. From monthly sales per van of Rs 3 lakh to Rs 4 lakh in 1998, the figure was down to Rs 2 lakh to Rs 3.8 lakh last year.

The contribution of mobile sales to Apna Bazar's revenues also didn't cross 5 per cent. In 2001, the store slashed the number of vehicles in Mumbai to six, from the initial 11.

This year, the ban in Mumbai on commercial vehicles over 15 years old prompted it to withdraw all its vehicles.

Still, the cooperative departmental store hasn't shelved its mobile retail scheme: the vans will be relocated to other towns in Maharashtra like Nagpur and Ratnagiri.

If Apna Bazar's bete noire was the kirana store, mobile ATMs face competition from their fixed-venue counterparts.

Since December 2002, ICICI Bank has launched three mobile ATMs "" two in Kochi and one in Mumbai "" primarily to fill the gaps in its ATM network. It hasn't quite worked out that way.

"Unlike fixed machines, mobile ATMs may run the risk of being perceived as unreliable in terms of location," says a retail consultant.

Walk-ins at a mobile ATM are also not predictable, as customers who are in urgent need of cash may prefer travelling to a fixed ATM.

The numbers reflect that. ICICI Bank claims 50 to 60 transactions take place daily at its mobile ATM in Mumbai; compare this to the roughly 300 transactions daily at fixed ATMs. (Surprisingly, bank sources claim a better transaction ratio in Kochi, possibly because of the high proportion of relocated non-resident Indians.)

Therefore, the bank has turned its attention to exhibition grounds and conference venues "" where high footfalls may convert to transactions. At the recently-concluded World Social Forum, for instance, the bank claimed an average of 100 to 150 transactions daily on the mobile ATM.

"This has been the biggest learning. We will seriously focus on high-footfall areas now," says O P Shrivastava, general manager, ICICI Bank.

Another speed-breaker for mobile cash machines is the installation and operating cost. The cost of setting up a mobile ATM is around Rs 45 lakh (including the cost of the cash dispenser and the remodelled vehicle), while that for a fixed ATM would be Rs 15 lakh to Rs 20 lakh, including real estate costs.

Security costs are also high, accounting for 30 to 35 per cent of the operating costs of a mobile ATM, compared to around 20 per cent for a fixed machine.

Functional issues also hamper mobile ATMs. When ICICI Bank launched its mobile ATM, customers accessed the machines from outside the van.

Apart from security, maintenance became a problem. Also, in harsh sunlight, it was difficult to read the screen. Soon, the machines were fitted inside the vans.

Mobile retail outlets can clearly be a driver "" if they are planned strategically. "It is mainly a topline driver," says Advait Kurlekar, retail consultant, Cedar.

"Also, it works only if the product is mass and low involvement like groceries and personal care. Or it might end up diluting the brand image."