 "Interest no bar for Mobile Store")
The website of the Essar group-owned mobile phone retail chain is full of cash-back offers and new launches. The Mobile Store (TMS) also happens to be the largest in the country. Till recently, it also had EMI schemes. However, the recent RBI ban on the so-called zero per cent EMI (equated monthly instalment) scheme from banks has been a dampener for the retail brand.
While RBI's ruling is meant to discourage veiled, additional processing fees charged by way of fineprint, it has also dealt a blow to affordability, gained through availing of such schemes through a credit card. Prashant Agarwal, joint-managing director of management consultancy Wazir Advisors says the move could impact TMS' sales by 10-15 per cent in the festive season. "A lot of the younger generation, in their first jobs, cannot afford phones worth Rs 30,000-Rs 35,000 a piece. But earlier, they would not mind paying Rs 5,000 per month as an EMI. Now, mobile phone retailers such as The Mobile Store will lose them." TMS gets 30 per cent of its sales such credit card transactions.
The CEO of the chain, Himanshu Chakrawarti, says such schemes are essential in making modern technology and higher-end phones affordable for the aspiring Indian. "The price difference of an iPhone 5S in India and in the US is just five-10 per cent. But the salaries in India are just a fraction of the US," Chakrawarti says. He claims that TMS was the first off the block three years back in introducing EMI schemes on credit cards.
However, the chain has been deploying an alternative to bank-led EMI schemes. A scheme of non-credit card EMI scheme with Japan's Aeon, a retail and financial services group, was launched in June, 2013.
"Credit cards number 18-19 million and it has not grown. So, we had to look at an alternate way," Chakrawarti adds. It first launched in Mumbai, and followed it with introductions in Chennai and Delhi, a week ago, and a pilot in Kolkata.
Under the non-card EMI, a customer submits an application with identity documents and proof. "The approval comes within an hour and 65 to 70 per cent applications are accepted," Chakrawarti says. But the scheme is dependent on Aeon's presence in the cities.
TMS also enjoys scale over its competition, raising the entry barrier to introducing such a scheme. Says BA Kodandaraman, chairman and managing director of Chennai-based durable retail chain, Viveks, "It (TMS) has the size and scale for such a scheme. One can't negotiate with the vendors to run this kind of a scheme unless one has a large scale."
TMS has the maximum store count of 750. Its closest competitor, Spice Hotspot has 650 stores, while the Bangalore-based Univercell has 450 stores. Of the Rs 40,000-crore mobile phone market, 12 per cent is organised, growing at 20 per cent. TMS is said to have 25-28 per cent share in modern trade.
Saloni Nangia, president at Technopak says, "It (TMS) must have put in enough evaluation parameters to make it foolproof as it is bearing the risk."
TMS has also rationalised its business on the back of some tough decisions. The chain is both cash-positive and Ebidta-positive for the last seven months. But it was the result of its shutting down 350 stores, that were in the red for the last three years.
The chain has also stopped with other formats it had tried. Its 'TMS Direct' which allowed consumers to check pricing in neighbouring stores and visit TMS for it to beat or match it did not find traction was closed. It pulled the shutters on its durables format that it had launched in seven cities, renaming the acquired chain, X-cite. "All these closures helped us to become profitable," Chakrawarti says.
For now, TMS is improvising with its existing stores. It will convert 100 of its existing stores into lounges to sell smartphones better. "Earlier, it was about selling phones where you explain features and just show the pieces. But in last two years, we have seen the convergence of many technologies in one device, which needs to be demonstrated,"says Chakrawarti. Spending Rs 50 crore, it would open 50 new lounges in the next year. In addition, the chain has also developed an 'Android Zone' with the Google Asia team where customers can choose different Google Play cards based on their personalities. If one is interested in stock markets, she can choose a 'Trader Money' card with different apps on stock market trading.
After all, Manoj Kumar, chief executive and co-founder of e-commerce venture edabba says that the surge in sales of smartphones have boosted margins of mobile phone retailers. "You can always sell products such as accessories and add-ons which carry higher margins with mobile phones," Nangia adds.
TMS is also planning to drive online sales. It draws two-three per cent of its revenues from e-commerce and is targeting 10 per cent in the next 15 months. However, there will be competition as mobile retailers such as the Bangalore-based chain Sangeetha come out with innovations of their own. Sangeetha has launched a service called 'Delight' where the chain picks up faulty mobiles from a customer's place, repairs and sends it back for a cost of Rs 99.
While RBI's ruling is meant to discourage veiled, additional processing fees charged by way of fineprint, it has also dealt a blow to affordability, gained through availing of such schemes through a credit card. Prashant Agarwal, joint-managing director of management consultancy Wazir Advisors says the move could impact TMS' sales by 10-15 per cent in the festive season. "A lot of the younger generation, in their first jobs, cannot afford phones worth Rs 30,000-Rs 35,000 a piece. But earlier, they would not mind paying Rs 5,000 per month as an EMI. Now, mobile phone retailers such as The Mobile Store will lose them." TMS gets 30 per cent of its sales such credit card transactions.
| THE WAY FORWARD |
|
The CEO of the chain, Himanshu Chakrawarti, says such schemes are essential in making modern technology and higher-end phones affordable for the aspiring Indian. "The price difference of an iPhone 5S in India and in the US is just five-10 per cent. But the salaries in India are just a fraction of the US," Chakrawarti says. He claims that TMS was the first off the block three years back in introducing EMI schemes on credit cards.
However, the chain has been deploying an alternative to bank-led EMI schemes. A scheme of non-credit card EMI scheme with Japan's Aeon, a retail and financial services group, was launched in June, 2013.
"Credit cards number 18-19 million and it has not grown. So, we had to look at an alternate way," Chakrawarti adds. It first launched in Mumbai, and followed it with introductions in Chennai and Delhi, a week ago, and a pilot in Kolkata.
Under the non-card EMI, a customer submits an application with identity documents and proof. "The approval comes within an hour and 65 to 70 per cent applications are accepted," Chakrawarti says. But the scheme is dependent on Aeon's presence in the cities.
TMS also enjoys scale over its competition, raising the entry barrier to introducing such a scheme. Says BA Kodandaraman, chairman and managing director of Chennai-based durable retail chain, Viveks, "It (TMS) has the size and scale for such a scheme. One can't negotiate with the vendors to run this kind of a scheme unless one has a large scale."
TMS has the maximum store count of 750. Its closest competitor, Spice Hotspot has 650 stores, while the Bangalore-based Univercell has 450 stores. Of the Rs 40,000-crore mobile phone market, 12 per cent is organised, growing at 20 per cent. TMS is said to have 25-28 per cent share in modern trade.
Saloni Nangia, president at Technopak says, "It (TMS) must have put in enough evaluation parameters to make it foolproof as it is bearing the risk."
TMS has also rationalised its business on the back of some tough decisions. The chain is both cash-positive and Ebidta-positive for the last seven months. But it was the result of its shutting down 350 stores, that were in the red for the last three years.
The chain has also stopped with other formats it had tried. Its 'TMS Direct' which allowed consumers to check pricing in neighbouring stores and visit TMS for it to beat or match it did not find traction was closed. It pulled the shutters on its durables format that it had launched in seven cities, renaming the acquired chain, X-cite. "All these closures helped us to become profitable," Chakrawarti says.
For now, TMS is improvising with its existing stores. It will convert 100 of its existing stores into lounges to sell smartphones better. "Earlier, it was about selling phones where you explain features and just show the pieces. But in last two years, we have seen the convergence of many technologies in one device, which needs to be demonstrated,"says Chakrawarti. Spending Rs 50 crore, it would open 50 new lounges in the next year. In addition, the chain has also developed an 'Android Zone' with the Google Asia team where customers can choose different Google Play cards based on their personalities. If one is interested in stock markets, she can choose a 'Trader Money' card with different apps on stock market trading.
After all, Manoj Kumar, chief executive and co-founder of e-commerce venture edabba says that the surge in sales of smartphones have boosted margins of mobile phone retailers. "You can always sell products such as accessories and add-ons which carry higher margins with mobile phones," Nangia adds.
TMS is also planning to drive online sales. It draws two-three per cent of its revenues from e-commerce and is targeting 10 per cent in the next 15 months. However, there will be competition as mobile retailers such as the Bangalore-based chain Sangeetha come out with innovations of their own. Sangeetha has launched a service called 'Delight' where the chain picks up faulty mobiles from a customer's place, repairs and sends it back for a cost of Rs 99.