Croma, MobileStore fight to stay relevant

Big electronics retailers are shutting stores and turning price warriors to keep their brands alive

Ten years after Croma and The MobileStore set up their first stores in the country, they are being forced to reinvent themselves. While Croma is resizing stores and experimenting with retail models and in-house labels, The MobileStore is mimicking online counterparts by offering customers detailed product and price information and helping them choose better. However, given the steep discounts offered by Amazon, Flipkart and the commoditisation that the category has undergone, analysts believe that stores will need to do more to keep their brands in play.

The MobileStore is owned by the Essar group while Croma belongs to the Tata group and both have yet to turn in a profit. The MobileStore has seen like to like sales growth decline, especially as mobile purchasing behaviour has changed dramatically over the past few years. Customers want discounts and are lured by one-day sales and other online offers that many Chinese handset brands offer. To counter this,  the chain has overhauled its technology platform and plans to launch a mobile app next month. The company says it is moving to a curated model from a catalogue model, which means that they will guide customers to the right phone according to need and not just provide them a selection according to price ranges. “Whether one is using mobile cameras for selfies or want to shoot outdoor videos or need it for night photography, we recommend accordingly,” says Alok Gupta, chief architect and CEO, Impact Retail.

The newly launched tech platform also offers store locator, buy-back, pick-up and delivery options. “Simple premise is that customers browse at home and buy at a store. We need to facilitate that,” Gupta says. He says that they deliver within two hours of ordering and the store wants to be the “Uber of mobile phone retailing.” Gupta believes the chain will break even by FY 2018.

However, the industry is rife with reports that the retail chain that has shut 400 stores  is looking at being bought over by BK Modi-owned Spice Mobility. Experts also say that surviving in the new marketplace will need a complete overhaul. “Logically speaking, the omnichannel strategy should work but I am not sure whether it is working for them or not. I think they can have a great future but just adding online to offline or re-engineering their current business won’t work. They will have to totally reimagine their business on all aspects including their supply chain and organisation structures,” says Harminder Sahni, founder at Wazir Advisors, a management consulting firm.

Croma’s  chief marketing officer Ritesh Ghosal says that the chain has tracked pricing of online players in the competing categories. This has helped them to recalibrate the premium they charge. 

Ghosal said the chain has gone in for tighter integration of online and offline channels. He adds, “We have restructured croma.com from an e-commmerce store to a builder of digital influence, giving the browser good reasons to visit the physical stores.” Croma has also shut small stores and reduced sizes of stores to boost profitability. It is also exiting cities which could not be profitably served through its existing distribution centres.

Croma is also monetising its store footfalls through in-store advertising, space-on-hire and shop-in-shop programmes. Ghosal said that the store is working on a fresh strategy for its owned label. Many have criticised the store for investing in a private label but the company believes that this will help counter the trend of online-only exclusives that is driving sales in the category. This will be done through special price points offered for Croma launches and a strong service warranty to counter unknown brands and unknown retailers.

Speaking to Business Standard earlier, Ghosh said “Croma has gone through some torrid times as we were caught by surprise when the customer migrated his window-shopping to the digital world and e-com marketplaces started using our categories (especially smartphones) as their traffic and GMV builders through predatory pricing. We however have learnt to live in this new world.” Also, he added that 86 of the 96 stores had turned profitable (compared to 60 odd last year) in 2016. “Store profits have grown 114 per cent over last year,” he said.

Rajeev Karwal, founder and CEO of Milagrow Business and Knowledge Solutions says Croma struggled because of the way its business was structured earlier. He added that Croma had also got hijacked by a few larger brands in most categories. “Bigger brands did not give them substantial margins and the private label actually bled them in a hidden manner,” Karwal said. He believes that the store should not have diluted its focus by bringing out private labels. “Being profitable and managing costs is important. Private labels can come later when you have volumes,” he said.