Mono-brand stores, or single-brand retail outlets, have become the new growth mantra for consumer durables companies. What was a trickle initially is fast turning into a deluge, with leading companies drawing up aggressive plans to scale up their presence through mono-brand stores.
Consider this: Samsung Deputy Managing Director Ravinder Zutshi expects mono-stores to contribute over a fifth of total sales in 2010 — up from 16 per cent in 2008. LG Electronics sees an even bigger contribution. Managing Director Moon B Shin says mono-stores can account for a fourth of LG's sales next year. Both companies have 300 exclusive stores already and are planning to ramp up the number substantially.
Others, such as Sony and Panasonic, are not far behind. Even Videocon, which already has a large retailer-distributor footprint in the country, is taking the mono-brand route to push its high-end products.
"We call these stores DigiWorld," says Videocon Chief Marketing Officer Jaideep Rathore. "We have 65 of them at the moment and the plan is to ramp up quickly to about 200 stores in the next one year," he adds.
Converting existing retailers
The modus operandi of how these players get a mono-brand-store network in place is simple: Most of them don't actually set up outlets of their own, but choose instead to talk to retailers or dealers who are willing to stock their brands exclusively. This happens at a price.
"Costs are in the form of doing up the interiors of the store," says Mirc Electronics Vice-President (Sales, Marketing & Service), Sriram K.
Mirc, which promotes the Onida brand of consumer electronics, also plans to get into the mono-brand space with some 10-12 stores by the end of this financial year. "There is also an additional cost in terms of a trade margin that's 3-5 per cent higher to be paid to the retailer for stocking the company's brands exclusively," he adds.
Higher margins
Typically, margins enjoyed by a consumer durable products retailer is about 9-10 per cent. An additional 3-5 per cent implies that margins shoot up to about 12-15 per cent. This is one reason why companies such as LG and Samsung are bullish about conversions at the retail level.
But sceptics argue that retailers who have been flocking to convert their multi-brand outlets to mono-brand stores are mainly small- and mid-sized retailers — not the target group that these big companies would like to have.
Champions of the mono-brand store concept, however, have another explanation to offer. "It varies from zone to zone. In the west and south, dealer brands such as Vijay Sales, Sony Mony, etc are strong. There's no question of going to them. They won't buy into this concept. So, we target the small retailers. In the north, you don't have strong dealer brands. So, the large retailers are willing to buy into your concept," says an executive with a consumer durables firm.
Not all on board
Some companies like Godrej Alliances and Whirlpool, however, are yet to jump on to the mono-store bandwagon. "We have no plans to get into it," says Whirlpool Vice-President (Corporate Affairs) Shantanu Dasgupta.
Godrej Appliances Chief Operating Officer George Menezes says the company is in no hurry to set up mono-stores and would prefer to wait and watch. "We continue to focus on expanding reach, but we choose to do it via multi-brand outlets. In our view, mono-brand outlets are more an exercise to improve brand visibility than sales. We'd rather wait and watch because companies in the consumer durables space, in general, are experimenting with different distribution formats. Mono-brand stores are an outcome of this. The trend has been on for the last two-and-a-half years, but it has picked up over the last one year," he says.
