Loyalty points that can earn you a trip abroad or get you free gifts are common marketing strategies for consumer products companies. But even steel firms have started going the same way now.
Take, for example, Nashik-based Santosh Hegde, managing director of auto component maker Shri Shyam Processors. Hegde has just received an air conditioner and washing machine for free under Bandhan, a loyalty programme run by Essar Hypermarts, a steel retail chain run by Essar Steel.
Hegde is a prized customer of Essar. He makes rear bumpers and other auto parts for manufacturers such as Mahindra & Mahindra and needs 500 tonnes of steel every month.
“It’s like having fast food in a swanky joint. Besides, I need not keep a high inventory as the delivery from the store is made within a day,” says Hegde. “The loyalty points are a bomus,” he adds.
Hypermart says it has 7,000 customers, some of whom have also won trips to Australia, under the Bandhan scheme. “We want repeat customers, so we are now working on branding and customer relationship management like any other consumer products companies,” says ikram Amin, executive director, sales & marketing at Essar Steel.
Besides, it has a toll free number to address customers’ queries and take orders. It is also going to start taking orders on internet soon.
Such initiatives are necessary as India’s per capita steel consumption is quite low at 45 kg, compared to 187 kg globally, while rural India’s per capita consumption is just 2 kg. Essentially, the idea is to sell steel as a consumer product rather than a commodity, which would improve consumption. The retailing initiative would change the dynamics for an industry where products were sold in bulk and transported in heavy trucks, experts say.
Essar has over 460 branded retail stores, out of which 90 are owned by the company and the rest by the franchisees. The company sold 1 million tonne of steel through these retail stores amounting to 30 per cent of its total sales “Branding has helped us to differentiate our products on the basis of end users,” says Jayant Acharya, director, sales and marketing at JSW Steel. The company entered the fray with its first retail outlet at Hubli in Karnataka in July 2008, while Essar initiated its retail venture one year before JSW.
JSW Steel sold over half a million tonne of steel from its about 200 stores in the last financial year. The company plans to double sales through its 400 retail stores this year.
Essar has Essar Sona and Essar Hira as brand names for its products. while JSW has branded its corrugated sheets as Jindal Vishwas and TMT Bars as JSW TMT Plus. It also has colour coated sheets branded as JSW Colouron.
Tata Steel, which pioneered steel retail chains in India with Steeljunction, has, however, gone slow. In the last four years, it has set up just five outlets in West Bengal. Steel Authority of India, country’s largest producer of the alloy, has not still ventured out for sales through the retail stores.
“In recent years, SAIL and Tata Steel have increased their production slowly in comparison to companies such as JSW Steel, hence their additional production has been easily absorbed in their existing market,” Giriraj Daga, analyst with Khandwala Securities says.
“JSW decided to tap new markets with its increased production and hence it is more aggressive on the retail front,” he says. JSW Steel’s production grew the highest by 2.3 million tonne in the last financial year.
