Amit Bagaria's Blog

This is THE SIXTH PART OF ‘YESTERDAY ONCE MORE’ – A series of stories initiated by Images Retail about successful local OR REGIONAL retailers spread across urban India, who continue to expand and grow despite tough competition from national and international retailers.

Following the closure of 2 Big Bazaar outlets in Ahmedabad, in September 2008, The Economic Times termed Ahmedabad as a retail graveyard. “The consumption pattern of local consumers has been a roadblock to modern retail. Although the cash-rich Gujarati consumer has lured brands to Ahmedabad, low acceptability of modern retail will turn the city into a retail graveyard,” commented analyst Harish Bijoor at that time.

Just 19 months later, the spectrum auction for 3G telephony saw the bid for the Gujarat circle at Rs.416.42 crores at the No.2 spot in the country, just a lac under the Rs 416.43-crore bid for Delhi. This article about three of Gujarat’s local retailers will show that the telecom services companies are wiser than modern retailers. I just don’t understand why modern retailers give up so easily – why they cannot analyse hard facts.

NARENDRA MODI’S TAILOR IS WORTH `80 CRORES

50-year old Jitendra (Jitubhai) Chauhan was only 17 when he used to do cutting and stitching in his father and elder brother’s tailoring business.  Today, he does a turnover of more than `100 crores from 23 retail outlets (7 JadeBlue and 16 Greenfibre) occupying about 71,000 square feet of retail space. JadeBlue sells more than 10,000 Modi kurtas per annum. “I took permission from Narendrabhai (Gujarat CM Narendra Modi) to use his name – after all, he is a loyal customer for more than 15 years,” says Jitubhai proudly.

JadeBlue was awarder as the Most Admired Regional Independent Fashion Retailer of 2009 at the 10^th Images Fashion Awards.  Jitendra Chauhan was awarded the Atlas Diamond Outstanding Entrepreneur 2009 by the Ahmedabad Management Association. In 2007 and 2008, JadeBlue received the Color Plus Best Dealer of the Year awards.

Armed with a B.A. in Psychology, straight out of college in 1981, Jitubhai, then just 20, opened a small retail store of just 250 square feet named Supremo Menswear in the Ellis Bridge area of Ahmedabad.  It sold fabrics and did tailoring. Jitubhai used to do the cutting and stitching himself. “The education in psychology taught me how to deal with customers and get to know their likes and dislikes,” says Jitubhai.

Encouraged by a few friends and with their investment, in 1984, Jitubhai set up a 10-machine factory in the basement of his store, to make RTW shirts, under his own brand D’Peak Point. He supplied these shirts to small retailers (indirectly known to him through his friends’ circle) in Mumbai. When a huge amount of money was stuck for almost a year, on enquiring, Jitubhai was told that the shirts were not selling in Mumbai.  He got the unsold stock back. His friends wanted him to sell these shirts at deep discounts through Ahmedabad retailers.

Instead, Jitubhai opened a RTW shirts showroom in 1986, just above Supremo Menswear, connected by stairs. “This was the biggest turning point of my life,” says Jitubhai emotionally, “if the shirts were not returned unsold from Mumbai, I would not be where I am today.”  In 1987, he expanded the store size and added RTW trousers.

Eight years later, in 1995, on the auspicious day of Dussehra, Jitubhai opened the first JadeBlue store on C.G. Road. He combined four shops on the first floor of a shopping complex to make one large store of 2800 square feet. The brand JadeBlue was developed with the help of celebrity graphic designer Subrata Bhowmick, an NID alumnus and creative consultant at leading communications agency Mudra (now owned by Anil Ambani’s ADA group). The word “jade” stood for the premium offering and “blue” because it was men’s favourite colour (it is mine). The letters J & B also stood for the first name initials of Jitubhai and his brother Bipinbhai. Jitubhai had requested Subrata dada to come up with a brand that would withstand time and would be accepted internationally. This only goes to show that Jitubhai was (is) a true visionary. He is also very humble, as he egged me to give credit to Bhowmick for the brand and the logo.

JadeBlue sold fabric, RTW shirts, trousers, sherwanis and kurtas and two non-house brands – Freelook and Killer. Four years later, Jitubhai more than tripled the store size, added a few brands and became a true MBO.  His motive was to give a wider choice (“basket”) to customers. Today, JadeBlue carries almost 40 brands, including Arrow, ColorPlus, Energie, Fahrenheit, Nike and UCB.

In 2000, he shut down the original Ellis Bridge store, as it was too small. The next year, JadeBlue added a 3500 square feet section for the dulha collection. Today, the C.G. Road JadeBlue is a 13,000 square feet men’s store and does annual business of more than `30 crores.

The first store outside Ahmedabad (5200 square feet) opened in 2004 at Baroda.  Two years later, a 6500 square feet store started in Rajkot, followed by a 13,000 square feet store at Surat in 2007, the second store at Ahmedabad (6000 square feet in the Mani Nagar area) in 2008, another 6000 square feet store at Vapi in 2009 and the first store outside Gujarat – 8000 square feet at Indore – in 2010.

The Gujarat CM is not the only celeb to be counted amongst JadeBlue’s clients. The owners of companies such as Nirma, Adani, Cadilla, Torrent and several IAS/IPS officers are also regulars.

In addition to the seven JadeBlue stores, there are 16 stores (of 600-900 square feet each) of their VFM brand Greenfibre, including 3 SIS inside Central. Jitubhai expects to grow his turnover from the current `100 crores to over `250 crores in two years. Almost 70% of the current turnover comes from western wear, 20% from ethnic and the balance 10-11% from tailoring and fabrics.

On being asked about a 5-year plan, Jitubhai smirked that he can’t think five year ahead. He plans to open two stores of 2000 square feet this year – one each at Nagpur and Raipur – which will carry only house brands. The regular JadeBlue stores (6000 – 12,000 square feet) will open at Nagpur, Pune, Hyderabad and two at Mumbai.  “I know that Mumbai will not make money, but will give us much more fame and national recognition,” says Jitubhai, without flinching.

Apart from apparel, JadeBlue only sells accessories. Even footwear is not a part of their merchandise mix. Jitubhai says JadeBlue can be compared with other retailers such as Options in Mumbai, Jai Hind in Pune, Hi Style in Chennai, Prestige The Man Store in Bangalore and Kapsons in Chandigarh.

In addition to his brother Bipinbhai, their two sons assist in the business. Bipinbhai looks after the tailoring and fabrics business.  Although JadeBlue needs capital to fund its growth plans, Jitubhai is averse to raising private equity, “as the PE guys do too much interference.”  On being asked whether he is planning an IPO, the award winning Gujarati self-made retailer Jitendra Chauhan politely avoided answering the question as “he had to attend a wedding”. I am sure that the dulha wore a sherwani from JadeBlue’s dulha collection.

THE ASHOKA TREE BLOOMS

What JadeBlue is to men in Gujarat, Asopalav (Ashoka tree in Gujarati) is to women.  Founder Hirabhai Bhansali was also 20 years old (his father was a sahukaar, or moneylender) when he started a 500 square feet Asopalav store in 1968 – in his native place, the ancient fortified town of Patan, 108 km from Ahmedabad. The store sold cut pieces (fabric). The current population of Patan is under 200,000. History has it that Patan was the 10^th largest city in the world back in 1000 AD (1011 years ago), with a population of 100,000 people. The city-kingdom was destroyed by Alladin Khilji in 1298.

The very next year, Hirabhai opened another 500 square feet store – this time at Palanpur – 27 km away from Patan.  Palanpur’s population back then was less than 60,000. The Patan and Palanpur stores are still in business today and have both grown to about 2000 square feet each.

Six years later, Hirabhai (with his partner V. Vohra) opened his third store of 750 square feet – this time in the Ratan Pole area of the state capital Ahmedabad. This store has grown 10 times in size today. This was followed by a 5000 square feet store (now 15,000 square feet) on Ahmedabad’s Ashram Road in 1985. For the next 14 years, no new stores were opened by Asopalav.

The fifth store in the chain was started at Surat in 1999 – it occupied an area of 7000 square feet, and this store today does higher business than the similar sized store in Ratan Pole, Ahmedabad.

In 2001, the Bhansali and Vohra families diversified into IT, with a development facility at Cincinnati, Ohio, USA. They also have a centre at Bangalore. Two of Vohra’s sons look after this business.

In 2006, Hirabhai opened a 60,000 square feet superstore in Ahmedabad’s Satellite area. This is one of the largest women’s wear shops outside of southern India and does a business of almost `130 crores, although Hirabhai declined to disclose sales figures. Asopalav sells saris and lehenga-cholis from all over India (priced from `500 to `250,000), dress materials, salwar suits, western wear and jewellery.

Hirabhai feels that Asopalav has no competitors in Gujarat. His store is like Benzer in Mumbai or Frontier in Delhi. When he goes across the country for sourcing merchandise from weavers, Hirabhai often bumps into 33 other large women’s ethnic wear retailers. “We are a group of 34,” he says, “Chiman Savla of benzer, S. Ramesh of Pothy’s (Chennai), Beena Kannan of Seematti (Kerala) and T.S. Pattabhiraman of Kalyan Silks (Kerala) are all good friends of mine.” That’s national integration.

According to Hirabhai, the women’s ethnic wear market in Gujarat is worth between `3500 and `4000 crores. As per Asipac’s research, this is almost similar to the market size in Kerala and half of the market size in Tamil Nadu.

“Gujarat is termed as the graveyard of modern retail because people here want quality at fair prices and are very calculative,” says Hirabhai Bhansali, “people have lost trust in malls and modern retail because they don’t offer quality.” I hope Manoj Modi of Reliance, Kishore Biyani, Kabir Lumba of Lifestyle and Govind Shrikhande of Shoppers Stop read this.

SURAT’S ACQUISITION KING

With a population of more than 5.5 million people, Surat is the ninth largest city in India. Gujarat is only the second state (after Maharashtra) to have more than one city in the top 10.

Just after independence, Dhirajlal Modi started a kiraana shop in the old city area of Bhagal. 37 years later, his three sons (Rajnikant, Bipinbhai and Prafulbhai), then aged 36, 34 and 32 respectively, started an 1800 square feet self-service convenience store named Dhiraj Sons, in Surat’s Athwa Lines. The store also sold crockery, home appliances and watches.

Another 16 years passed by. In 2000, a 16,000 square feet (mega) store was opened close by within the Athwa Lines area. Categories such as luggage, footwear, hosiery, fashion jewellery, gifts and cosmetics were added. In 2003, the 7600 Kutchi Superstore at Parle Point was acquired and converted into a Dhiraj Sons store. In the same year, the 42,000 square feet Rita Supermarket at Nanpura (Surat) was acquired and converted into a branded apparel megastore under the name of Dhiraj Sons Fashion World.

The sixth store of 9000 square feet was opened in 2005 in Surat’s Sumal Dairy area. Apart from grocery, crockery and watches, this store also has CDIT products. The next year saw the opening of two new stores, a small store of 4500 square feet in Bardoli (population 70,000), a town built for NRIs, 30 km away from Surat; and a 9000 square feet store in Surat’s Kumbharia area.

In 2007, the 7000 square feet Picnic Supermarket on Gordor Road was acquired (their third acquisition) and converted to Dhiraj Sons. Last year, the 10^th Dhiraj Sons store opened in the Adajan area of Surat. Apart from these 10 stores, the Dhiraj group also has three small specialty stores – one each in toys, plastics and gifts. Together, the 13 stores occupy a total retail area of about 105,000 square feet, giving the an annual turnover of `130 crores, of which 60% comes from grocery, 20% from apparel and 20% form CDIT and other categories.

The plan for this year is to open 7-10 new stores, in Surat, Navsari and Valsad. “The national retailers will all come and we have to not just compete, but move forward,” says Prafulbhai’s son, Ankur Modi, “we expect to achieve a turnover of `1000 crores in 3-4 years.”  Future Group’s Big Bazaar, Reliance Fresh and D-Mart are already in Surat. Tata’s Star Bazaar is opening very soon.

Commenting on the acquisition of three competitors, Ankur says that “all three shops closed down because they could not compete with us.”  Big Bazaar also shut down one of its two outlets at Surat. As many as seven family members are running Dhiraj’s business – the founder’s three sons and their four sons, and Ankur claims this is the main reason for their success.

Apart from the 13 retail stores, Dhiraj Sons sets up eight temporary retail counters (mostly in tents) during special occasions – selling colours during the Holi festival, crackers before Diwali and decorations before Christmas. Modern retailers have a lot to learn from this Surat retail giant.

Actually, the reverse has happened. Before Big Bazaar opened at Surat, Dhiraj Sons we studied their business model and realized that one of Big Bazaar’s key strategies was to have promotions every Wednesday. Dhiraj implemented this three months before the first Big Bazaar store opened. When Big Bazaar launched their Wednesday promotion, “the people of Surat felt they were getting nothing new,” says Ankur.  Dhiraj repeated this before D-Mart opened. They studied their potential competitor and caught on to D-Mart’s strategy of “daily discounts, daily savings”. Just as in the case of Big Bazaar, three months before the first D-Mart store opened in their home base, Dhiraj Sons introduced a standard 5% discount on all MRP products. Sales volumes have risen 17% since then.

Only one new store has opened in the last 3½ years because the promoters of Dhiraj Sons were busy hiring professionals at all levels and in getting formal training themselves. “We took classes at institutes such as the Leadership Management Institute and attended the India Retail Forum”, says Ankur, “all this has helped a lot.” I hope that modern retailers learn a thing or two from this enterprising Surat retailer.

This is THE FIFTH PART OF ‘YESTERDAY ONCE MORE’ – A series of stories initiated by Images Retail about successful local OR REGIONAL retailers spread across urban India, who continue to expand and grow despite tough competition from national and international retailers.

As per research done by Asipac, the CDIT (consumer durables and information technology hardware, including mobiles) market in India is worth about `133,000 crores ($29.2 billion), with consumer durables contributing about 56%, mobile phones about 26%, IT products 16% and cameras 2%. LG is by far the largest player, with sales of more than `19,000 crores ($4.2 billion, about 14.4% of global sales), followed by Nokia at about `16,000 crores ($3.5 billion, about 6.9% of global sales), Samsung at about `15,500 crores ($3.4 billion, about 7.5% of global sales), HP at about `13,000 crores and Sony about `5700 crores ($1.25 billion, about 4.8% of global sales). If Steve Jobs would read this, Apple would certainly not treat India like some banana republic.

Four-year-old Croma (a 100% subsidiary of Tata Sons, with technical and strategic sourcing support from Woolworths of Australia) is already the country’s second largest CDIT retail player with 61 stores in 14 cities of which 25 are in malls, and a 1.2% market share, with sales of `1550 crores ($341 million).  Next is the largest player with sales of about `1800 crores. Croma CEO Ajit Joshi estimates the total market size to be smaller at about `100,000 crores, giving him a 1.5% market share. Joshi expects to open 4-5 more stores this quarter and 25-30 stores in the coming fiscal, taking up the store count to 93 or 94 by March 2012.  About 55% of Croma’s business comes from mobiles, IT and digital cameras, while 45% is from large and small appliances, with the brand’s private label accounting for 11% of the appliance sales.  Croma stores are Juhu and Malad (West) in Mumbai each do annual business of more than `90 crores.

Other national players include e-Zone from Future Group (55 stores in 18 cities, including 29 in malls) and three-year-old Reliance Digital (26 stores in 19 cities, half of them in malls).

Mumbai-headquartered Vijay Sales has 37 stores spread across Mumbai, Delhi, Pune, Ahmedabad and Surat and reportedly does annual sales of more than `1000 crores, but 22 of the stores are in Greater Mumbai alone. There are 9-10 other large regional players, of which seven are located in the South.  This article focuses on four of these South-based CDIT retail giants.

“Since modern retail has come, many of the regional players have got their act together and this is very good for consumers,” says Joshi, “their shops have started to look much better, with modern fixtures and removal of cardboard boxes from the customer areas.”

VIVEK’s ANANDA

Around the same time that I was born in distant Kolkata (then Calcutta), Late BA Lakshmi Narayana Setty (“LNS” for short) from Kolar Gold Fields in Karnataka, then only 20, started a 200 square feet store named Viveks & Co. at Mylapore in Chennai (then Madras). The name came from Swami Vivekanada, whose teachings and philosophy were highly admired by the young LNS.

LNS’s father was a rice merchant at Kolar.  While the first son BA Kodandaraman Setty (KRS) was helping his father in the rice business, the second son, LNS, being very bright in science, was sent to BMS College of Engineering in nearby Bengaluru (then Bangalore). But LNS wanted to quit college and start a retail business at Madras, the city which was home to his guru. Despite his father not supporting this move, LNS dropped out of college and set up the first shop in 1965. The shop started by selling electrical fittings and folding chairs. Slowly, LNS added radios, fans, mixers, irons, heaters and other household equipment.

Seeing quick success, LNS began planning a much larger shop of 3500 square feet to be set up at Purasawalkam in Madras. Alas, his dream did not come true as he passed away in 1969 at the age of just 25.  Elder brother KRS (then 27) took over management of Viveks and opened the Purasawalkam store soon after his brother’s death.

Viveks also became a distributor for Sumeet mixers for Karnataka state and part of Chennai. “Colour TVs were still a luxury for the middle class back then,” says youngest brother and CEO BA Srinivasa, “even buying a refrigerator was difficult, as a bank clerk earned `3000 per month, but a refrigerator cost `10,000.” Viveks introduced a daily instalment payment plan for small traders in the mid 1970s.  Seeing immediate success, Viveks started EMI plans for employees, and then for customers in the early 1980s.

In 1980, Viveks opened the third store at T.Nagar.  This 10,000 square feet store was then the largest consumer electronics retail store in India. The liberalization policies initiated by Dr. Manmohan Singh (then Finance Minister of India) from 1991 onwards led to several global brands setting up manufacturing facilities in India.  In 1992, Viveks spun off its then large and growing consumer finance business to a separate company – Viveks Hire Purchase & Leasing Limited.

The three brothers – KRS, Chandrashekar and Srinivasa – visited USA, UK, Europe, Singapore and Malaysia, and saw many interesting retail formats.  They were most impressed with and inspired by Best Buy of USA (annual revenues: $49 billion) and Dixons of UK.  They started thinking big – they had opened 3 shops in 30 years, could they open 30 shops in the next 3 years?

With this vision, Viveks set up a corporate office and started attracting professionals. In 1995, Viveks opened a 12,000 square feet store at Jayanagar in Bangalore, followed by many other stores over the next few years.

In 1999, Viveks had only 12 stores.  They had to reach 30 quickly. So they acquired Jainson – then a 14 store chain with a turnover of `50 crores, third largest in Tamil Nadu. In 2002, Viveks acquired the old 15,000 square feet Spencers store on Mount Road from RPG Group and continued running it under the Spencers name. The next year, they acquired 2 stores of Premier in Salem. By 2006, they rebranded the Spencers and Premier stores as Viveks.

Today, Viveks has 44 stores – 26 under the name of Viveks and 18 branded as Jainson, together occupying retail space of 250,000 square feet.  All 44 stores are MBOs and the retailer has not yet ventured into single brand stores (see following stories) even though its competitors have. 14 of the stores are in Chennai, 22 in other parts of Tamil Nadu and 8 in their home state Karnataka.  Viveks has an annual turnover of close to `425 crores ($93 million).

There has been no expansion in the last 3-4 years, as the promoters have been busy with consolidation. But expansion is nor firmly back on the agenda. Four to five stores are expected to open in 2011. By 2015, Srinivasa expects to have almost 150 stores spread across Tamil Nadu and Karnataka (Andhra Pradesh and Kerala are not yet on their radar), yielding a turnover of close to `2000 crores, as “consumers today have higher incomes, more exposure and therefore have much higher aspirations.”  That would mean a CAGR of 36%.

Amongst the brands sold at Viveks, LG and Samsung have almost equal share, together contributing about 43% of the turnover.  In comparison, Croma’s No.1 brand is Sony, followed by HP.  At Viveks, flat panel TVs is the largest selling category, followed by refrigerators. IT and mobile phones constitute only 8% of the sales, and Viveks wants to increase this but is finding it difficult because of lack of space. “All sub-categories and various models need to be displayed, as the consumer perception, experience and value proposition has to be strong,” Srinivasa says, “as the number of brands and models in the market increase, the store sizes need to become bigger.”

He feels that national chains such as Croma and Reliance Digital have certainly done a good job of giving consumer experience and they are helping to grow the market.  Although Viveks itself grew by acquiring other retailers, they are not open to an acquisition.  But Srinivasa does not rule out mergers and consolidation amongst regional players. “Consolidation and mergers are the order of the day and whether we like it or not, we have to keep our options open,” he says.

BANGALORE WAS A HILL STATION

In 1970, 22 year old Panna Lal Giria (PLG) from a village in Cooch Behar District of West Bengal came to Bangalore on a holiday.  He liked this hill station with fantastic weather and nice people and decided to settle down in the city.  PLG’s family was in the cloth trading business at Cooch Behar, and he set up a net factory in Bangalore.

In 1971, PLG set up a 175 square feet kitchen appliances shop by the name of Girias in Bangalore’s Gandhinagar market area.  As the product range expanded, a neighbouring shop of 700 square feet was acquired in 1979. Today, the Gandhinagar store has grown to 10,000 square feet.

For several years thereafter, much like Viveks in Chennai, Girias also did not expand. Then, in 1994, they opened a 1500 square feet shop at Coimbatore (Tamil Nadu), which in 2003 shifted to a larger 12,000 square feet space. In 1999, PLG’s younger brother, Hansraj, wanted to open another shop in Bangalore’s popular high street Brigade Road. There was a lot of opposition from other family members. But Hansraj Giria went ahead and this shop was an instant success.  There has been no looking back since then.

Two stores were added in 2001 and the chain’s sixth store was opened at Mangalore in 2003. In 2004, Girias opened a 7000 square feet store at Rajajainagar in Bangalore – today, this store does annual business of `32 crores (ATD of `3800 psfpm) and is No.1 in the chain.

The eighth store opened at Mysore in 2005, followed by the ninth at Salem (Tamil Nadu) in 2006. One store each started at Bangalore’s Domlur area and in Hubli town of Karnataka in 2007. This was followed by three openings in 2008, two at Bangalore and one at Chennai.  In 2009, Girias opened their third store in Chennai, eleventh in Bangalore and a second store at Mangalore.

Last year, Girias added four new stores – 1 at Chennai and 3 at Bangalore, taking up the total store count to 22, including 14 at Bangalore, 3 in the rest of Karnataka and 5 in Tamil Nadu.  In the next 3-4 months, the store count will go up to 25, with 16 in Bangalore and 4 in Chennai.

Girias does an annual business of `500 crores, of which `420 crores comes from pure retail and the balance from wholesale.  Hansraj’s son Rishab Giria (29) expects that, by 2015, Girias will have 50 stores and a turnover of `1500 crores.

The highest selling brand at Girias is LG, which contributes to 16% of its sales, while No.2 Samsung contributes 12%.  In the categories, just like Viveks, flat panel TVs comes out tops and contributes 24% to the top-line, while white goods contribute 16%.  Girias sells about 1500 mobile handsets per month from its 22 stores, which is miniscule compared with the mobile phone shops, some of which are selling as many as 1200 handsets per shop.

There are as many as 10 family members in the business, four in Panna Lal’s generation and six in Rishab’s generation. The youngest, Arihant, is only 23.  “That is the biggest weakness of the national chains,” says Rishab, “the owners are not sitting in the shops.”

Rishab feels that the national chains have many other weaknesses, including little or zero flexibility in pricing, slow decision making processes and high overheads. He firmly believes that E-Zone from Future Group is slowly dying and Reliance Digital is still in an infancy stage. “Croma is the only threat,” says Rishab, “but Croma is also the highest priced and price is key in this business.”

I disagree with his view. With 26 stores already operational, the 3-year-old Reliance Digital is already bigger than Girias in number of stores and will cross Girias in turnover next year.  Besides, Croma’s turnover is likely to touch almost `2500 crores by next fiscal.

PAI HAS HIT A LOTTERY

Rajkumar Pai was in the lottery business and was looking at diversification into something more organized and modern. His friend recommended the consumer electronics retail business. 35 years after the first Viveks store opened at Madras, the first Pai International store opened on Bangalore’s 100 Feet Road, Indirangar, in 2000.  There was a huge difference in size – while the first Viveks store (which opened in socialist India) was just 200 square feet, the first Pai International store (in a now modern and open-for-business India) was a whopping 16,000 square feet. I remember being awed by this store when it first opened.

Pai opened three stores in 2001, followed by two in 2005, three in 2006, including one at Mangalore, three in 2007, five in 2008, just one in 2009 (a 20,000 square foot store at rajajinagar in Bangalore, the chain’s largest), and to catch up after the recession was over, as many as nine in 2010.

Today, Pai International has 27 stores, including 23 MBOs, 2 LG stores and 2 Samsung stores. While 17 of these are in Bangalore, the other nine are in Belgaum, Bhatkal, Chikmaglur, Chitradurga, Hassan, Hubli, Kundapur, Mangalore (2) and Udupi, all in Karnataka.  There are also four Pai Mobile stores which, as the name suggests, sell only mobile handsets and accessories.  The total turnover this year will touch `340 crores.

In 2011, Pai will open 12 more Pai International MBOs in Karnataka plus 30-35 Pai Mobile stores.  By 2015, Rajkumar Pai expects to have close to 100 Pai International stores and 200 Pai Mobile stores, with a combined turnover of over `2500 crores. That will need a CAGR of 49%, a mammoth target. Pai is interested in expanding into the other southern states, but only after he has completely saturated Karnataka.

Like Girias, Pai’s No.1 selling brand is also LG, which contributes `75 crores, followed by Samsung at `60 crores.  In the categories, just like all the other players, flat panel TVs are No.1, contributing 28%, followed by refrigerators at 17.5%. Pai sells 5500 mobile handsets per month and this segment contributes about 8% of his turnover.

Learning from Croma, Pai has just started selling IT products. “If I don’t sell IT and mobiles, the customer will go to Croma,” says Rajkumar Pai.  He seems to be very impressed with Croma. “The national chains have very good back-ends and deep pockets,” Pai says, “Croma is very systematic because of the back end being managed by Woolworths.”

According to Pai, there are very few brands in India and the small number of manufacturers, therefore dictate terms.  He feels that many western brands failed because “they did not have good teams from top to bottom.”  He cites Philips as an example of a failed western brand.

Yet again following Croma’s footsteps, Pai is considering getting into the private label business in a couple of years’ time.  Is Ajit Joshi reading this?

10 NEW stores in FIVE MONTHS

Paras Jain was in the business of watch trading and multi level marketing.  Then in 2004, he leapfrogged into the electronics retail business by opening three stores in Bangalore, under the brand name Adishwar. In the second year itself, Jain opened three Adishwar stores and one Sony store, followed by three more in 2006.

In the next year, as many as seven new stores were opened, including three LG and one Samsung stores. This took up the store count to 17, including one each in Mysore, Mangalore and Belgaum, all in Karnataka. Although only one new store opened in 2008, Jain opened eight new stores in 2009 (including two Samsung stores and one each of LG and Sony) and as many as 12 in 2010. Of these, 10 stores were opened at Hyderabad in just five months last year. “Only when we expanded, then the others started expanding also,” says Jain, “earlier, the gross profit margin used to be 3-5%, today, overheads alone are 12-14%.

The chain now has a total of 38 stores, occupying a total retail area of 1,73,300 square feet, of which 29 are Adishwar MBOs occupying 1,41,000 square feet, 4 are LG brand stores, 3 are Samsung stores and 2 are Sony stores. 21 of the stores are at Bangalore and 10 in Hyderabad.

When he was planning to enter Hyderabad, Jain had discussions to acquire Hyderabad based Shah’s Electronics (see below), but gave up as they were asking too much royalty for their customer database and “I can create my own database for just 20% of that amount.”  Jain feels that another Hyderabad player, PCH, may acquire Shah’s.  He believes that, in another 2-3 years, there will be mergers between regional players within and across regions.

Adishwar expects to clock a turnover of `330 crores this year, achieving an 80% growth over the previous fiscal.  In 2011, Jain plans to add 18 more stores, taking up the total store count to 56. By 2015, Jain is targeting 100+ stores, with a turnover crossing `1000 crores.

Jain says that between Girias, Pai and Adishwar, they have 50% market share in Bangalore, while the national chains have only 18%.  “We (the regional players) are balancing the market between the national players and the unorganized sector,” says Jain.  He is going slow in Tamil Nadu as he feels it is a very conservative market and will take another five years to change.  Jain also shared with me that more than 90% of the markets in cities like Ahmedabad and Indore was unorganized.

Commenting on the national chains, Jain feels that regional players take faster decisions and give much more attention to customers, whereas, in a national chain, “every customer is the same, whether he is buying a one lakh rupee LCD TV or a hundred rupee mobile charger.”  Pai disagrees with this. Amongst the national players, Jain of Adishwar admires Croma, whereas amongst the regional players, he has high regards for Viveks and TMC of Hyderabad.

Unlike Pai, Adishwar does not want to sell mobiles and IT products, as Jain feels that the margins are too low.  He certainly seems to be the most aggressive of the lot in terms of growth. Only time will tell who is right.

OTHER PLAYERS IN THE SOUTH

Vasanth & Co, based at Chennai and started in 1978 by Congress MLA H. Vasanthakumar, has 45+ stores and a turnover of `600+ crores, making them the largest regional player in the South and the second largest in the country.  TMC was started in Hyderabad in 1980, has 11 stores in Andhra Pradesh, including eight in Hyderabad, and an annual turnover of about `200 crores.

Shah’s Electronics was started by GC Shah in Hyderabad in 1971.  Today, it has nine stores occupying 29,000 square feet and a turnover of `50 crores. His sons Neeraj and Nishit Shah run the business now.  Shah’s also does not sell mobile handsets and IT products. Neeraj feels that Adishwar is a bigger competitor than Croma or Reliance Digital. Although Neeraj says that they are growing and plan to add 3-4 new stores in 2011, and 20 stores by 2015, others in the business say that Shah’s is in financial trouble and is looking to sell out.

Other regional players include PCH (25 stores in AP, including 19 PCHezone shops, 5 mobile shops and 2 Sony shops), VGP, Unilet (10 stores in Bangalore) and Kundan (5 stores in Bangalore).

West Edmonton Mall

With 5.3 million sft, 650+ shops, 100+ F&B outlets, nine attractions and two hotels, West Edmonton Mall (WEM) in Edmonton (Canada) is unquestionably the mall amongst malls. There is always something to do.  When it opened in 1981, at 1.14 million sft, no one could imagine what it would become.  WEM has six of the world’s largest attractions, including the largest indoor amusement park and indoor triple loop rollercoaster, largest indoor lake and indoor wavepool, largest indoor bungee tower and the largest parking lot.  Other malls, especially in Dubai, are trying to copy WEM but are still way behind.  WEM is my favourite and we hope that Bangalore’s Neomall at least comes close.

Menlyn Park

Menlyn Park near Pretoria in South Africa is one of the best malls I have visited.  With 1.27 milion sft, 300+ shops, 37 F&B outlets and nine attractions, this mall is full of energy. Although the mall also boasts of the world’s first rooftop drive-in movie theatre, where you can even opt to sit in one of six vintage cars, I love the events arena and the play park.  There is so much to do for kids of all ages, parents in the area are thankful their kids never get bored of Menlyn Park. This mall gets more than 20% of its revenues from non-rental income.