Channel v/s Modern Retail : Is the equation changing?
Subrotah Biswas,
Country Manager, India & South West Asia, Logitech
Retail, for Logitech, consists of the traditional IT channel on the one hand and the emerging retailers on the other. “These are the outlets which have all types of gizmos, laptops, desktops, as well as new gadgets that come out, focussing completely on the digital lifestyle of people,” points out Subrotah Biswas, Country Manager, India & South West Asia, Logitech. Logitech is looking at the retail space of around 300-400 retail outlets.
Equally important for Logitech's retail strategy are the fast-growing LFR outlets, which are driving a major transformation in the retail landscape of the country. “We are actually ready to give a very different experience to the consumers in terms of having the products in stock, products on display and also products which are on demonstration. And this is possible only when we make our presence in all the major LFRs,” says Subrotah Biswas.
Retail forms an important part when it comes to Lenovo's expansion strategy. Continuing its aggressive retail expansion to capitalize on the fast-growing PC markets, Lenovo has come up with its innovative 'Getting closer to customers' strategy, starting from October 2010. “Recognizing the immense retail potential in tier 3-5 cities, we instituted a robust retail strategy to achieve deeper penetration and strengthen consumer connect. We have planned to launch almost 400 LES Lites, essentially a smaller format of a Lenovo Exclusive Stores (LES), in the next few months. Keeping in line with our strategy of 'Getting Closer to Customers', we plan to reach out to 150 untapped towns and cities in the coming months,” explains Alex Li, Vice-President, HSB (Home and SMB) Lenovo India.
LES Lites are a smaller version of LES, typically around 150-200 sq. ft. in size. Offering a perfect blend of brand display, information, guidance, touch-and-feel of products, LES Lites will provide customers an end-to-end brand experience. The first LES Lite store was inaugurated in Patna in October. The 100th store was launched in Ahmedabad, the 150th in Agra and then the 200th in Cochin.
“We will continue to strengthen our channel network to enable market expansion in the key upcountry markets. In parallel, we will expand our product portfolio, especially in the lower end of the price band. We will offer customers improved levels of service across more service centres in the country,” Alex comments.
SMC Networks, a networking vendor, owes the growth of its business in the country to the small retailers. “We cannot leave them behind as they have been there with us since the start of our business in India,” says Sarfaraz Dhanji, Country Head, SMC Networks India, while giving an overview of the company's retail strategies. It regularly introduces new schemes for the partners to keep them abreast with new developments in the product space. “The last was in November. In March, we are starting with another one,” Sarfaraz adds to it. SMC plans to aggressively woo the Indian IT and telecom market in order to come out with more and more application-based products. These will specifically cater to the ISP, IT and telecom market.
Logitech is continuously investing to revamp its retail and give it altogether a different thrust. For this, the company has taken a couple of new initiatives and announces new strategies almost every quarter. “We are looking at multi-brand retail outlets very seriously and trying to have our own retail space within them. Currently, there are around 14 stores where we have our direct presence and we have an entire wall dedicated to our products. So the idea is very simple: we want to launch our entire Logitech product range and ensure that all the products get a proper display in these outlets so that the consumers actually know what they are paying for and understand the value positioning that our products offer,” explains Subrotah Biswas. Logitech has an exclusive flagship store in Kolkata. “It was an experiment and it is doing really well.”
In terms of growth and opportunities, 95% of Logitech's business comes from channel, out of which 10% constitutes organized retail and Logitech wants this percentage to grow higher in the coming months.
Lenovo Exclusive Stores (LES), Regional Distributors (RDs), Multi-Brand Outlets and Large Format Retail Stores (LFRs) contribute a significant part to Lenovo's total revenue. Across India, Lenovo currently has over 120 Lenovo Exclusive Stores (LESs), more than 225 Lenovo Multi-Brand Outlets (LMBs) and 17 Large Format Retail Stores (LFRs). It is engaged with more than 15 modern retail accounts, which, between them, have over 225 stores.
SMC Networks has three national distributors in the country, under which tier-I partners operate. It has around 100+ partners, out of which 40+ are tier-I partners. “We will be having our presence in Noida and Bangalore from the start of our next financial year. Until now, we have been operational only through our office in Mumbai.” SMC has tied up with national distributors, including RAH Infotech, Sapphire Microsystems and Priya Limited.
In spite of the growing importance of organized retail trade, the traditional channel has never been looked down upon by Logitech. “We try and ensure that channel partners involved with our business should run a healthy business. We try to encourage them to run a productive and a profitable business and also ensure that they make enough margins out of it on our products. We are pretty strong and committed towards channel loyalty initiatives.” And, this is one reason, as pointed out by Subrotah Biswas, why the company keeps launching channel programmes to engage its partners and make sure that there is enough reason for the partners to promote its products.
According to Lenovo, the channel comes with a few inherent traits which they can use to their best possible advantage. They are located in regions that naturally have a potential for high traffic. The most valuable advantage they have is the ability to localize. But the channel needs to invest in deeper engagement with their customers and act on their scale of operation. By doing this, they can offer the same freedom of choice to the customers as the modern retailers do. “There definitely will be an impact in big cities for traditional channel trade. Modern retail is a more organized form of retail and traditional channels have to move on to a more value-added model,” sums up Alex.
Modern retailing also enables retailers to evolve and come up to the next level. They have a lot of positive influence on the traditional retail. The traditional retailers understand the importance of displaying their products and having the consumers experience the products before making any buying decision. The merchandising concepts are changing and the retailers are experimenting with different models to approach their customers. “At the end of the day, it is all about how much confidence does the consumer have on the shop. The Indian traditional retailers score a very high point when it comes to building the customer trust and I see no reason why they would not continue buying from them in future as well. We are seeing more and more of our partners going for nice class shelves with their products properly displayed and giving the consumers a look-and-feel kind of an experience,” says Subrotah Biswas.
LFR being a new concept, Sarfaraz does not feel it as a viable option. “LFRs do not have that variety in their products which the retailers normally have. An LFR may be having only two brands, but retailers will be having ten different brands, even the lesser-known names which very few customers are acquainted with,” remarks Sarfaraz. Also, there is always a room in a traditional retail set-up to go for a negotiable price, but this is never the case in an LFR.
Going forward
With the current growth of the Indian market showing an upward trend, the future of the Indian retail industry looks quite promising. The coexistence of both the modern and the traditional form of retailing is going to dominate the retail scenario for some time now. This is because both these forms of retailing have their own set of customers to cater to. People who do not feel comfortable going to the modern outlets would like going to the traditional retailers.
For more contact:
samrita@varindia.com
See What’s Next in Tech With the Fast Forward Newsletter
Tweets From @varindiamag
Nothing to see here - yet
When they Tweet, their Tweets will show up here.