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South India's largest retail consumer durbales chain benchmarks itself with nothing less than the great Wal-Mart. The plan: Rs 220 crore from the present Rs 140 crore, by next fiscal. By Nitya Varadarajan
In terms of size, the Rs 140-crore retailer has a long way to go before it gets anywhere close to Setty's benchmark: the US-headquartered Wal-Mart. But in service and reputation, the Vivek brand is sticking. For one, as a category killer (a term used in retail to describe a big, specialty retailer), Vivek gives the assurance of best deals in consumer electronics. Its vast sourcing and distribution muscle also means that it is able to back up its selling with quality service. The electrical and electronics market is estimated to be Rs 20,000-crore big. Of this, domestic appliances account for Rs 8,000 crore, audio/video equipment Rs 7,000 crore, and white goods Rs 5,000 crore. Traditionally, margins have been low, ranging from 8 per cent net for high-end televisions and refrigerators to 12-15 per cent for small-ticket items like household appliances. According to a McKinsey report on retail, dealers of high-end items sacrifice margins to generate sales and, thus, end up with 4 per cent. Vivek, however, manages to show a 12-per cent net margin. But Setty isn't getting complacent. Despite Vivek's product range and offering, the ambience and customer-friendly service (installations and minor repairs are done by Vivek itself), there are many who still buy from other shops. "There are 200 dealers in Chennai, authorised and unauthorised; and more than 8,500 dealers in the country. They all are my competitors," he says. In retail, if there's anything more important than acquiring customers it is to retain them. Therefore, instead of spreading his basket across the country, Setty prefers to focus on one region (currently it is South). It will be two more years before Vivek begins expanding to North and West "I am not as big as I would like to be," says Setty. "I am still aware of the impact an extra cup of tea served to 700 of my workforce can have on my bottomline,'' he says half seriously. A consortium of bankers who see potential in his business and management style have come forward to help. Vivek has achieved the first phase of expansion bang on schedule. Having opened just three showrooms in 30 years (1965 to 1995), Vivek is spreading itself rapidly. Today, it has 34 showrooms (all self-owned) and by March, 2001, will add another seven. The numbers grew with the acquisition of Jainsons (the third largest retailer in this segment after Vasanth & Co) last year and its 14 showrooms. Vivek's other competitor in Tamil Nadu is Vasanth & Co (25 showrooms), but Vasanth does not have a matching reputation on after-sales service. What next? Set up franchisees. These would be Vivek men imbibing the company culture and benefiting from the training offered by Vivek's Institute of Retail Management The move would help a successful franchisee model and take the total store tally to 200 by 2004. The states where the expansion will be focused: Karnataka and Andhra Pradesh. Once the network has been beefed up, Vivek plans to boost margins by bringing its own store brands. For starters, Vivek is looking at kitchen appliances. Here too, there could be lessons to learn. Rival Vasant already has some in-store branded products, but these are not doing as well as expected. But Setty is confident that the Vivek brand name will do the job. His revenue target for next fiscal: Rs 220 crore. Clearly, a bright big picture. |
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For B.A.
Kodandarama Setty, Chairman and Managing Director of the South India's
largest consumer durables chain, Vivek Ltd, the goal is not just to lead.
Rather, it is to become bigger than his suppliers themselves. Bigger in
size, reputation, and service.