Economy

Croma adapts to the new age

CromaOver the past year, Croma, the large format retail chain for consumer durables and infotech (CDIT), which turns 10 next year has found itself on the brink of a maelstrom; the growing dominance of e-commerce is driving shoppers online while the rising clout of rivals such as Reliance Digital is gnawing away its share of the brick-and-mortar sales pie.

Reliance Digital, which came into the market a year later than Croma in 2007, has beaten it both in terms of sales and number of stores in FY2015 It notched up sales of Rs 4,233 crore while Infiniti Retail (the operating entity of Croma) reported sales of Rs 3,269 crore, according to a recent filing with the Registrar of Companies. A year ago, Croma was on top, with sales of Rs 3,198 crore and Reliance Digital was second with Rs 3,044 crore, according to reports. Reliance Retail (which includes Reliance Digital) has 1,196 stores versus Croma’s 100 stores.

How does Croma plan to fight back? “The question pre-supposes that Croma is falling behind competition however that is not our assessment of the market. We do not believe that small format stores, or virtual stores offering deep discounts, are a sustainable proposition,” said Ritesh Ghosal, chief marketing officer at Infiniti Retail.

Ghoshal believes that brick and mortar stores, especially in electronics goods, are not going away in a hurry. Customers need to “touch-feel-try as a precursor to buying,” he said. “Having 100-odd stores in the best destinations to add to our digital footprint makes us competitive,” Ghosal added. Proof he says lies in the numbers; the chain posted double digit growth in the festive season and only 10 per cent of CDIT purchases in the season happened without a visit to the store at some point in the purchase cycle.

True, but therein lies the challenge. Consumers are increasingly buying online, but checking out the goods and their prices in offline stores. According to a UBS Securities report earlier this year, categories such as consumer durables, apparel and footwear account for nearly two-thirds of the $4.5 billion e-tail market, and this is expected to further increase to four-fifths of the overall e-tail market by 2020, when e-tail will be a $51.6 billion market.

Rajeev Karwal, founding director of Milagrow Business and Knowledge Solutions and former chief executive at consumer durable, IT & telecom vertical at Reliance Retail says it is near impossible for Croma to compete with entrenched regional brick and mortar players on one hand and e-commerce firms on the other.

Croma however believes that it can counter the onslaught with its ‘omnichannel strategy’ (integration between physical stores, its web portal and mobile phones) that it launched sometime early this year. Omnichannel chains allow buyers to pick up goods ordered online from stores the same day. Additionally, customers can place orders at stores after checking out the products online and get them delivered home. It also allows store pick-ups at a different city from the one in which the order is placed. Croma says that around one in two of its store customers, first visit its site and 40 per cent of its online customers choose omni services.

According to PwC’s 2015 Global Omnichannel Retail Index 2015, “retailing is in the throes of morphing from a single-channel, exclusively online or offline activity into a more multifaceted omnichannel landscape.” The report that surveyed shoppers in 19 countries, says that Macy’s in the US is the omnichannel poster child, “having first implemented the strategy in 2008.”

However there are naysayers to this strategy. “E-comm and specialist offline retail require completely different competencies as well as huge financial outlay which I am afraid Croma will find near impossible,” Karwal said, adding that Best Buy, the renowned durable and infotech retailer in US, is trying to become omnichannel but finding it tough.

Going omnichannel is just one of the ways in which retail chains are hoping to cope with the changing demands of the new shopper. Croma, for one, is going in for stores within e-commerce platforms. Ghoshal says that they will also launch a mobile app and other services. He claims that Croma is the only fully functional omnichannel electronics retailer in the country. Its main competitor Reliance Digital does not have online shopping portal yet. “We haven’t seen big potential in online business yet. But it does not take much for us to scale up the online part,” said a Reliance executive who did not want to be quoted.

Croma, said Ghoshal, is also expanding the store network and wants to open 10-12 stores every year. But Ghosal says it is not only about numbers. The explosion of smart phones at every price point, internet connectivity and the advent of ‘mobile first’ websites have changed the market, giving omnichannel retailers like them the edge. Harminder Sahni, managing director at retail consultancy Wazir Advisors, says, “It is not a choice but a compulsion. In fact I am surprised what took them so long?”
[“source -business-standard”]

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