Uniting to build a ` 1,000-crore retail business
Nine retailers with 14 retail stores have united to form a consortium company, Unity IT, that aims to be among the largest IT retailers by 2017
This may be a transformation of a different kind—nine competing retailers forming a joint venture called Unity IT to have their own brand of a retail chain across Maharashtra. Explains Deepak Chadha, Director, Unity, and CEO, Cyborg World, “Though we were competitors we were all perturbed by the frequent changes in vendor policies, increasing competition from large format retailers, over-distribution, and margins decreasing below 2-3 percent. We thought that the joint venture would provide the scale and skills which would help us to compete with LFRs and online retailers.”
While the idea to form this joint venture originated in April 2012, implementing it was not a cake-walk. “Each of the founders has been running his own business for long and had his own style and model of operations. The primary challenge was to arrive at a mutually agreed mode of operations. However, we overcame the hurdles because we knew each other for 7-8 years and understood each other’s strengths,” recalls Kanchan Samat, CEO, Unity, and Director, Wiz World.
The second challenge was to partner vendors. “As most of us were primarily into exclusive partnerships, other vendors were suspicious about us suddenly seeking new partnerships. They were also doubtful about our ability to manage multi-brand retail. However, looking at our conviction and the scale that we could offer, vendors agreed to partner us,” says Chadha.
The consortium currently has 14 stores branded U&IT, and is targeting revenue of ` 100 crore in the current fiscal. Continues Chadha, “Though we started only four months back, revenue has been strong. It increased drastically when we added the telecom portfolio in December 2013. Smartphones and tablets will add ` 15 crore this fiscal.”
Highlighting the benefits to members of Unity IT, he says, “While the participating stores buy all the products from Unity IT, they are relieved of the hurdles of backend processes. All they have to focus on is sales. Since it’s our own venture, we transfer all the price benefits to partners that we get due to high volumes.”
The only investment required from each partner is a per-store security deposit of ` 25,000-`50,000, and standard in-store branding as defined by Unity IT guidelines. According to Chadha, Unity takes 1 percent as operating margin on purchases.
Margins have also improved for the consortium partners. “The economies of scale helped Unity to
All the 14 stores have been rebranded U & IT. While the stores continue to run under their original founders, they buy from the consortium Unity IT who buys from distributors as a single agency
We are targeting ` 220 crore revenue in FY2014-15 and ` 1,000 crore by FY2017-18. Through a franchise model we plan to add 100 more stores within 18 months backed by online retail
purchase products at the best prices from distributors. Also, there was no pressure from vendors to carry stocks; this meant that we could plan our purchases and this improved our liquidity. Overall, all the partners have seen their margins improve by 2-3 percent, which is a lot in the retail business.”
The joint venture has helped the retailers to offer a consistent and wider sales and post-sales experience. “We now leverage each other’s service network to provide a wider and enhanced post-sales experience to customers. Further, the creation of a common brand enabled us to consolidate marketing expenses and channelize them for a unified high-decibel campaign to promote the U&IT brand,” adds Samat.
Unity IT has ambitious plans for the future. The company is targeting ` 220 crore revenue in FY2014-15 and ` 1,000 crore by FY2017-18. It has plans to introduce the franchise model in April 2014 and expects 100 more stores to be added in the next 18 months.
“By 2016, we plan to have a presence in major metros across the country and the entire west region,” says Chadha.
The company will also get into online retail in May 2014, and will leverage the network of the member partners to deliver products.
Director, Unity IT, and CEO, Cyborg