Croma plays it smart
The retail chain’s growing strength lies in a mix of exclusive ties with brands and strong in-house offerings
Consumer durables retail chain Croma is well on its way to achieving break-even at the operating level in 2017, even as it celebrates 10 years of operations. Infiniti Retail Limited, a 100 per cent subsidiary of Tata Sons, is reportedly hopeful of closing the fiscal year 2017 with revenues of ~3,100-3,200 crore in comparison to ~2,900 crore in fiscal 2016. At a time when e-commerce players are luring customers with exclusive offerings and deep discounts even in consumer durables and many local electronics retailers are rolling out their chains nationally, how does Croma hope to keep the momentum going?
Launched in October 2006, the chain now has 100 outlets across 20 major cities of India. Croma stores serve about 200,000 customers every month with an average ticket size of ~10,000. Mirroring its tagline, “We help you buy”, Croma appears to have stayed on course by building its business on the strength of a wide range of brands and products, competitive pricing (minus irrational discounting), and post-sales service assurance.
In an era where online marketplaces slug it out to boast exclusive deals with a wide array of brands, Croma has been selective in striking exclusive partnerships. For example, it has got into an exclusive brand partnership with Japanese electronics brand Hitachi which is attempting a comeback in selective global markets after exiting the electronics business a few years ago.
Availability of a wide range of products and brands is crucial to the survival of a multi-brand retailer. But making profits and matching consumer trust is equally important, and this calls for creating an enviable bouquet of offerings focusing on product quality and pricing. Hence, it’s important to take the right calls on who you partner.
While going for exclusive brand partnerships, Croma looks for a brand that commands trust, resonates with consumers, and has access to the latest technology know-how.
“In case of Hitachi, the brand name is a big draw. It is a premium brand. People know that it is a Japanese brand and it leads with technology both in hardware and software,” says Ritesh Ghoshal, chief marketing officer of Infiniti Retail.
On similar lines, Croma sells products of Dubai-based electronics consumer brand Super General which manufactures air conditioners and refrigerators. Since the company has expertise in making products for dry and hot environs where water is scarce, the retailer sees huge business opportunity for their products like ACs which can work at high temperature (say 50-degree Celsius) or refrigerators that cool faster. A market like India is slowly awakening to the necessity of having such products in the average household.
Apart from third-party brands, Croma has gone about creating a strong pool of buyers for its in-house branded products. It is targeting feature- and price-sensitive buyers to push its own products. For example, brand-conscious people will opt for a Sony or LG TV which will be put up in their drawing rooms signalling prestige and awe. However, there is a large section of consumers which prefers to buy their second TV sets to adorn individual spaces such as a room. Such buyers are looking for a quality product at affordable prices and are more than willing to hedge their money on the Croma product. In this space, the retailer competes with the likes of Micromax and Intex which are mass brands rather than high-end premium offerings.
At the same time, Croma is cautious of spreading itself too thin across categories. In case of in-house branded products, the inventory risk is completely the company’s. Therefore, Croma is only present in product categories where it is sure of selling a definite number of units every month. The company has Croma TVs and smaller electronics appliances which are mass market products. It has stayed away from a volatile product category such as smartphone where sales tend to fluctuate largely.
And how does Croma compete on the pricing front with e-commerce players which have an advantage by virtue of heavy discounting?
Ghoshal claims that the retailer has a policy of not selling below the minimum retail price or negotiating below the floor price. The team keeps a close track on pricing maintained by offline and online competitors on a weekly basis. And it accordingly comes up with product and service propositions which help it to convert potential demand into sales.
The retail store chain regularly reaches out to customers through exchange and upgrade offers. In the online world selling and buying is a two-way process. A buyer may sell on OLX and buy on Amazon. In comparison, Croma drives selling efficiencies by giving customers an option to sell and buy in the same trade channel. And most importantly, since Croma is not competing on an assortment-to-assortment basis with online marketplaces it’s able to pursue a smart pricing strategy.
Lastly, points out Ghoshal, Croma is able to differentiate itself from competitors on the strength of its customer and onboarding service experience, extended warranty and an easily accessible physical store.