Buying patterns have become unpredictable: Himanshu Chakrawarti

A rendezvous with Himanshu Chakrawarti, CEO, The Mobile Store is always interesting. With over 14 years in the Retail industry, Himanshu is revered as a Retail guru in India. He has managed several store formats across a variety of category segments (entertainment, apparel, grocery, consumer electronics). Most recently, he was credited with pioneering changes in the Mobile Retailing category. Post taking over The Mobile store three years back, he has helped the company’s market share and profitability grow despite taking some bold steps like shutting down stores. With Mobiles being the fastest growing category in the organized Retail Industry in India, he is clearly one among the few industry chiefs in the country who are shaping the new Retail Experience for consumers.

 Q. Tell us about The Mobile Store growth story?

A: The Mobile Store started in late 2006. It was a feature phone market then and the selling mechanism was via mom & pop stores. Mobiles were sold using dummies over the counter and there was a need for an organized, standardized selling experience. This led to Essar setting up a national retail chain. We are today in over 90 cities with 700 plus stores. Across all our surveys, we find ourselves as the most recognizable brand in this retail segment. We are the largest seller across all brands of phones. We are the largest seller of insurance and accessories in this segment. We also operate a very buzzing site called themobilestore.in which is a vertical specialist site providing rich content to consumers on the mobiles category. E-commerce sales have rapidly grown over the last year and a half. Consumers come to look for products and information on this site and while we are improving this experience and content we are far ahead of the rest of the competition in this format.

“The volume or unit growth is not there due to the high level of penetration of mobiles. This is therefore a replacement market… The value growth is as high as 15-20 percent.”

 Q. Personally, you have had a very interesting journey in the retail domain. How different is the mobile retail space?

A: I have been in retail for a bit more than 14 years. I have worked in apparel retail for four to five years, I worked in grocery retail for some time, worked in entertainment retail for about five years. The whole focus there was on large size stores, massive stock keeping units (SKUs) and less stores. From there I moved to a format of very high velocity. In mobiles the SKUs are lesser, the tail is small, the network of stores is wider and the churn is very high. Essentially the rhythm and mechanism is very different. The team rhythm is very different as well.

Q. What is the Market share of The Mobile Store ?

A: We need to cut the market in two ways. The volume or unit growth is not there due to the high level of penetration of mobiles. This is therefore a replacement market. There is a tremendous amount of up gradation taking place. As a result, market growth is taking place by way of increase in average selling price. The value growth is as high as 15- 20 percent.

Our stores are part of what we call as modern trade and it is about 12-13 percent of the market, Another 12-13 percent is taken up by the E-commerce players, whereas a good 75 percent still belongs to the unorganized market (mom & pop stores). We have about 27-30 percent of the modern trade market. We are aiming to gain market share in the E-commerce segment.

“ level of loyalty in Mobile Retailing is a bit higher, this is because lot of people experience some level of problem at some time or the other and that’s what leads them to the store. However if there is a price difference like you see with E-commerce players, then they are willing to trade off the loyalty “

 Q. Do you see Brand and Retailer loyalty growing in this segment?

A:  There is some brand loyalty, the best example is Apple. At lower segments, there is no loyalty. There is proclivity to the brand but no commitment unless there is a series being launched. But, the churn of the customers in this market is very high, so that’s one reason why brands like XAOMI can come and make such a big impact so quickly.

However, the level of loyalty in Mobile Retailing is a bit higher, this is because lot of people experience some level of problem at some time or the other and that’s what leads them to the store. However if there is a price difference like you see with E-commerce players, then they are willing to trade off the loyalty. People come to us when they want to do a buy back or need data transfer. When you buy a new phone you need to do data transfer, 75 percent customers don’t know how to do it. They keep personal information on the phone like passwords, photos, contacts and banking passwords in their phones. In such cases, the consumers want to go to a reliable place and want it to be handled in a transparent manner.

Our differentiators are The Lounge experience, Value Added Services and being fully Multichannel

 Q. How does The Mobile Store differentiate itself as compared to its competitors?

A:  We have three primary ways in which we differentiate ourselves. For the top to middle segment, we have “Lounges” – it’s an upgraded, connected, amplified experience. This has been created in about 23 – 24 stores. It’s not merely a feature amplification but an amplification of all that a customer can do with his Smartphone – what apps work best, how you can use get a better experience with each feature etc.. Our version 1 has inspired other chains to take the leap. We are currently implementing version 2.

Our second differentiator is the value added products. Every time you buy a phone, you need accessories and help with them. Take the example of setup of screen protector without bubbles. You need insurance etc. There are handling problems which need to be worked out through our connection with brands. We offer these value added services to all our customers.

Our third differentiator is that we are fully multi-channel. Our website, contact center and stores can handle customers end to end. You will get a full-fledged experience no matter what channel you use to access us. The experience is still not integrated but we are quickly moving towards providing an Omni Channel experience to our customers.

“The buying process earlier was very linear”

“In the last couple of years with access to internet on the phone, social media, ecommerce, the pattern has become random”

 Q. What are some key customer trends you are noticing ?

A: Customers are very different today. The buying process earlier was very linear. Earlier an average person would change a phone every 15-18 months. They would start exploring other options in the period before they buy. They would ask friends, check out their top choice models, walk into our store and check out the phone. They would never come alone. Always with one more person to re-inforce the choice.

In the last couple of years with access to internet on the phone, social media, E-commerce, the pattern has become random if I may use this term. Today customers walk into a store randomly to check out new products just to kill time before they go for a movie, post a query on social media and ask for an opinion, check the product price, sellers and delivery time on the net. They might come to the store to check the price of the product. So the sequence is very random and unpredictable. It’s a ‘need and impulse’ buy today and a function of how in their own minds this (buying a phone) is no longer on a list of things that needs to be done after some period. It’s always there on the list. There is virtually no one I have met who is not checking out new phones even if they have bought a phone just a month back. It’s completely unpredictable. It therefore opens significant opportunities if we design methods of dealing with this pattern.

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Q. What are some unique experiences we can hope to see from The Mobile Store in the future?

A:  Cables and accessories is a rapidly growing market. Customers find it difficult to understand what cables to buy for their applications. We have simplified the understanding of cables by way of a simple chart that you can see in our stores besides introducing a whole range of cables that customers can buy for their day to day usage. These cables are displayed right below the chart in the stores.

Also, there are many other apps which the brands have not done a good job of promoting for instance, the NOKIA city lens…we bring out these features in our attempt to help customers get value.

The Selfie stick is another experience we are adding to our stores. Selfies are big abroad because there you cannot get anyone unknown to click your snaps as easily as you can do it in India. Our stores will soon have Selfie sticks to help customers come and click their Selfies.

A lot of these experiences are replicable by competitors however by the time they copy this one, we will be upto the next services innovation. While you can democratize ideas like EMI for purchase using credit cards, The Lounge, and some of the ones we discussed, you can’t democratize the spirit of Services Innovation. That’s our difference.

“A lot of these experiences are replicable by competitors …while you can democratize ideas …you can’t democratize the spirit of Services Innovation.”

Q. In which areas are you looking for partners?

A:  We are always looking for partners. The reason is simple. We cannot be Einstein’s and start everything from scratch…when we did the equated monthly installment (EMI) as an offering…we partnered with Innoviti. On hind sight, we forgot to patent it (smiles) but while we innovate a lot, the idea can come from anywhere. See ‘The Lounge’, it’s a great example of how we have co-opted with brands as partners to help us create this experience. Similarly when we are looking at value added insurance, we have Edelweiss working with us. We work with IKSULA in the ecommerce technology space. We partner with Vodafone and Tata in the operator space.

Q. How mature is the involvement of analytics in merchandising decision making in India and in The Mobile Store?

A:  In our industry the obsolescence risk is very high. Our industry is the only one where the price goes down very quickly and by a good margin. In such categories, you need to have a lean inventory. In our case, unlike best seller books, no one comes asking for an old phone. I am of the firm belief that if you ask my store level person to predict the top 8-10 expenditure items for the next few months, I can guarantee you there will be 80-90 percent inaccuracy in prediction. This whole concept of the person in the store knowing the net demand at a store level is significantly over hyped. They are only reacting to crisis at all times. This has to be segregated from the customer experience. The person at the store level is the best judge of customer experiences. Understanding this through a centrally managed team is a disaster. But what inventory should go there is visible in a large distributed network like ours. Statistically also, the accuracy of projections gets significantly better at aggregate levels and therefore it makes most sense to have this done centrally, if everything has to go downstream then your ability to centrally distribute improves significantly.

We earlier found it tough to get consensus within our organization but we went ahead with having a central system in place. Today we run a literally “Zero obsolescence” inventory operation. For this we were nominated at the “World Retail Congress in Paris” last year amongst four global organisations for best merchandising practices. We turn our inventory about 21 times each year. In fact a lot of our industry players have had indepth discussions with me on how to approach this problem and we are clearly identified as someone ahead in the game in these practice areas.

“This whole concept of the person in the store knowing the net demand at a store level is significantly over hyped. The person at the store level is the best judge of customer experiences”

Q. There has been heavy discounting by the E-commerce players lately, what is your view on this trend and its impact on your industry?

A:  If you look at factors why E-commerce has picked up, you will notice it has picked up due to the explosion in the mobiles arena creating massive access. Three things that customers look at are width of choices (physical retail has this constraint), the next differentiator is service. It’s not just about how quickly you deliver but things like visibility on my consignment, cash on delivery, free pick up on faulty consignment delivery, return the product no questions asked. E-commerce sites have done these extremely well. The last differentiator is price. All E-commerce players have established themselves on a play of all these three factors. In the last 4-6 months they have actually compromised on the first two and this is not limited to the 6th of Dec. There has been a diminishing customer experience and they seem to be doing customer acquisition through discounting. It’s predatory to do this as it will come to haunt you later. When prices are no more equal and low forces get unleashed, the media comes after you; the customer buzz is negative etc. That said the prices will continue to be low as cost structures are different. Discounts will continue, pricing structures will continue, significant growth will be there in E-commerce. That’s the tide of technology, that’s the quality of players we have. Money will continue to pour in. When you look at a 3 US$ billion market in India with a Chinese market of 108 US$ billion in E-commerce, there is a benchmark and significant growth opportunity. The questions around how will they make money or is this sustainable, are irrelevant.

“All E-commerce players have established themselves on a play of the width of choices, service and price”

Q. How will The Mobile Store blend the E-commerce experience with the store experience?

A: There are larger forces at work; access through mobiles, peer pressure. Wallets will come into business to facilitate transaction, COD will become end use terminals, the whole ecosystem will determine how the consumer will move. We need to understand what will happen to the consumer. Information is going to be fully available. Customers will be unpredictable and our static segmentation processes will not work. We need to ensure that from our perspective we are able to give them the solutions they want. Work on being accessible for consumers. In the information explosion, there will be a great wave on helping customers narrow down choices and curate experiences.

Q. What are the three areas of focus for The Mobile Store going into the near future?

A: Our focus will be first, the Customer Experience and better next generation integrated experience across channels. Secondly, we believe, there is no shortcut to innovation, our next innovation will be out by December on the Internet of Things. Thirdly, we will focus on innovation in facilitating payments, we are a relatively poor country and yet prices of handsets match that of the US.

“In the near future, we will focus on providing better next generation integrated customer experience, innovation based on the internet of things and facilitating payments”

Q. Do you think there is a huge secondary market getting created for mobiles? Do you plan to play in this arena?

A: There is a massive market and it has always been there. As Indians we never throw away. With buyback coming in, with retailers like us and platforms like OLX, you will see more and more handsets coming out of the drawers. The question to be asked is where do these phones go? These products go into the refurbished markets at significantly discounted prices. Good amount of these go into other poorer countries in Africa. This system is currently completely disorganized and will organize itself.

Q. What would be three big trends for the markets in India?

A: The consumption story is a Trillion dollar question, the growth is going to be good and the winners will be people who have their experience and formats right. The second aspect of the story is that online is here and here to stay. It can be an opportunity or threat but there is no way you can ignore it. Some of my interactions have been strange where people say that it does not work in my industry. I have been telling them that it does not seem to work because your category is lower down in the list. Wait for it to impact. The third one is that in the entire retail industry we need to work towards getting the back end better, physical infrastructure, IT systems, warehousing needs to work better and there is significant space to improve things. We need to all work towards making this comes through. Things like road infrastructure, cold storage etc are larger issues. The whole ecosystem like transportation hubs, warehousing hubs are very poor. Both physical, IT, people to be trained have to be in place to get this growth story going.

“The consumption story is a Trillion dollar question. The growth is going to be good and the winners will be people who have their experience and formats right”

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