Multibrand stores used to be the place where Indian customers compared and shopped for electronics and home appliances. Now the largest of such retail chains are having to take on a new challenge : online and e-commerce. Are they holding their own, or succumbing?
Earlier this week, the retail trade in the US was offered an ominous new buzzword by the investment research firm CFRA: “Death by Amazon”. It was the name of a new index created by the firm to rate stocks that it recommended for ‘sell’, based on the company’s vulnerability to competition from Amazon, the online e-commerce behemoth.
Every time Amazon announced that it was entering a new vertical market, the stocks of existing players in that sector, took a toss, putting fear into investors that the online giant would soon scoop up all the sales. And how did CFRA arrive at the index? Simple. It compared how much of Google search word traffic by consumers, for a term say LED smart TV was going to the website of a retailer versus how much was going to Amazon.
In CFRA’s initial shortlist of vulnerable retailers, were two of largest electronics retail chains in the US – Best Buy and the specialist console games chain, Gamestop. The Death By Amazon index is reported this week by Business Insider, and one can be sure, analysts in other geographies will soon do similar surveys.
India woke up to the challenge much earlier
Interestingly, the India-based electronics and home appliance retail business woke up much earlier to the challenge posed by e-commerce giants like Amazon and Flipkart (with its new Walmart backing). In late 2018, leading consumer electronics retailers, mostly headquartered in South India like Viveks, Vasanth &Co, Girias and Sathya, approached major appliance manufacturers like Godrej, LG, Panasonic, Samsung, Sony, Whirlpool and others, asking these brands not to allow deep discounting of their products by online vendors.
Apparently, the retail store chains received some assurance of parity, because six months later they continue to deal in these brands. But not all. Some of the retailers mentioned above, decided to stop selling the products of the German brands Bosch and Siemens.
There was no official explanation, but industry watchers said this could be because products of these two companies , best known for washing machines and dish washing machines, were still available at big discounts compared to the prices that retailers could offer. The online operators like Amazon and Flipkart have generally pleaded inability to help, saying they control the platform, not the price set by individual sellers.
New e-commerce regulations kick in
Roughly at this point in time, Government of India decided to step in and frames rules to regulate who could sell online and how they operated. Scattered across the new commerce policy were provisions which sought to regulate how low the online prices could go, and generally the business media in India has condemned these provisions as anti consumer and needless interference in what should be something the market should define.
Be that as it may, the retail electronics chains in India have shown that unlike their American counterparts, they are not about to roll over and die. They have one big thing going for them, the archetype Indian customer, who unknown westerners, believes in serious touchy-feely comparison shopping before making a purchase deemed to be worth the money.
Major study of Indian electronics and appliance retail market
A major study recently released, by the UK-based strategic market analyst EuroMonitor, examines for the first time how Indian retailers hold their own against two challenges: the single stores and the Internet marketplace. The report entitled “Electronics and Appliance Specialist Retailers in India” ( 42 pages, March 2019 USD 990) analysis key demand trends, forecasts future markets, identifies market shares of international and desi players in India and suggests strategies for growth.
According to the EuroMonitor study, “Reliance Digital from Reliance Retail remained the leading retail brand in electronics and appliance specialist retailers in 2018. Competitive pricing and offers on a par with the major online marketplaces, such as Flipkart and Amazon, helped drive its sales.”
“Croma, the flagship brand of Infiniti Retail, owned by Tata Group, continued to be amongst the fastest growing retail brands in electronics and appliance specialist retailers in 2018. This is because consumers have strong faith in Tata Group and associate its brands with quality and affordable pricing.”
The report concludes with its take on why multibrand retail in electronics and appliances remain the preferred choice of Indian consumers: “Consumers increasingly prefer to shop at multi-brand outlets, especially for electronics and appliances. As consumers become more price-conscious, they are attracted by the choice of brands and product offerings at different price points in multi-brand outlets.”
In the US circumstances may be more dire for retailers, to prepare for an early demise at the hands of Amazon. But as studies like this show, Indian electronics retailers are in a similar position of the late and great American humorist Mark Twain, who while holidaying in Europe read his own obituary in a home town newspaper and cabled its Editor. “Rumours of my death are an exaggeration!” Right now the retail electronic trade in India could say much the same thing!
This story is written by Anand Parthasarathy. His rich experience, reporting ACE (Appliances and Consumer Electronics) stories encompasses working 15 years with The Hindu as its IT Consulting Editor. He is a qualified instrumentation systems engineer who has worked for 20 years as a scientist on numerous defence R&D projects, and as a project manager for surface-to-air missiles at DRDO.