Croma does a Best Buy to beat online retailers

Tata Group's consumer electronics retail chain Croma is seeing huge opportunity in the 'store pickup' approach adopted by American retailer Best Buy, to increase sales across its retail outlets in the country.

Ajit Joshi, CEO and MD, Infiniti Retail Ltd, the company which runs Croma stores, said no retailer in India offers this facility, which will act as a key differentiator for Croma stores in the country.

The 'store pickup' concept allows customers to order online and pick it up later from store.

"This is a big concept in the West, especially with Big Buy, and Croma is looking at playing on similar strengths," Joshi told dna at the opening of their 101th retail outlet spread across 13,500 square feet at Prabhadevi in Mumbai.

"The customer chooses to buy the latest iPhone online and has paid for the product, all he has to do is collect it from the nearest store thus reducing the transaction time. This will be a unique offering, something no other company is providing either online or in the offline space," said Joshi.

The Croma staff would also help customers personalise the product being purchased in addition to transferring data, photographs, etc.

With stiff competition from online retailers such as Flipkart and Snapdeal, Croma views the online-offline combo as a key strategy to increase reach/sales while also offering convenience to its customers.

"People are adopting a mix of online and offline and every single dot-com company has started making noise about coming offline. Over 100 stores in the chain is a big strength and we will combine the forces of brick and mortar and offline for expansion," said Joshi.

Interestingly, despite being small at the moment, the online platform gives Croma Rs 1 crore worth of business every week.

The company will adopt an omni channel (mix of online and offline) strategy and add 10-14 stores this year. The focus, however, will be to invest and expand in the existing cities, thereby avoiding the need for multiple distribution centres for multiple stores.

The zip store (smaller stores of 2,000-3,000 square feet) format will be purely for expanding in a crowded market where finding bigger real estate (8,000-12,000 square feet) is a challenge.

For every city that Croma has presence in, the management is targeting a consumer durable and information technology (CDIT) share of 20%.

"At the moment, we are not even close to that. But we are working on it. We are also looking at developing kiosks that can be taken to a large number of people such as station or factory," said Joshi, stressing that Croma continues to be the number one retailer as per turnover generating sales per square feet of around Rs 38,000.

With around Rs 700 crore being already invested by Tata Sons in the last seven years, in addition to debt instruments, the company management doesn't feel the need to ask for more funds and expects to generate own funds for expansion going forward.

"At a store level we are fine (break even) but at the company level we aren't as corporate costs and marketing costs are yet to be factored in," he said, adding that the retail chain would have had grown from 24-27% over last year -- last year's turnover was Rs 2,500 and this year would be approximately Rs 3,100 crore.

The company's private label business crossed Rs 180 crore of turnover in the last fiscal – it was Rs 128 crore the year before. "The fact that it is 10-15% cheaper and is also loaded with features has helped us. If we had to follow the leader which Best Buy is, we want the turnover from private label to be 12%," he said.