Electronic retail chains taking online route to tap more customers, cut costs

Written by Sohini Mitter | Mumbai | Updated: Jul 6 2012, 07:08am hrs
Electronic retail chains are aggressively selling goods online to cater to customers in tier II and III towns, as more buyers prefer buying online, and rising commercial real estate costs prevent retail firms to build stores.

The e-commerce turnover is already 1% of our total business, Himanshu Chakravarthy, chief executive officer, The Mobile Store (TMS), owned by diversified Essar Group, told FE. We are offering price discounts to our online customers and these are not extended to the physical outlets.

TMS, which earlier had a catalogue-only website, started selling mobile phones and tablets online in April. TMS online sales have doubled every month until now. The company also earns 3% of its sales by selling handsets to pure-play e-commerce sites like Flipkart, Infibeam and Indiaplaza.

We are also selling tablet computers on our website and will soon start stocking mobile accessories, which will be exclusive to online customers, Chakravarthy said.

Many electronic chains are looking to adopt a brick-and-click model to meet the growing online demand for electronic goods. Shopping for electronics has significantly shifted online in the last one to two years and retail chains have had to rework their strategies to lure customers both in stores and off it, said Purnendu Kumar, vice-president (retail) at Technopak Advisors.

According to a study by online marketplace eBay India released in February, it sells a mobile handset every four minutes, a laptop every 17 minutes and a digital camera every 23 minutes.

Tata Groups electronic retail chain Croma started its e-commerce operations cromaretail.com in April, after five years of selling goods through physical stores. Croma has set a target of R3,000 crore from online sales by 2014.

E-commerce, today, is critical to retail chains. If the business is the body, brick and click are its two arms, said Ajit Joshi, chief executive officer of Infiniti Retail, which owns Croma.

Other retail chains such as Next, owned by consumer durables maker Videocon, and Future Groups futurebazaar.com also sell goods through their websites.

Consumers pay less shopping online as these chains offer steep discounts to attract sales and volumes. Discounts by Flipkart, Homeshop 18 and BuythePrice e-commerce sites vary between 15% and 20% and they earn more than half of their revenues from sales of electronics.

Our average selling price has gone up from R1,000 to R2,500 after we started selling electronics, Ravi Pakash Vora, vice-president (marketing) of Flipkart, told FE in an earlier interaction. It is one of the best-performing categories and 40% of our sales come from there.

Croma, however, maintains parity in its online and offline prices. We are clear, we are not a deal site, its CEO Joshi said.

Experts say this trend will only grow. Electonic items are catalogued in great detail across all sites, with product specifications, user reviews etc and the shopping process is simple as well, an analyst tracking e-commerce trends said. This is driving the online boom in this category and it is here to stay.