Vijay Sales’ online business isn’t looking up. The electronics chain will, however, retain a small presence to create customer awareness, Nilesh Gupta, managing partner and son of Nanu Gupta, owner and founder of Vijay Sales, tells FE’s Jharna Mazumdar. The company reported revenues of Rs 3,160 crore in FY17 and expects sales will improve by 10% to 15% in the current year. Further with the implementation of GST prices of consumer durables have gone up by 3% to 4%. Excerpts:
How have sales been post GST?
We had announced aggressive discounts of as much as 20% to 45% in June to clear our stocks. We now have very little stock on display and the new stocks, with new price tags, is just arriving. Prices have gone up by 3% to 4% with 28% GST for most items like refrigerators, air conditioners and micro-wave ovens.
Do you see any impact on your business due to the price increase post GST?
July sales are expected to be 25% to 30% lower compared to last year as most customers made their purchases in June. However, consumer durables are a necessity and soon we expect sales will be back on track. An early festive season will also help recovery of sales.
How many stores do you have at present?
We have 70 stores operational in the country and plan to add another three stores within the next couple of months, one in Pune and two in Delhi. We are very clear that each of our stores should be profitable and we have expanded cautiously. The first Vijay Sales was opened by my father, Nanu Gupta, at Mahim in Mumbai in 1967. It was just a 200 sq ft shop, and he sold only television sets. He used to engage directly with the consumers, even going to their houses to fix their gadgets. We opened our second store only in 1986 and the first Vijay Sales store outside Mumbai in 2007 in Surat.
Are you also offering discounts at similar levels offered by the online players to drive sales?
Our prices are competitive and we don’t offer heavy discounts like the online players. The online business is loss-making due to heavy discounting and we have limited our presence just for customer awareness. We do have a website and have been forced to have a presence online due to steep competition but we are bleeding. We will not expand it further at least in the near future. The heavy discounting business model doesn’t make sense as it results in huge losses and is not sustainable in the long-term.
Despite stiff competition from online players how have you managed to survive?
While categories like smart phones and gadgets sell more online, customers still prefer to buy big ticket items like TVs, refrigerators, air conditioners from the stores as they want to see the product. Moreover, for the purchase of large ticket items the decision is not taken by one member but mostly by all members of the family. Customers prefer to come to a store and decide on big ticket purchases. Our physical stores are profitable while the online presence is a loss making proposition. We ensure the stores break-even within a couple of years or else we shut the store. Last year we shut around 4 to 5 loss-making stores but also added a similar number.
How do you expect sales to be this year?
The company witnessed sales of around Rs 3,160 crore in FY17 compared to sales of Rs 2,750 crore in FY16. Sales are expected to improve by 10% to 15 % compared to last year in FY18. We are a profitable company.
What are your expansion plans going forward?
We plan to add not more than 6 to 7 stores in FY18 and are going slow on expansion as we want to ensure that all our operational stores are profitable. We are in no hurry to expand. We have only company-owned stores and that is how we would like to expand. Earlier the company used to add around 10 stores but has slowed down for the last couple of years with competition intensifying in the space. We want to focus on our existing business and will not enter any new geography in the near future. Vijay Sales has presence in Maharashtra, Gujarat and Delhi NCR.