'Today, phone buyers want value-added products'

Q&A: RAJIV AGARWAL, CEO and Director, The Mobile Store

The Mobile Store, the mobile phone and accessories retailer backed by the Essar Group, was targeting a business of Rs 5,000 crore by 2010 when it launched two years ago.

That revenue target may slip due to the economic slowdown, but not by more than a year, chief executive RAJIV AGARWAL tells Raghavendra Kamath in an interview, where he also talks about being open to inorganic growth. Excerpts:

What revenue targets have you set for the current year?
We are doing a business of around Rs 125 crore every month and same-store (sales) growth of around 15 per cent year-on-year. We are looking at a business growth of 15-20 per cent this fiscal compared to over 100 per cent last year.

The reason is that, last year we opened hundreds of stores but in this fiscal, we have consolidated to cut costs and improve margins. We are already positive on Ebitda (earnings before interest, taxes, depreciation and amortisation). We have six per cent of the overall market today and 50 per cent of the organised market.

The company was targeting a business of Rs 5,000 crore by 2010 and a store count of 2,500 outlets when you launched in 2007. Are you on track?
No. I think we have to push it back by one to two years. We will still gun for it.

But if not 2010 end, we are hopeful that we will do it by 2011 end. This revision in target is mainly due to the economic slowdown we saw since 2008.

There are reports that you are a front-runner to buy B K Modi’s mobile handset retail chain, Hot Spot? Is that correct?
If they are selling it, we will look at it. In fact, we are looking at both organic and inorganic options for growth. 

How is your private brand, Ray, doing? Have you met your targets?
We would have sold 100,000 units since its launch (four months ago). We could have done much better but we did not take it outside our stores. We did not because we wanted to grow step by step. Now we are exploring means to take it outside our stores. We have already launched four variants and are planning to import three more models. Our phones are in the value category of Rs 5,000 to Rs 6,000. We would look at the higher end after testing the market with this segment.

How are you planning to boost your margins when mobile phone prices are dropping continuously?
That phone values are dropping does not mean our revenues are also declining. Today, buyers want value-added products which carry higher margins and not basic phones.

Additionally, we are creating loyalty among customers so that they give us repeat business. We have launched two-year warranty on phones and money-back offers wherein buyers can return the phones within 15 days if they do not like it and get 80 per cent of the money back. We are also focusing on accessories, repairs and connections in a big way.

What new initiatives can we can expect in the near future?
We are planning to to launch 1,000 small stores, which we internally call Chota Mobile Stores, with a size of 50-100 sq ft in densely populated areas. We have already launched 10-15 such stores in Mumbai and Hyderabad. We are also looking at entering IT, peripherals and consumer durables in the next six months.

How do you look at the launch of private brands in mobile phone space?
About 30 per cent of the market is dominated by Indian and Chinese players and the rest by established brands from abroad. There is a big scope for private brands. Since the IMEI number is a necessity now, a lot of players are looking at this option seriously.

Does the mobile rates’ war impact your revenue?
As far as competition among operators goes, any increase in them leads to increase in subscribers and brings more business for us.