Mobilestore's USP: Scale

The largest standalone mobile phone retailer is trying to beat margin blues by doing things on a much bigger platform than competition.

Srikant Gokhale, CEO of Essar group-owned The MobileStore, is in awe of the latest Micromax mobile phones’ TV commercial where Bollywood actor Akshay Kumar is shown frying a fish, shaving himself and watching his wife via a projector, all using his mobile phone.

“If you look at the recent TV ads by mobile phone companies, they are no longer just showing off the features. They are focusing on how the phones can change your life. That is exactly what we are planning to do at our stores,” Gokhale says.

As game changing technologies such as 3G, Androids, mobile number portability (MNP) and smartphones unfold, MobileStore is converting around 300 stores in 15 cities into experience stores, where consumer can personally touch, feel and understand the utilities that mobile phones can offer.

Though consumer durables and infotech retailer Reliance Digital is also planning to create similar experience zones for its customers, MobileStore has the advantage of scale over its competitors. It is already the largest dedicated mobile phone retailer with 1,200 stores, and has nearly 45 per cent share in organised mobile phone sales.

Apart from consumer durables and IT chains such as Croma and eZone, the country has only a handful of dedicated mobile retailers such as Hot Spot, Univercell, Sangeeta,

Axiom among others. Besides, phone makers such as Nokia, Apple etc also have exclusive outlets.

“Gross margin in this business is around 5-6 per cent and net margin in the range of 1-2 per cent. Hence break-even requires very high throughput – a reason why very few retailers want to run dedicated stores,’’ says a retail consultant who does not want to be quoted.

Within the city stores, MobileStore is creating ‘app stores’ where it would put up new mobile applications on display. MobileStore staff will explain various apps which are suited for different customers such as businessmen, students, youth, professionals. Tata’s durable and electronic retail chain Croma has also set up Appup stores in tie up with Intel for laptops.

Gokhale knows his USP is size and hence plans to have 50 app stores by March this year. “We will even download the app for customers as some of them do not know how to do it. From merely selling mobiles to our customers, we will be advocating applications to them ‘’ says Gokhale.

The company has already tied up for the apps that will be showcased in the stores with handset manufacturers for the smartphones. The chain gets nearly half of its sales from smart phones and Gokhale expects the percentage to increase significantly in the coming days.

Of MobileStore’s total stores, 600 are in cities, and it plans to open 200 more in the next 12 months. Besides, 300-400 franchisee-owned stores will come up in tier III and IV towns. .

“It’s true that MobileStore grew fast and then stopped. Since they went to small towns, they could not generate big throughput there. But having said that, it is equally true that it has now built scale and are hence not struggling like many others,’’ the retail consultant adds.

MobileStore has shut or relocated around 100 stores as part of its restructuring plans during the last couple of years due to the slowdown. The chain has also put brakes on its private label Ray for the time being as it is focusing on the retail strategy.

Gokhale is now betting big on smaller towns as well, which is why he is following a franchisee-led model and a new concept called “Shop-in-box’. “There are 300,000 shops selling mobile stores in the country. They do not have bargaining power. They can easily become our franchisees,’’ he says.

In the shop-in-box experiment, which is being practised by cola majors which place refrigerators in grocery and food stores with their logo, MobileStore will place boxes inside these shops containing a certain number of handsets with a price tag of below Rs 3,000. These can be carried from one place to other.

The chain is expecting 30 to 40 per cent increase in revenues this financial year over FY 2010, Gokhale says. He wouldn’t reveal whether the chain has broken even and would only say “we are in a much better situation now. We are EBITDA positive at the store level,’’ he says. EBITDA means earnings before interest, tax, depreciation and ammortisation.

Instead of expanding the consumer durable and electronic segment after it acquired durable chain X-cite in 2009, MobileStore has also launched an experiment called ‘TMS Direct’ under which customers can buy durable and electronics items through MobileStore outlets under the ‘hub-and-spoke model’.

The uniqueness in this experiment is that though MobileStore does not keep the display or stock of such items, customers can come back to them after checking such items at a nearby durable store. The chain would match or beat the price offered by other stores and source it through its own stores called The Electronic Store (earlier known as X-cite) in seven cities including Delhi, Pune, Ahmedabad and Hyderabad. “Once it is successful, we will launch it in other cities as well by March this year,’’ Gokhale says.