Why Intex, India’s Third-Largest Mobile Maker, is Defying Conventional Wisdom

There’s something wonderfully counterintuitive taking place at Intex, India’s third largest mobile manufacturer.  Intex is investing Rs 100 crore to set up 400 brick-and-mortar stores. What’s interesting is that the decision takes place in an environment where online sales–with their online-only strategies, flash sales, by-invite-only sales—dominate the headlines.  And then there’s the fact that less than three months ago, UniverCell, south India’s largest brick-and-mortar cellphone retailer, with over 380-stores, announced it had given up the battle to e-commerce. What’s Intex up to? We spoke to Vishal Malik, DGM-Retail Business, Intex, to find out. Online sales dominate the IT product and mobile space, forcing players like UniverCell to get out of the brick-and-mortar game. In this environment, why is Intex planning to invest Rs 100 crore to set up 400 stores?What’s missing online, right now, is the ability experience products. About 1 lakh Android phones are sold in India every day. Many of these buyers are first time users of smartphones, and what we’re finding is that most people don’t know how to use these devices. What’s needed is a platform where customers can experience products they want to buy. As a company, we’re trying to fix that disconnect by creating a platform where customers can experience the wide range of products Intex offers. Those products can only be experienced through stores, which we call Intex Smart World. I’m talking about more than just experiencing mobiles. I’m talking about experiencing music devices, LED TVs, etc.  Our stores are divided into two areas: One for sales and the other for experience, tutorials, digital displays, support, and engagement. We’ve trained our staff to ensure that customers know how to use all the features of the products they buy, thereby maximizing their investment.   In addition, only 8 percent of India’s population lives in the top eight Tier-1 cities, and they are comfortable with e-commerce. The opportunity is in Tier-2 and Tier-3 cities, where Internet connections can be slow and bricks-and-mortar stores are few. CRISIL expects the Indian e-commerce industry’s size to more than double to around 18 percent of organized retail by 2016. Even then, its share of the overall retail–organized plus unorganized–market is expected to be just over 1 percent. That means offline stores are not going anywhere. What’s the most important driver for the stores: Educating customers, creating greater customer engagement thereby greater brand loyalty, offering customers a better buying experience? There are two: Experience and display (sales). In addition to giving customers an experience, we want to create an alternate (sales) channel.  We’re in an era of personal technology and we, at Intex, want to be a force in this exciting new space.  The stores have to sell enough to pay for themselves. What’s to stop customers from experiencing a product from the store and still buying online? We can’t stop the market. That said, we’re trying our best to ensure that there are no price differences between channels. We will keep all the prices of all our products similar across channels.  Our stores come in two variants, COCO (company-owned and company-operated) and franchised. We see 25 percent of the stores we plan to open in COCO format. In both cases we will work directly with the stores; there will be no parties in-between to raise prices. We are trying to match prices to online players because we don’t want customers to see a difference in price.  That aside, customers need a lot more than mere box selling. Take a customer buying a speaker for instance. Online, customers can’t experience that speaker. They need a place where they can hear music from that speaker. The same applies to customers buying TVs. We want customers to buy having had a complete experience.  Won’t that mean lower margins from products sold within stores?We can make adjustments to that. Ultimately, the buyer of our products should see a difference in experience, no matter what channel they use.  The other side of this argument is that certain customers want the advantages of buying from a store including the ability to experience a product–and not having to wait for delivery. And with all the added benefits of the stores, including tutorials and support, we expect them to come and buy at the store.  Teknopak has a term for this: Price plus. The price plus could be one or more of fashion, quality, convenience, service, experience, or innovation.  You already have a retail presence in the form multi-brand outlets. Wouldn’t it make more sense to place trained staff in those stores rather than investing in new ones?Yes, we do sell through LFRs (large format retailers) and we have over 80,000 dealers across the country.  And, yes, we already have staff in LFRs. But there is a space constraint. We have a large range of products and services.  Can you talk about the size of the stores and who will train the staff in franchisee stores? We will train all the staff, including those from the franchisees, to ensure that customers have a consistent experience.  For the COCO stores, we looking at stores between 800-1500 square feet. And for the franchisee stores, we’re looking at 500-600-plus square feet.  We have a long-term vision for branded retail. In the first phase of expansion, we’re looking to touch 100 cities. And we’ll gradually work our way to other cities.  Will the stores offer after-sales services as well?No, after-sales service will not be available at the stores. They will serve as touch points to customers. We have 900-plus service centers across the country, and the stores will direct customer to them or offer basic information.  Aren’t there more first-time buyers who need buying advice in non-metro cities? If so, why did Intex open its first store in Delhi? Why not a start with non-metro, low-tier city? When I said we were opening in 100 cities, I meant we were covering all the major cities. That includes metros and B-class towns, too. Very soon, you will see our stores in B-class towns. Today, we’re talking about stores in Panipat, Ludhiana, etc. Do you think India should regulate online discounting to protect brick-and-mortar stores, a model France employs with books, for example? We are all here to stay. I think both models can survive without regulation. We live in an era where we should not restrict anyone. It’s the customer’s right to access any channel. I’d like to point out that in countries like the US, where e-commerce is strong, stores are doing well. In fact, I believe that online stores are act as a catalyst for brick-and-mortar stores, and getting them to upgrade themselves.  In addition, didn’t the same thing happen when LFRs and multi-brand outlets launched? Standalone shop owners had apprehensions, especially around the ability of large players to buy in bulk. But, today, both exist.   At our stores, we’d like to bring to customers some of the benefits that are missing online. I believe we can give customers a great experience.