The technology segment clearly does not enthuse big multi-brand retailers any longer.
Big retailers in India are cutting down on their durables and electronics retailing business, citing high inventory maintenance and low margins on products.
Last week, Shoppers Stop said it was scaling down its electronics and durables business.
Earlier, Future Group decided to hive off its durables retailing chain, eZone, and look for a strategic partner.
Several other multi-brand retailers Business Line spoke to also indicated that they were undertaking a “course correction” for their consumer durables and information technology (CDIT) business.
So, what ails the business? Analysts note that the segment is highly competitive and the margins low. Also, the stand-alone mom-and-pop stores make substantial revenues because of the low cost of operations.
According to Mr Mark Ashman, CEO, Hypercity, “It (CDIT business) is a tough category…. It is about 15 per cent of our sales mix at the moment. We want to grow in the home and apparel area. So, it is an area that we continually review.”
He said the company had to downsize the space it was giving to the category in its new stores.
“The unfortunate thing is that we get good top line sales from it, but don't earn much margin on it. So, it is an area that we are not necessarily looking to grow.”
Future Group, which has scaled down its eZone outlets significantly, said it would build centralised inventory. “The expenses do not justify the wafer-thin margins,” Mr Kishore Biyani, CMD, Future Group, said recently.
Future Supply Chain Solutions, which handles the logistics for Future Group, said it was yet to attain uniform efficiency levels across products categories that are sold in Big Bazaar, HomeTown and eZone.
“We need to understand each supply chain almost as well as the people in that line of business. We have to understand the FMCG business as well as FMCG majors, and that of furniture as well as furniture players,” said Mr Supratim Ganguly, Head, Contract Logistics, Future Supply Chain Solutions.
He said the company was yet to achieve the same level of efficiency in all categories. The efficiencies in apparel were the best and the company was trying to replicate it in other segments, he said. In electronic items, the company sells a lot of private brands imported from China and Taiwan. For these, it had to build new capacity.
Mr B. S. Nagesh, Vice-Chairman, Shoppers Stop, said in the CDIT business, the standalone mom-and-pop stores make decent money because of the low cost of operations. “If you look at the players who are currently in either the listed space or coming from a larger group, I think the whole thing is about space productivity.”