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Retailers are no more enamoured of TV sets, washing machines and other bulky electronic items.
E-commerce firm Flipkart discontinued sales of consumer durables and IT (CD-IT) products in June. Hypercity, owned by Shoppers Stop, decided to go slow on TV sets, mobile phones and computers. The latest to join the group is Aditya Birla Retail’s More, a departmental store yet to turn profitable.
“We think we have the right assortment in the food category but CD-IT is not our specialty. It doesn’t make money and occupies large amount of space,” Shoppers Stop Managing Director Govind Srikhande said, adding “the exit will improve efficiency.”
Separate format
Kishore Biyani-promoted Future Group had even floated a separate format — eZone, in 2006 — to sell these products, though it continued to sell a few CD-IT categories from its Big Bazaar stores to cater to consumers in small towns.
Similarly, Tata-owned Star Bazaar has decided not to stock large and bulky electronic goods. “We want to focus more on items that are bought often and not once in three years,” said Jamshed Daboo, CEO, Star Bazaar.
Importantly, the low margin of 5-8 per cent on CD-IT products, compared with 60 per cent and more on apparel and food products, is the main concern. But several other issues such as requirement of large shelf space and high real estate costs, logistic constraints and low consumer sentiment, have forced many companies to exit the business.
Losses for retailers have mounted as high as 20-30 per cent chiefly due to breakage and reverse logistics. Besides, the high churn rate and new technology, a product launch every seven days makes it difficult for retailers to maintain a good level of inventory, Nilesh Gupta, Managing Director at Vijay Sales, said.
“For us, it is our bread and butter and hence all our focus is on CD-IT. But for other retailers such as Shoppers Stop or More, it becomes a tad difficult as they have to manage a thousand other categories and products,” Gupta added.
Shoppers Stop has been resizing its Hypercity stores from one lakh sq ft to 30,000 sq ft, in an attempt to make them profitable, Srikhande said. However, reduced store space means lower scope to stock bulky products.
Higher shipping cost
In the e-commerce segment, the high cost of shipping is affecting players such as Flipkart as these have to be borne by the retailer. Breakages during transportation add to their woes, even as the demand for CD-IT products is on the wane. Meanwhile, pure-play CD-IT retailers such as eZone, Tata’s Croma and Mumbai-based Vijay Sales are also feeling the pinch, with the increase in excise duty on imported items. This makes these items costlier by 8-10 per cent.
According to Debopam Chaudhuri, Vice-President at research firm Blu Fin, sales of consumer durables have remained flat since August 2012, and are unlikely to pick up till the rupee stabilises. With retailers not keen on stocking CD-IT products, e-tailing could well be the norm.
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