Vivek group: Riding three horses
By Venkatachari Jagannath | 11 Aug 2005
Chennai : At a time when managing a single retail format is a challenging task, the country's largest consumer durable retail group, Vivek, runs three — Viveks, Jainsons and Premier — with 50 outlets spread over 2.5-lakh sq.ft of retail space.
The Rs330-crore turnover group intends to triple the number of outlets in five years time.
"Our plan is to have an extensive network of outlets in Tamil Nadu, Andhra Pradesh, Karnataka and Kerala. However, we are yet to decide on the format-wise expansion numbers," says director, B A Srinivasa.
Interestingly, the group's three formats serve three different market segments — Jainsons in the lower-middle class with 27 outlets under the ownership of Jainsons Corporation; Vivek's in the mid- and upper middle class segment with 22 outlets owned by Vivek Limited; and Premier, in the upper end with three outlets under Bysani Consumer Electronics Limited).
For three decades since 1965 the group owned just three outlets. In 1995 Vivek & Co became a public limited company and by 2000 the number of outlets went up to 16.
"Looking back our first year turnover was Rs1.6 lakh. Now we do that in an hour," muses Srinivasa.
Much of the group's growth happened due to acquisitions. In 1999 the group bought Jainsons owning 14 showrooms and in 2003 the company bagged the Spencers Super Store on lease. The Spencers Super Store has now been rebranded as Premier.
The delay in entering the more lucrative western and northern markets is explained by Srinivasa. "Our strategy is different from other retail chains that went national with one or two stores per city. We would like to cover the southern states first and then expand to other parts. The idea is to become a strong regional player first before gaining the national stature."
The group follows the principle of having one outlet every seven kilometres in a city so as to cover all the localities.
According to Srinivasa, consumer durable retailing is a low margin business that requires tight control over costs. "That is possible only when we become a strong regional force."
Becoming a strong force is a three pronged strategy. First by opening own stores and the second by franchising while sourcing is centralised to enjoy the economies of scale. However the group is yet to decided on the number of franchisee stores.
Barring the IT education sector not many retail chains have succeeded with the franchisee model. The retail group believes that franchisee model would work for it even though the white goods retailing is a low margin business.
"The franchisee would be able to pay the royalty to us by selling high margin in-store branded products." With 100 outlets the group can source couple of white goods and sell under its own brand or as a co-branded product.
"Such model(s) would be available only in our stores and it would give us and the franchisees good margins. Today the laws governing the franchisees are not well codified. We hope the laws would be in place by the time we increase our number of outlets by another 50," he adds.
Given the fact that the goods sold in the retail outlets are manufactured and priced by others, the group has deftly managed to differentiate its three formats.
While Jainsons outlets are small in size and non airconditioned, the Vivek's and Premier stores are bigger and airconditioned ones. The group also runs an after sales service chain under the Viveks brand.
Further, the three formats have now been segmented based on the city. In the case of metros and big cities the group would increase the presence of Viveks and Premier brand outlets while reserving the Jainsons brand outlets for smaller cities and towns.
"The target is to achieve a turnover of Rs1,000 crore by 2010. We are also talking to investors for additional funds," says Srinivasa.
