Tata-owned consumer durables retail chain Croma is shutting down small stores and focusing on larger ones of over 10,000 square feet so it can sell a wider portfolio of products and offer better after-sales service.
The chain has been facing rising competition from e-commerce giants such as Amazon and Flipkart, which are offering discounts to push sales.
The move signifies a change in the Tata group’s digital plan as it looks to build physical and online infrastructure. “Today 85% of the consumers do research on the internet, where they see a large range of products. Before they walk into the store, they have made their selection. So I have to ensure I have a wider portfolio. I can’t have a small store with a limited range,” Avijit Mitra, CEO, Infiniti Retail, which owns the Croma chain, told HT.
Croma plans to open 10-15 stores each year. It opened its 101st store in 2014, but the tally dropped to 97 after a few stores were shut. It plans to open four more stores by March 2017 and 8-10 in the next few months thereafter, with a planned capital expenditure of around ₹50 crore.
“We have found that our large format does better in profitability and range. So in many cases we have either enlarged the same store or have shut it down to move to bigger stores in the same area,” said Mitra.
Croma’s smaller Zip stores will largely cater to airports.
Consumer electronics is the largest category for e-commerce companies that have been clocking record sales. Flipkart sold 15.5 million units in its Big Billion Dollar Day sale between October 2 and 6, while Amazon reported a threefold rise in sales at over 15 million units in the Great Indian Sale between October 1 and 5.
Croma also sells its products on online marketplaces. “We still do a little bit of business on Amazon and Snapdeal, but margins are not adequate. We want to focus more on profitable channels,” said Mitra.
Croma has revamped croma.com and is focusing on Tata Group’s e-commerce platform TataCliq. It aims to post an operating profit in the current fiscal.
In the previous fiscal ended March 2016, Infiniti Retail reported a 20% fall in sales at around ₹2,920 crore, while net loss stood at ₹196 crore.
Mitra said sales dropped by almost 50% in the first few days after the government’s move to scrap ₹500, ₹1,000 currency notes, but sales have recovered since and are now at 90% of normal levels.
There has been 60-70% rise in sales via finance schemes at Croma after the note ban, which now account for around 25% of sales, said Mitra. Earlier, cash purchases contributed to only 20% of sales, he said.