Thursday, July 18, 2013

Car Care at its best

3M Car Care Center India

I pass through this outlet almost everyday but have always been on a rush. This time around, I stopped by and experienced first hand what they have to offer. I am referring to the 3M Car Care outlets which have sprung up across the country quietly but drawing attention from car enthusiasts and those who love to maintain their cars spic and span. These outlets are franchised and are managed by capable entrepreneurs who have an inclination towards the automotive business and customer service. Spread between 1,500 sft – 4,000 sft covering three different business models, these stores provide complete car care which include the following;

  • Car Detailing
    • Interiors / Exteriors
    • Corrosion Treatment
    • Films for sun protection
  • Car Care products Retailing
  • Car Graphics
  • Customer Engagement
  • DIY Bays

photo 2

I was warmly welcomed by a service staff who knew his subject well – he explained the different packages they offered and justified why they were expensive. There were already two vehicles which were undergoing treatment – a Mercedes S Class and a Renault Duster. I asked him how is the business doing and he gave a smile, meaning things were doing quite well. Location was not totally a disaster though. It is located on the Beach Road, close to the iconic Light House (in Chennai). Although I felt it could have been located more strategically. Another gentleman walked over to me shortly and started interacting. Introducing himself as Vijay, he informed that he was the Franchisee Owner of the store. He explained in great depth his interest in automobiles, cars and bikes alike and his love for taking good care of them. According to him, the investment on the store including security deposit is around a crore (though I felt it was quite high) and the monthly business was about 15 lakhs with a margin of 35% on Sales.

The customer lounge is powered by lighting wifi and one can use the facility while the car is being spruced up. Customers have written their compliments and feedback on Post-Its, which is incidentally one of the most iconic products of 3M.

photo 1

The company has taken up print advertisements recently which has helped increase walk-ins but what they actually need to do is much more – own the category and grow it too. The market size for Car Accessories in India is estimated to be over Rs. 1,000 crore, most of which is unorganized. Car Dealerships and private players like Carnation,3M, etc. have a huge potential, given the shoddy ways of getting your car done up at busy street-side shops. If marketed well, this could be a viable Retail model and is easily scalable. Like in many other cases, I see a bigger opportunity in smaller towns across the country where people take good care of their possessions.

For me, its about making up my mind for a 20K bill – sooner than later, I would be there!

Tuesday, July 16, 2013

Why Flipkart is not Amazon's competition

My former boss and CEO of indiaplaza.com K. Vaitheeswaran always used to say that the best business model on the internet retail space is perhaps without stocking inventory. In my short stint at this web company, which was also the pioneer of India's ecommerce business with the same name set shop in 1999, I added around 60 vendors in just 6 months who would list their wares-from designer clothing to everyday wear, from watches to wallets and so on. During the late 90s, internet cafes were coming up all around the country. To browse the internet on bulky 17" screens with a dial up connection that would take five minutes or more to connect would cost around Rs. 100/- an hour (and the prices subsequently came down due to increased competition and lower internet rates). Shopping online those days was a novelty - well it continues to remain so still I guess. The early 2000s saw a slew of players come and go and during the last part of the decade saw the emergence of the likes of flipkart.com, myntra.com and many others. These ecommerce companies or etailers stocked merchandise-large warehouses were set-up in the suburbs of cities and mostly internal logistics teams ensured last mile delivery. Most of them were venture funded and blew their investors money on advertising, PR and promotions. Some companies were spending as much as Rs. 1,500 for acquiring a new customer - while there is no global benchmark as such for this purpose, the sum would be recovered from the same customer when he/she spends atleast Rs.6,000/- over time assuming 25% Gross margins. Not an impossible task once the customer is habituated to the internet way of shopping. Sadly, of the 25% Gross margins, what remains is less than 1-2% and that too for smart and successful companies. Most of them, even today are reporting negative margins. Well, for any business it takes time to stabilise. Typically for product retailers, break-even happens between 15-18 months and much earlier for F&B retailers. None of the ecommerce companies in India of sizeable scale and repute are profitable as I write this article. And many of them are on the path to profitability. After burning millions of dollars. The good part is customers have taken up to e-shopping faster than they have taken to Organised Retailing. Retail Industry in India is about Rs. 400,000 crores approximately and less than 10% is fom the Organised Retailers. Led by apparel and fashion, the organised industry is seeing massive growth, at a CAGR of over 15% over the past 6-8 years. Not bad, while global retailers are seeing negative growth on same store growth year onyear. Amidst all this, the $61 Billion Amazon launched its India site in June 2013. Not much different than its previous avatar, Junglee.com which was launched with much fanfare in early 2012. Amazon.in is a marketplace, a business model where retailers, small or big can list their products and Amazon attracts potential customers to shop on its site with secure payment gateways and millions of items listed across its pages. The Amazon trust is expected to attract many more customers and in the short term, Amazon may also build large warehouses and extend direct sales to its customers, subject to Retail FDI regulations. And there has been speculation that sooner than later, Amazon would compete heavily with the likes of Flipkart. Within the online space, perhaps yes but not in the consumption space. The e-tailers have to compete directly with the physical Retailers, both Organized and Unorganized. They are the main competition for the ecommerce companies. Together, Amazon, Fipkart and hundreds of other sites would fuel up consumption using the internet. However, with low penetration of Broadband Internet and 3G on mobile phones, it is unlikely that this retail landscape would change drastically over the next five years. Afterall, half a decade is a long time in business...