December 2012 | Sangeeta Menon

Coming of age

All of six years old, electronics retail chain Croma continues to show the eagerness, curiosity and enthusiasm of a young buck, exploring new ideas and experimenting with fresh concepts

Growing up has been an exciting journey thus far for Croma. Until October 2012, the month it turned six, Croma’s presence spanned 15 cities across India, with 85 stores in various formats, including large format megastores, the smaller and hipper Croma Zip stores and, going even smaller, 100-sq ft kiosks in high traffic malls.

Croma posted a turnover of Rs19 billion in the last financial year, recording impressive year-on-year growth of 55 percent. As if that wasn’t rewarding enough, it has just been voted the ‘most admired retailer’ in the consumer electronics category — by industry body India Retail Association — for the fifth time in six years, a record in the Indian retail segment.

Like most six-year olds, that positive reinforcement just makes Croma look for more ways to please its customers. The latest bit of evidence here is cromaretail.com, the online shopping venture launched in April 2012 to recreate the company’s success in the brick-and-mortar space. Coming at a time when several Indian e-tailers are reworking their business models to stay profitable, Croma’s e-commerce platform has been received enthusiastically by manufacturers and consumers alike. This despite the fact that the company refuses to adopt the popular deals-and-discounts approach in selling online.

No deals is the deal

“Our brand partners support us in this approach because they don’t favour discounted sales,” says Ajit Joshi, Croma’s chief executive and managing director. “Yes, it is a slight disadvantage to not offer deals, but we are willing to live with that. We only sell what we have in stock. If we don’t have stock, we don’t display it in the online store. Slowly, customers have begun to see and appreciate that what they see on cromaretail.com is what they get.”

 

The online store has shown a steady rise in transactions since launch, mirroring the pattern in the physical stores, with 60 percent of sales coming from the digital products category and 40 percent from the home products category.

Croma has also been cautious about cash on delivery, another popular model for Indian e-tailers. “It’s a tricky model,” says Mr Joshi. “Currently, Indian e-retailers are facing high returns and rejects, which translates into a huge cost in reverse logistics. There are fraudulent orders as well. So we decided to be conservative on this front.”

However, after testing the market for six months, putting enough checks and balances in place, and finding a strong technology partner in Tata Consultancy Services (through a unique revenue sharing arrangement), cromaretail.com has finally launched cash-on-delivery with Mumbai as the trial market. With orders flowing in even without advertising — the new payment option is visible to customers only when they reach the payment stage on the website — Croma now plans to roll this out in Delhi, Bengaluru and Hyderabad.

The website itself is being seen as what Mr Joshi calls an “omni channel”. It will work hand-in-hand with the various physical formats, such as kiosks at busy railway stations and various corporate premises (Tata companies, for example), from where customers can log on, browse through the online store, place their order and have the final products delivered to their homes.

With fresh spaces to play and explore, Croma’s appetite for an enhanced product portfolio keeps growing, matched only by the Indian consumer’s appetite for new gadgets. The more, the merrier; make them affordable and things start getting even better — that’s what Croma has learned. Take the recent experience with the Croma tablet, for instance. Launched in early October, the product stock flew off the shelves in a week. And why not? Priced at Rs5,999, the Android-based tablet, with the latest JellyBean operating system, was an offer that customers couldn’t resist.

“Along with the latest technology, there is also the trust that comes with the name,” emphasises Mr Joshi “That’s why we witnessed such unprecedented response for the Croma tablet,” says Mr Joshi, adding, “What happens in a restaurant sometimes happens in Croma stores, too.”

Connecting points
The growth of the Croma private label is another indication of the changing profile of Indian electronics consumers: they are getting younger, savvier, more willing to spend on gadgets and personal grooming. And a growing number of them are women. Which explains why the Croma label’s range of over 200 products is largely made up of personal grooming products such as foot spas, massagers, hair dryers, as well as kitchen and household appliances such as microwave ovens and vacuum cleaners.

Of the 100 vacuum cleaners that Croma sells, as many as 61 are from its own label; Croma microwaves also have a significant penetration (18 percent). With the success of the Croma label, the company is now looking at opening it wider to absorb more categories of buyers. “We are creating different price points within various product categories so that all kinds of customers can afford a Croma product,” says Mr Joshi.

To make the proposition even more attractive, Croma-labelled products now come with a two-year warranty, a first in the industry. That should explain why Mr Joshi is confident that the label’s sales for the current financial year will touch Rs2 billion, up from Rs1.3 billion last year.

Meanwhile, Croma continues to be the preferred partner for the biggest brand and product launches in the Indian electronics market. From the iPad to, most recently, the Amazon Kindle, the company has brought many aspirational must-haves into the country, creating profitable and positive associations with the store’s brand.

As Mr Joshi points out, several customers walk into a Croma store not with the intention of buying, but just to see “what’s new” at the store. The chief executive is not complaining about these footfalls not translating into transactions, because of what it means for the brand and its association with the latest in technology.

Beyond sales
Another incentive for customers buying from Croma is a newly introduced replacement scheme, meant to “ensure peace of mind”, as Mr Joshi puts it. Thus, if a product purchased from Croma develops a fault, the company gives customers, irrespective of the brand, a replacement product they can use while their product is being repaired.

“Of the products that we sell, 95 percent are from non-Croma brands, and these brands are available at any other online or offline store,” says Mr Joshi. “From a customer’s perspective, then, the difference lies not in where they buy a product from, but in the overall shopping experience in the store and in the after-sales service.”

In order to enhance this experience, Croma has set up a 24x7 customer care centre with Tata Business Support Services. The centre handles complaints and feedback from buyers of all brands from Croma stores. There’s also a technical support team that addresses the maintenance and servicing of Croma-label products. This team will soon be also handling the servicing of products from other manufacturer labels as well.

The idea is to eventually spin off this function into a separate business unit. Starting with the next season for air-conditioners (February-March 2013), the servicing team will handle the maintenance of Voltas and Samsung air conditioners. Croma plans to win over other manufacturers to this approach, so that it can own the relationship with the customer and also ease some of the typical troubles associated with electronics shopping and after-sales service.

Croma is taking more than baby steps into uncharted territories in the business it has made its own. Further excitement and greater milestones are, appropriately enough, on its radar. The company expects to have 90 stores in this financial year and is aiming for 100 in the next. Maybe its time to call Croma a mature adult.