Consumer electronics makers LG, Videocon, Onida and Samsung are rolling out exclusive models for big retailers, initiating a strategy to differentiate products sold in large chains from those sold in small shops.
This strategy would put to rest small merchants' complaint that they are not able to compete with big chains like Croma, Future Group and Reliance Digital who often do heavy discounting in prices because their trade margins are double.
With such a strategy, consumer electronics companies are able to increase the average selling price in modern retail, which ensures their margins, and ensures that price comparison with rest of the channel is avoided.
This strategy would put to rest small merchants' complaint that they are not able to compete with big chains like Croma, Future Group and Reliance Digital who often do heavy discounting in prices because their trade margins are double.
With such a strategy, consumer electronics companies are able to increase the average selling price in modern retail, which ensures their margins, and ensures that price comparison with rest of the channel is avoided.
An example of a company putting this strategy into practice is Mirc, maker of the Onida brand of durables and TVs. The company has launched an LCD TV for the modern retail, which is priced at a little premium than sold at the normal channel but has additional features such as more than one HDMI port and USB drive. The models are differentiation in terms of design, features and even colour.
Modern retail accounts for only 6% of the 35,000-crore Indian consumer electronics market. Modern retail may still be small in durables, but since it is gaining share the durable companies are meeting their demand while at the same time ensuring neighbourhood retailers are not hurt. This is an established practice in the apparel industry overseas.
Marketers hope to push premium products through modern retail and mass products through neighbourhood stores. Market leader LG has stopped pushing volume products like CRT television, single-door refrigerator and semi-automatic washing machines through modern retail to maintain price parity in the market. LG is specifically undertaking this strategy for LCD and Plasma televisions, whereby certain series of models are sold exclusively through the retail chains. Samsung, the other Korean player, has developed three models of washing machines - a 5.5 kg front-loading machine, a 6.2kg top-loading machine and a 12 kg model - exclusively for modern retail and brand stores.
This phenomenon will gain pace now that the Centre plans to allow FDI in multi-brand retail. Selling exclusive models is an established practice amongst multinational consumer electronics retailers such as Wal-Mart and Best Buy, particularly on TV and laptops.
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