Hotspot in North India and particulary in delhi is very strong. Sanjeev Mahajan CEO hotspot was under pressure to be on same name as group brand SPICE. However so far sanjeev mahajan could succeed in it. Here it is interesting to tell that BK Modi group has also Spice Handsets in market. They are selling really good nos. and now number 5 mobile brand in India. Sajeev was reluctant to change name to spice retail as it could give mindset to consumer that it is exclusive store of spice telecom. He has been succeed in his efforts has ‘Hotspot’ is now known as ‘Spice Hotspot’.

Re-branding has not been done over night, it has been done in phases so that consumer doesnt see ‘closed’ all over at same time. 3-4 stores in one area has been closed at a time and renovation and re-branding is done. Business has no impact on shifting to new brand name. In fact in some quarters business has been increases.

BK modi wanted to bring all group companies under umbrella ’spice’. He has done that with other companies like in BPO and VAS. With hostpot rebranded as Spice Hotspot now Spice will have more visibility in market.

Kings eleven owner Mr. Burmen was prevailing business sense when he said if some one is willing to pay rs. 1000 crore then he will sell out his franchise. They along with wadia and preity zinta bought kings eleven for Rs. 345 crore way back two years.  Without making any profit if returns are expected 300% then who will not be in selling mode. however Ness wadiya co owner of kings eleven was making statement otherwise.

IPL business dhoka! oops IPL , Business loss and profit is not easy to be understand by common man . Here looks rocket science to understand it. if a common man start a new venture and it is in loss for next two years then only option left is shut down the unit. But if you happens to be owner of IPL team the business calculations will be changed. Now I believe lalit modi has a unique business sense and that sene has been sensed by big corporates only. Is it prestige issueor f corporates that have enrolled ambanis, wadias, burmens and subarto roy. It looks rather then profit it is business prestige to own a IPL team. And this is where lalit modi is en-cashing it and shashi tharur is pitching for kochi team !!!

This is being done on the name of  common wealth games. common wealth games was assigned reasonable funds way back. however sheila government never shown any interest in projects related to CWG. It was done in anticipation loss in assembly election. however Delhi voters voted for congress and sheila dixit  government was reinstated. it is where litmus test of sheila started. Now they had nothing in there hand no time and no money. Thank god central government is being headed by Congress only. so fund demanded was fund issued. however Delhi government has nothing to support from its kitty. as time spent projects  become costlier and costlier. for example signature bridge to connect east Delhi was initially estimated rs. 700 crores and its present cost is rs. 1200 crores. This difference of 500 crore that goes to inefficiency at the part of government is being passed as tax to innocent voters.

Not to surprise even senior congress Delhi leaders as well as ministers has not come in support of the budget. Here it shall be noted that mobile phone generate turn over worth 500-600 crores per month. and VAT has been increased to 12.5%. however in NCR it is 55 only. It is going to be much much cheaper in NCR than in delhi. and with increased price of diesel, LPG and CNG Delhi is not a city for poor man.

All malls has put big screen to catch mood of customer. However this time IPL has been commercial on this front and sold license fees in crores of rupees for public view in mall. So this year consumer has no choice to enjoy shopping as well as be update with IPL matches. This is where this year has affect on consumer buying behaviour. Customer either go specially to watch matches or stay at home or convenient location.

It must be noted here that when match of city specific say Delhi daredevils is being played then sales in Delhi goes down and same is true for Mumbai Indians.

Franchise model or say end point dealing with customer may be classified in following categories.

1. coco – company own company operated
2. foco – franchise own company operated
3. fofo – franchise own franchise operated

1.   Company own company operated : In this model store is looked after by company staff. Every staff is asset or liability of the company. Company need to take care of capex (say renovation cost, interior, layout, hardware, it infrastructure, furniture and fixture, ceiling and  flooring, glass door) plus operations cost (salary, electricity, store maintenance, telephone expenses, pilferage etc).

In this model a particular revenue is must in order to make store self sustained. so location factor comes very important and thus increase in rent. So often it has been seen that even if coco store is not profitable it kept running otherwise brand will have bad name on account of closure of store. Advantage of this model is every process is followed closely. No false commitment is done. customer get first hand experience with retail chain. However disadvantage is that irrespective of revenue operational expenses are fixed and increase with time say annual increase in salary or electricty rate increased by government.

2.  Franchise own company operated : In this model initial setup cost is born by franchise. Thus company save capex in return franchise is entitled for a minimum guarantee or percentage of revenue earned. This percentage of revenue sharing may vary from 1.5 % ( in telecoms ) to 50 % (in apparel). company born only operational cost. This product is more viable as shutdown cost doesnt result in disappearing of capex or write off of capex.

3.  Franchise own franchise operated: In this model company rent out brand to franchise and for this a particular non refundable sum for a pre agreed time period is charged. Prices and merchandising is decided by company. Marketing in national media say print and electronic is taken care by brand. Both capex cost and operational cost is born by franchise. Franchise is assured of minimum guarantee or percentage share of revenue.

Xcite brand name will be changed to The Electronics Store and layout will resemble that to The Mobile Store. Formal announcement is scheduled to be at end of march.

Xcite has large format store like Croma and reliance digital. It has stores located in premium locations like in Delhi and NCR. This news has been confirmed by both however detail of acquisition yet has to be make public.

The Mobile store has 1300 retail outlet in India with presence almost every state.

Lets focus on karbonn and Zen mobile. Karbonn mobile is brain child of pradeep jain. he has experience of distributor of samsung mobile in Delhi. It is where his vision came in focus. Pradeep jain is very sharp and at the end of day knows what requires and where was the gap.

Concern with mobile handsets MNCs has been that they were focused in metros and A class cities. They have hardly developed channel in rural area or say in B and C class cities till 2007.

So B and C class cities were catered by metros and A class cities. As being Samsung distributor way back in 2002 Pradeep jain knew this fact. He had good touch wit potential buyer across India and he sharpened hs skill with vodafone and selected model of Motorola.

Now he has seen untapped market and huge potential. so when Karbonn was launched its targeted audience was B and c class cities with focus on few states. It was its latest stint with cricket that brand generated its demand in Metros. However focus is still on B and C class.

Same is case with Zen mobile, it is comparatively new however its promoters are not.

When these brands were launched they were not with fine talent of Industry. personnel passed out from top management institutions were not even ready to attend interview. These brand has been run by old guys in trade. They may not have best f education but they do have best of experience at local market.

Second thing they put their focus on was pricing, rather than going for abnormal profit they just operated on 15-20% margin.

Third lot size was also taken care. In spite of bigger  lot size was restricted to 500-1000 pcs per model. If model was demanded re ordering was done otherwise new model was launched. This way freshness of handset was maintenance. each time customer got new handset with different look color and features.

Fourth target audience was rural or suburban cities. so if phone was slow it was not noticed or was not priority for customer. Mobile phone with camera video and memory card was luxury for such customer. This segment was not techno savvy so even opeartional issues were resolved.

Fifth In india resale of handset matters as much as new handset. And all brands such valued 50% of price day after it is sold. Advantage with these brand was they were providing same value proposition at 50% of price and thus resale was almost taken care.

sixth – Service of handset was an issue. however it is interesting to note that in B and C class cities most of the bigger brands like Nokia samsung sony motorola never had their service centres. so for this segment local repairing was only option available. And these company took advantage of this.

Seventh – They shifted to national television as soon as they saw healty bottom line. It was a double boost for the customer to see their brand on TV with likes of Sachin Tendulkar, Ricky Ponting and Sanath jayasurya.

Eight – There was always a grey market present in India. It was replaced by Chinese cheap phones. So when consumer was offered same thing with authentication it was catch 22 situation for both.

However having such a large industry was never a boom for Indian economy. It maybe called financial ignorance on the part of regulatory authority. To understand it no rocket science is needed. Lets understand it with a example. say Nokia launches a model ‘A’ in Indian market bearing a price of rs. 15000. In next 6 months price reduces to rs.6000 without any government relaxation to manufacturer. Interesting part is government do not earn anything on net profit when it was sold at  rs. 15000.

please allow me to clarify it. when product A was launched in Indian market with a price tag of Rs.15000. then its Indian partner which is HCL was allowed to purchase it on say rs 13000. so all taxes were applicable on difference of 15000 and 13000 as profit tax. And this rs. 2000 was shared with National importer (HCL) then Regional distributor then micro distributor and then dealer. so government levied tax on this rs. 2000 as profit. which again may be adjusted against expenses say marketing and operational expenses. however government was not entitled profit tax for difference in  cost and selling price. which is difference of  rs. 5000 (cost price)  and 13000 (transfer price to HCL).

Now the question is why government is not entitled tax or benefits on this difference ( difference in cost and selling price). First these handsets were not being produced in India. Now they have set up manufacturing units in India but for low end handsets. so HCL was importing handets from China, Taiwan, singapore or Finland. And at there transfer price was set up high so that profit could not be shared with Indian government as tax. second with most of the ountry india has double taxation treaty which allows manufacturer to pay tax on a particular head in one country only.

lets take example of it. In Singapore highest individual tax is 8% and in India it s 30% plus cess. So if a nokia personnel is recruited in India for a annual package of say Rs. 1 crore then tax will be at least 30 % i.e. 30 lacs. so what Nokia prefers is to station this person in Singapore and pay tax just rs. 8 lacs. In this e-age it is simple to mange work sitting abroad and with frequent visits. As air fare between Delhi and Singapore are cheaper than air fare between Delhi and Kerala.

Here is where brands like Karbonn, Maxx, Micromax , Lawa and spice saw the opportunity. Continue in part 2…

The mobile store so far has been biggest retailer in India.  It has Pan India presence from Kashmir to Kerala and Gujrat to Guwahati. It has currently 1300 touch point. Second in the list is Hotspot spice. They are on expansion mode and diverged to franchise model for expansion. company own company operated store are pain to operate on little margin. In mobile industry turn over is high while margins shrink to 2-3%. Hotspot has been first to innovate franchise model and run it successful. after testing prototype they are gunning on it. In Rajasthan itself they have made 300 franchise.  Plan for them is to have 5000 touch point by 2012.

The mobile store as said biggest mobile retail chain has not come with something conclusive. It has been reported that they are in pipeline to purchase a biggy in ‘One Mobile’. so when Hotspot is banking on franchise to expand its net ‘The mobile store’ is looking for acquisition and merger. It will be interesting to see how economy revive will boost mobile retailing and particularly these two giants.