E-Zone + Electronics Bazaar – Exlcusive Insight

Electronics Retailing in IndiaE-Zone and Electronics Bazaar are two electronics retailing formats of Home Solutions a subsidiary of Pantaloon Retail India Ltd [PRIL].The business is run independently as a separate profit centre by professionals with prior experience in the consumer electronics space.

Business Growth Strategy: Fitting into overall PRIL’s strategy to dominate in top-5 cities, its electronics division is also adopting a strategy to dominate the top five cities. E-Zone has already achieved dominance in Bangalore despite the existing six strong entrenched local players and has plans to achieve dominance in Hyderabad, Kolkatta, Delhi and Mumbai over the next 6-12 months.

Mega e-Zone in Tier-I Cities:It has plans to set up one mega E-Zone in each of the key cities to enhance its brand image and dominance. It has already opened its first 30,000 sq ft mega E-Zone in Bangalore which has met with very good consumer response.

Private Labels: Private labels now contribute a strong 12% of total revenues, up from 5% last year. Home theatres and air conditioners are the key drivers for PRIL’s private label business and the target is to achieve 20% penetration for their private label business.

Strong growth: E-Zones are clocking same store growth of around 30% due to strong growth in lap tops and LCDs. Contrary to expectations mobile phones contribute only 7-8% of their total electronics business revenues.

Bottomline: The electronics business is likely to achieve a turnover of Rs7.5-8.0 bn in F2008e which is nearly 2x larger than its nearest competitor. The current gross margin in this business is 15% which is expected to stabilize at around 18% with improvement in the scale and operating leverage. Interestingly, the division has chalked out an ambitious growth plan to roll out nearly 175-200 E-Zone stores by F2011 from the existing 40 taking the total turnover of the division to around Rs30bn. Around one-third of the division’s revenue is likely to be contributed by Electronics Bazaar.