Doing Business Despite LFRs

For long, partners have been ruing that the advent of large-format retailers
has signaled diminished business for partners. But there are ways and means to
counter the threat posed by LFRs, which was explored at a panel discussion
during Com-IT Expo 2007.

This was the theme of the panel discussion held at the Com-IT Expo 2007,
which was organized by Traders Association of Information Technology (TAIT).
Needless to say, this was the discussion, which was widely awaited by a lot of
dealers who have been suffering from loss of business, thanks to the mushrooming
of large-format retailers or LFRs.

Vinita Bhatia, Executive Editor, DQ Channels, moderated the panel discussion.
Voicing the concerns of the retailers were Naresh Popat of Checkmate Computers
and Shashank Dalal of Unicomp Systems, while Paras Shah, MD, Neoteric
Infomatique and Ashutosh Ghavi, Retail Head, Intel tried to come up with
workable solutions for this business dilemma.

LFR: Threat to the channel

LFRs buy products in bulk from vendors or distributors at lower price than the
market-operating price at times. In turn, they can sell the stock at lower
prices as compared to smaller retailers. Additionally, they offer a mall-like
ambience which customers are increasingly getting fond of.

But the lead question at the panel discussion was whether LFRs were truly a
major threat for the channel? Shah admitted that LFRs are a threat to the
channel community, but rather than lament about their existence, it would be
better for the channel to gear up and deal with it. “Partners need to find their
own niche and develop their own specializations. We should not take LFRs as a
threat; instead we should consider them as an opportunity. This is because we
can highlight our uniqueness of offering customized service as against their
mass-scale approach.”

Agreeing to this, Ghavi from Intel added, “Partners now need to look into
innovations, and create a differentiator between themselves and LFRs. They need
to see what is it that LFRs offer to customers and what is it that they can
offer better.” One good example he gave was urging partners to bundle a few
hours of PC usage training to be given with every machine they sold. “This will
be of great interest to old people who often buy PCs to keep in touch with their
children abroad,” he added.

The panelists (L to R): Naresh Popat of Checkmate Computers; Shashank Dalal of Unicomp Systems; Paras Shah, MD, Neoteric Infomatique and Ashutosh Ghavi, Retail Head, Intel

Another example was giving kids an opportunity to develop their own PCs by
giving them the various assembling options.This can be followed with a
certificate, which stated that the child has personally designed the entire PC,
which will attract the youth to buy PCs from small- time retailers as against
the LFRs.

The retailers on the panel agreed with these suggestions and added that
specialization is the niche of the channel, and this will hold them in good
stead for times to come. Popat who owns a retail shop in Borivali added that it
is always difficult for LFRs to employ skilled manpower but partners already
have skilled manpower and now they only need to develop it. He added that
retaining people was not easy when they were offered hefty packages by LFRs, but
if the staff is given a conducive working environment and scope for growth, they
can do it.

“In most retail outlets, the back office job is done by the retailer himself.
He just needs sales people who can deal with customers very well and educate
them on the right products to purchase,” he added. Keeping this scenario in
mind, it was important to impart soft skill training to these sales staff so
that they are able to convert prospective customers to loyal ones easily.

Dalal also laid emphasis on constant investment into the business to grow it
and improve the quality of their work. This could be in training, marketing or
even word of mouth publicity. Agreeing to this, Popat added, “Positioning your
brand properly is a very important thing for partners. We now need to pose our
brands as a solution. We need to take over the retail outlets by giving value
adds to the customers like services on a call and engineers on a single call.”
He even suggested giving customers the option that if they want certain
services, they ought to pay a nominal sum for it or go for packaged services at
a discounted price. “We have to rely on services more rather than box pushing,
because that is our key strength,” he noted.

The other challenge that smaller retailers face vis-a-vis LFRs is retaining
customers. LFRs can attract customers in droves with their marketing gimmicks,
which a retailer might not be able to do. In such a situation, a retailer should
strive harder to retain his existing base of customers rather than spend time
and money on acquiring newer ones. “There was a time when a customer would call
me asking for a product at a lower price, because another dealer had offered him
the same at the reduced price. I would then tell the customer to go to that
dealer if he wanted. Now, I make the customer understand that though I might be
offering the product at a slightly higher price, I would take responsibility of
the service and outline what other services I could offer him,” recalled Dalal.

All agreed that personalized services would distinguish the smaller retailer
from the LFRs, and therefore, the former ought to invest in it. Shah said, “Its
important for the channel now to leave the traditional type of behavior, and be
very polite and generous to the customers. This will help the channel to retain
the customers that it already owns, and in turn this will be a win for the
channel against the LFRs.

One benefit that LFRs have over retailers is the breadth of products that
they offer under a single roof across a spacious outlet and in a comfortable
ambience. One suggestion that came forth from Shah to counter this was setting
up a hub for IT so that customers were given a wider choice of products in the
same area. This could be in the form of housing dealers in a single building or
in an area.

While the thought was very good, the implementation is not as easy. Speaking
on behalf of TAIT, Umang Mehta one of the executive council members of the
association said, “We have been thinking about having a designated area where a
lot of dealers can operate from, just like Nehru Place. But this calls for a lot
of investment,” he maintained.

However, he added that this suggestion would be the ideal way to beat LFRs
because customers can touch and feel different models and brands in a single
place and take quicker purchase decisions.

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