Taking on the giants

It’s about 5 pm on a weekend and all four floors of the Vijay Sales store at Kandivli, a west Mumbai suburb, are teeming with people looking at electronics purchases. Amid this crowd, it wouldn’t be surprising if a solitary older gentleman, dressed simply in trousers and an untucked shirt, were overlooked. But as soon as he walks in, an employee rushes forward to greet him. He strolls around and gestures to another member of the staff, who listens intently and immediately hurries to lower the volume and change channels on the television sets blaring all around. A couple of shoppers turn to look curiously at what makes this seemingly unremarkable senior so special. At 77, Nanu Gupta may have passed on the day-to-day management of the Vijay Sales chain of electronics stores to his two sons, but he is still very involved with the business he started 46 years ago. He visits the chain’s 24 stores in Mumbai at least once a month and employees point out that on exceptionally busy days, Gupta even chips in as salesman and mans the cash register. 

Those days are few and far between, though. The ₹1,700-crore company employs more than 1,500 people across 54 stores in five states. Each store deals with close to 300 to 500 shoppers every day, about 60% of whom end up buying something from the 9,000 items on display — from mobile phones to home theatre systems, mixers to cooking ranges, washing machines to televisions. This year, the Mumbai-headquartered chain will add another eight to 10 stores in Maharashtra, Delhi, Uttar Pradesh and Gujarat. It aims to close FY14 with net sales of ₹2,200 crore, having grown for the past five years at about 30% CAGR. A far cry from the one-man operation that Gupta started in 1967 in a store so small he had to fold up his chair to make room for customers.  

Starting small

Vijay Sales came into being not so much because Gupta had a burning desire to be an entrepreneur as from his fear of losing his job. Born and raised in Haryana, Gupta moved to Bombay in 1954 as an 18-year-old straight out of school and started work as a distributor for Usha International. Although he worked with the sewing machine and electric fans company for close to 13 years, Gupta recalls constantly worrying about job security. “I used to be scared all the time, wondering what would happen if the arrangement fell through. That’s when I decided to start my own business,” he says. In 1967, with ₹10,000 borrowed from family and friends, he started Vijay Sales Corporation, named after his younger brother whom he took on as partner, and opened the first Vijay Television Store at Mahim. The name notwithstanding, the store — a tiny, 50 sq ft outlet — sold sewing machines, fans and radios in addition to black-and-white television sets. “We had brands such as Bharat TV and later, Dyanora, Crown and Standard. TV sales helped set up the foundation of the current business,” Gupta recalls. 

By 1981, when the electronics business was renamed Vijay Sales, the Mahim store had already expanded six-fold and over the next several years, Gupta opened branches of his electronics superstore across several Mumbai suburbs. “When we opened our Goregaon store in 1998, at 1,500 sq ft, it was our largest at the time. People said we had lost our mind, since there were hardly any electronics available at the time to display. Today, that store seems too small,” laughs Gupta. Now, Vijay Sales stores — all company-owned, incidentally — range from 4,000-25,000 sq ft, with an average store size of 7,000-8,000 sq ft.

How did Vijay Sales grow to become one of the biggest consumer electronics retail chains in western India? First, its sourcing strategy was significantly different from other electronics outlets. Gupta was aware how unsold inventory could quickly choke a retailer’s cash flow. Accordingly, when he set up his business, he took goods on credit from manufacturers and paid for them only after they were sold. While most brands of the time, such as Usha and Bharat, agreed to this, some such as Philips refused to extend credit to retailers — in such cases, Gupta invested the profits from other sales to buy and stock these big-name brands. Even now, Vijay Sales has a mixed supply structure, where products are bought from big brands and taken on credit from newer players. It has a network of nine warehouses across India, which, based on a city’s demand and octroi structure, stock 30 days’ inventory and ship out goods to customers. A significant chunk of the profits is ploughed back into the business and invested in areas such as customer service. “If I don’t trust my business enough to invest in it, why should anyone else trust it?” asks Gupta, rhetorically. 

There’s also the emphasis on customer service — in the early years, Gupta would himself visit customers’ homes for product demos. Vijay Sales was also among the early retailers to have its own delivery vans, a service it began offering in the early 1980s when it started selling larger white goods such as refrigerators, washing machines and air-conditioners. Now, the delivery service is outsourced to local logistics players in different cities, who together run 150 branded vehicles exclusively for the company. “Today, we have a team of over 150 people across India just to handle customer services and delivery,” says Nilesh Gupta, Nanu’s elder son and the company’s managing director. All of which helped Vijay Sales hold its own when big retailers turned their eyes to electronics. 

Thinking big

Till well into the new millennium, Gupta was satisfied with Vijay Sales being a predominantly Mumbai- and Maharashtra-based business. But the entry of big players such as the Future Group with eZone, Reliance Digital and Tata with Croma made the company look to its laurels. “We realised that if we did not expand our presence to keep up with competitors, we may be phased out. Until then, we were perhaps a little too relaxed,” concedes Nilesh Gupta. Since FY09, Vijay Sales has expanded rapidly, moving into new geographies such as Delhi, the National Capital Region and Gujarat, opening 29 stores in the past five years (see: Sound affair). 

Sound affair

While revenues have grown at a healthy rate, store additions have been conservative

The numbers for same-store sales aren’t too impressive at present: new stores are clocking 15-20% y-o-y, while older stores are seeing flat growth. “This reflects the stagnation in the consumer electronics retail business where, barring mobile phones, other products are seeing flat growth,” says Nilesh Gupta. “In the coming two years, as the economy revives and new categories are launched, we expect older stores to bounce back to the same growth rates as new ones,” he adds. Given the current business environment, Vijay Sales is also going slow on further expansion — its first store in south India is planned for two years hence.

Efficiency matters

Vijay Sales’ measured expansion has resulted in higher revenue per store

Fifty-four stores in 46 years may not seem very impressive, but the careful thought before opening new stores has worked to Vijay Sales’ advantage — it has never closed down any store and its revenue share per store is higher than its rivals (see: Efficiency matters). “We have been making 2-3% profits consistently and have offers and discounts all year long. Unlike our rivals, we leverage volumes, not the selling price,” says Nilesh Gupta. Big brands that sell through the chain are not complaining either. “We have grown with Vijay Sales and the one thing that makes us continue our relationship is their commitment. If Nanu Gupta says he will bring in X turnover every month, the target is set in stone. He ensures it is reached,” says Sanjeev Agarwal, sales head, LG India. That thought is echoed by Venugopal Dhoot, chairman and MD, Videocon. “Our relationship with Vijay Sales goes back 25 years. They know where to sell and what price to sell so the consumer sees value in the deal. That is an irresistible combination for companies such as ours,” says Dhoot.

The Guptas certainly seem to have the magic touch when it comes to marketing consumer durables. Nilesh Gupta likes to recount an incident dating to when plasma TVs were new in India, around 2005. He was negotiating with an LG representative for the purchase of a few sets, when his father jumped into the conversation. “We’ll take 100 units of the ₹3 lakh unit, if you can work out a way for us to sell it at ₹1,99,999,” he said, even as Nilesh watched dumbstruck — other retailers weren’t even stocking that model, claiming it would have no takers. But Nanu stuck to his guns, and was proved right — all 100 sets were sold within a month. “We were also among the first to stock window air-conditioners, back in the 1980s, when even manufacturers wondered whether we had the expertise to sell them,” Nilesh adds. 

In 2012, Vijay Sales decided to extend its expertise to the internet, reaching out to a new customer group through this route. The website is mainly popular with customers looking to buy mobile phones and Nilesh Gupta acknowledges that sales from this route are still a very minor part of the business, barely bringing in ₹30-40 lakh a month. The number should increase substantially in the next couple of years, he adds.

That’s where the recent tie-up with e-commerce site Snapdeal should help. Vijay Sales has a separate page on the Snapdeal site and pays a commission for all the deals that happen through the website. Gupta says the results have been encouraging, even though there are other players online selling the same brands at cheaper rates. “Many of our online customers are settled abroad and buy products on our site as gifts for their parents and relatives. They aren’t necessarily looking for the cheapest deal but want confidence in the product and the dealer,” says Nilesh Gupta. Tony Navin, vice-president, business development, Snapdeal, agrees. “The Vijay Sales brand has trust and recognition, which means increased customers for us. For the chain, our reach into tier 2 and 3 towns contributes to greater reach. The partnership is growing revenue at about 40-50% month-on-month.”

Given the challenges it faces from large retail chains and the burgeoning popularity of e-retail in the electronics segment, Vijay Sales will have to bank on brand loyalty from such customers for sustained growth. Though its slow and studied pace and decision to retain control of its stores when it comes to expansion may keep Vijay Sales insulated from nasty financial shocks, it remains to be seen whether the friendly, neighbourhood electronics superstore will be able to keep pace with the vagaries of the segment.