Durables cos wary of Reliance Retail's after-sales peg

Durables cos wary of Reliance Retail's after-sales peg

Author | Source: The Economic Times | Thursday, Jun 29,2006 7:34 AM

Durables cos wary of Reliance Retail's after-sales peg

Durable majors like LG, Videocon, Philips and others are at loggerheads over Reliance Retail's strategy of breaking the ground rules in the market by planning to take over the after-sales service of all brands sold under their formats.

The company is currently negotiating with durable manufacturers to let them take over the after-sales function across brands and categories. Currently, retail chains provide after-sales service for only their private labels and not the branded makes.

The primary objective of Reliance, it is learnt, is to establish a huge after-sales network for its private label of consumer electronics and home appliances to be sold under the 'Reliance' brand name. However, branded majors are concerned the control of after-sales by Reliance will harm their brand image and fail to guarantee customer satisfaction.

Unlike other retail formats where private labels currently constitute only 20-30% of the total durable sales, Reliance is planning to stock more than 50% as private labels. Most of the current crop of retail formats like StarIndia Bazaar, Hypercity and Home Solutions Retail source their private label line of durables from countries like China and Thailand, but guarantee after-sales in India.

“After-sales is our interface with the customer and an important aspect of brand management. We are certainly not comfortable with the idea of some other operator handling after-sales.

That is a critical function, which we outsource to trained franchisees but where the technical expertise is our focus,” said Girish Rao, head (marketing) of LG. Industry sources say every brand has its own unique technical features and it calls for a specialised force to understand and service these models.

R Srikanth, vice-president, customer satisfaction, Samsung India has been hired by Reliance to head the after-sales business. Reliance is negotiating a take over of after-sales to make service its USP. But durable makers are worried their bargaining powers with consumers would weaken.

“We are more comfortable losing that business equation with the company rather than hurting our brand image,” said the CEO of an Indian durable company. Through its after-sales network, which will also double up as a sales force, Reliance is planning to have a control over the point of interaction with the consumer.

The focus on volumes and the entry of modern formats has now made it imperative to be more sensitive to customers than ever before. Modern retail formats are trying to offer more than a 40% discount on their private labels vis-à-vis the branded makes.

Consumer durables such as televisions, DVDs, refrigerators, video cameras and washing machines are sourced in massive numbers from China and Thailand to be sold in the new formats. Global durable retail chains like Woolworth, Best Buy, Circuit City and Radio Shack are also eyeing a slice of the Indian market, sources said.

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