Flush with the first rush of success, Mahesh Shah, CEO, Home Town, spoke to FE’s Radhika Sachdev about the challenges faced by the brand and what the future of specialised retailing looks like
How big is the “interiors” market in India; what’s the size of home and office interiors and what portion of this is organised? And, who do you see as your biggest competitors?
The organised market would be worth Rs 1,00,000 crore. The rest—about Rs 1,50,000 crore—is with carpenters. The office segment can be pegged at Rs 800-1,500 crore in the organised segment and Rs 4,000 crore in the unorganised sector
In terms of competitors, we really don’t have any. Ours is a true-blue discount home store of the first kind in India; so we are actually building a new category here. Earlier, when a customer had to get a plumbing job done, he went straight to a plumber, who took him for material purchase to the shop that he earned a commission from
There was no transparency in the system and you could not compare products and prices. At Home Town, all the brands are prominently displayed on the shelves;so you can touch, feel and pick the ones that best meet your needs and budget.
You hawk everything from tiles to fixtures to design services. Which of these segments gives you the best margin?
No doubt, the product segment. Services are there only to cover the last mile. There is not much profit there. And, even within products, ours is a volume-driven business. Whatever margins we derive, we derive from our volume.
Your USP—everything under one roof—seems to have been usurped by competition, such as Lifestyle’s Home Center
You cannot compare Lifestyle’s Home Centre to Home Town because we don’t fall in the same genre. They don’t have electronics, service or delivery sections and they also work in a price segment that is different from ours.
We heard that there have been problems galore, especially at the services end, as most of the work is being outsourced to third party contractors.
What we are following at Home Town is a mixed model, that is, we have a few contractors on the pay roll and the rest have been contracted through an open bidding process. We did a careful scan of their track record before empanel-ling them. There is a Bill of Quality (BoQ) that they have been made to sign and we take a security deposit from them—it’s all process-driven, though we did encounter a few hiccups.
To be honest, we were caught unawares by the initial rush of customers. We had not anticipated such a response and buckled a little under the pressure, but everything is back in control now. Over 95% of our customer, sales and delivery processes has been revamped.
How much time do you think it would take Home Town to sort out the logistics problems?
We have had some teething problems. However, these are gradually being ironed out. I am personally looking into all the operations and dealing with customers, first hand. I can say with confidence that we have improved and are now bringing greater satisfaction to our customers. This is a virgin territory for us. We are still on the learning curve, but quite a distance has already been covered.
Meanwhile, we are also ramping up fast. We opened the second Home Town in Ahmedabad and plan at least seven more this calendar year at Bangalore, Hyderabad, Pune, Ludhiana, Gurgaon, Thane and Kolkata.
That’s good progress. However, what made you choose the national capital region for your first flagship outlet?
Noida (in Uttar Pradesh, just outside Delhi) is a happening area in the NCR and there are no land constraints there. Land is an important consideration with us as our average store size is 25,000 sq ft, against the national average of 2,000-10,000 sq ft. We have also observed a propensity to “Live Life King-size” among Noida residents, which is a quality present in other north Indians as well. So they comprise the biggest chunk of our market.
You plan to open various sub-brands of Home Solution—Home Town, Ezone, Collection I and Mela at different parts of the country. Wouldn’t it be simpler to just replicate Noida model?
Home Town will remain our dominant model and we will aggressively push it. But other models will also co-exist wherever there is demand for one of these split models. Eventually, the choice hinges on a host of factors—demand, demographics, land availability, location etc.
If you go into the history of how we came to establish Home Town, you would know that we started categorywise.
Our approach was: let’s under- stand each category first and then club them into one brand, Home Town. But these sub brands will co-exist with Home Town. We have 16 Ezones, 11 Collection I stores and six Mela stores across the country currently.
What’s your investment in each store?
Approximately Rs 20 crore each.
What kind of footfalls have been recorded at the Noida store during weekdays and weekends?
Through the week, it touched a quarter of a million and on weekends, it’s twice that size. Those are statistics for the month of May.
When do you hope to break even?
Although it’s been just two months since the Noida launch, we expect to break even before the year gets over.
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Great Interview!
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