NO down payment, no processing cost, no advance first instalment, cheap interest-free monthly instalments of Rs 665 and 40-day free viewing time. With Akai TV, you have it all.
Akai India's 24-year-old CEO unleashes a barter blitzkrieg
NO down payment, no processing cost, no advance first instalment, cheap interest-free monthly instalments of Rs 665 and 40-day free viewing time. With Akai TV, you have it all.
Offering these bargains is Akai India's 24year-old managing director, Kabir Mulchandani, a Stanford dropout who was called in to salvage his family-owned Baron International (owner of the Bush brand). And took it from virtual non-existence four years back to a Rs 325 crore turnover and a net profit of Rs 70 crore in 1996-97.
Starting out by selling B&W TVS for his company in 1992-93, Mulchandani managed a turnover of a mere Rs 5 crore. He realised that reviving the Bush brand would require far more investment than getting in a foreign brand like Akai with whom Bush had had dealings before. "But I had a track record of failure, a turnover of Rs 5 crore and damaged relations with Akai as Bush India had failed to deliver in the last few years." After seven months of negotiations, the Akai patriarchs relented and offered him a non-exclusive dealership.
That done, Mulchandani launched four colour and three Hi-Fl Akai models in March 1995 at premium prices, below Sony and above Panasonic, even though Akai is priced considerably lower than both in other world markets. Mulchandani's strategy was to establish a premium image without compromising on his margins to get volumes. "I wanted to lower costs instead," he says. And so he reduced his own costs by 30 per cent by using better production technology and sourcing from Akai's factories. The move paid off.
He also decided to give "benefits" to the consumer instead of price-offs. This would ensure actual gains for the consumer without damaging either the psychological price line or the brand image. Producing a three-pronged effect--for the consumer, the dealer and, of course, for himself.
Mulchandani tackled the weak 21-inch segment by offering Rs 10,000 for any old CTV along with the purchase of a 21-inch. "Our (industry's) thinking has always been curtailed by market size," he says. Mulchandani saw potential in the possible one per cent in Mumbai's cry population who would want to upgrade their TV. And overcame Mumbai's 15,000-unit lean season market size to pick up 10,000 units of his own. He has replicated the experiment in other markets, which has yielded sales of 1 lakh units across the country.
The CTVS that Mulchandani got in return were useless for the company but of great value to the dealer. "it's a win-win situation all the way," says he. In the scheme where he offered a free 14-inch CTV on purchase of an Akai 21-inch model by cash or immediate payment, Mulchandani picked up 15,000 14-inch units when the total Indian market was 30,000 per month. He has a further arrangement with Countrywide offering a finance scheme with risk cover for every unit sold. The scheme, which includes a 40day free viewing time helped him sell 3,000 units in Mumbai in the first half of April despite the transporters' strike. And he expects sales to go up to 12,000 units per month once the scheme goes national. He already has 20 per cent of the 60,000 per month 21-inch market and claims he is producing 20,000 units monthly.
Now Mulchandani has set his sights on the 29" CTV segment. Considered a "luxury" model, it has an annual market of 6,000 units according to ORG data and retails at about Rs 45,000. Mulchandani has worked out a formula by which he has committed the purchase of 80,000 units to Akai by negotiating on the price. A worldwide shortage of 29-inch picture tubes has ensured a 150day lead for him before delivery. If the competition retaliates, it would lag five to seven months behind. Mulchandani is working hard at mopping the market dry meanwhile. Mulchandani estimates the 29inch model to account for 30 per cent of the market five years hence and this period will be crucial for him to establish a lead.
Meanwhile, he is exploring other options. Akai, for instance, had never focused on the B&W TV owner in its consumer offers. While a new B&W set costs Rs 2,500, Mulchandani offered Rs 4,000 off on any B&W TV brand if the customer bought the 20-inch Akai. He sold 27,000 units and now has a 10 per cent share in the segment, so far under the firm grip of BPL and others.
Mulchandani is now targeting a turnover of Rs 1,000 crore this year and a unit sale of 4 lakh from last year's 1.8 lakh. Impressed by his performance, Akai International has now modified its deal with Mulchandani to an eight-year exclusive dealership contract, the longest in the company's history. But Mulchandani is not counting his laurels yet. "The industry is so unforgiving that I work everyday as if it is my last," says he. Meanwhile, he is already working on his next product which will be launched at yet another unbelievable price this Diwali.