Peepul Capital’s 100 Crore Investments in UniverCell, and Understanding Branded Retail Outlet Dynamics

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UniverCell has announced that it received Rs. 100 crore investment (in four tranches since 2007) from Peepul Capital (earlier iLabs Venture), and the money is being used for expansion : 167 stores now to 300 by March, 2009.

Branded Mobile retail outlets are swamping the mobile market and is expected to capture ~40% of the retail telecom market in 2 years.

Apart from UniverCell, other branded outlets that exists are Subhiksha (positioned as ‘cheapest’ phone destination- positioning mainly driven through TV/Print/radio ads and has a strong brand recall), Axiom stores (Panataloon’s JV with Axiom of Dubai), MobileNxt (N18 venture), Spice’s HotSpot and several electronic retail outlets like eZone etc.

Dynamics of Mobile Retail Stores – Where is the big opportunity?

• Size of handset market – ~7000 crore a year – ULCH accounts for ~50%
• Ever increasing demand – for e.g. 9 mn subscribers in the month of August, 2008
• Untapped market -of Replacements : As per BCG research, by 2010, India’s replacement market will be 70 %! [source]

Retail stores vs. mom-and-pop stores

• Better margins – Unlike the unorganized stores (estimated ~50,000 mom-and-pop stores sell phones, recharge cards/accessories etc), Branded retailers buy directly from manufacturers – at price ~4-5% cheaper.
• The big money is on the volume and most of these branded stores are undercutting small retailers in pricing – the % market share (mobile sales) of branded outlets has increased from 1% in 2006 to 15% in 2008.
• Inventory range: Branded retail stores have far more brands than unorganized retailers – offer more brands/choice of phones.

What’s happening in the Market?

Small mobile sellers are considering pooling their purchases to have better negotiating and bargaining power with mobile manufacturers – just the way, small retailers in TN are teaming up to form a chain!

Branded retail outlets’ biggest challenge comes from piracy and gray market, but falling price (of handsets) and replacement market boom can potentially drive customers to branded stores.

What’s your opinion?

Recommended Read : Mobile Handset Market Share | Top 10 handsets (used for mobile browsing)