See the bright Sun: Aditya Vision

Hello everyone, sharing some insights from my recent visit to Aditya Vision stores last week in 4 different cities in Jharkhand- Jamshedpur (3), Ranchi (2), Dhanbad (2), Chas (Bokaro), covering a total of 8 stores. They have a total of 13 stores in Jharkhand currently. I had planned this trip specifically to visit the stores, understand the competition in the nearby areas, understand their operations, and the market better.

Except for one store in Jamshedpur where I met Jamshedpur’s Area Sales Manager (who looks after all the 3 stores in Jamshedpur), I visited all these stores initially as a customer and the sales staff had no clue why I was there. This ensured that I did not get any special treatment.

TL;DR-

• Great store location and aesthetics. Wide display of products with a well trained sales team and experienced Store Managers.
• Reliance Digital and Croma are there only in Jamshedpur, Dhanbad, Ranchi, and Bokaro. Each district/area has local competition and AVL has significant advantages over the local competition. Those advantages are- price, staff, display, offers, and service. AVL has a huge buying advantage over the local competition.
• The same products which are sold in the Metros are being sold in Tier 3 and Tier 4 cities, and mostly at higher prices (due to lesser competition). AVL is absolutely winning the game where there is no large competition like Reliance or Croma.
  • Till the company sticks to the current model where they open stores in cities which have ridiculously cheap rent and employee cost, they should do well.
• AVL has much better operating metrics in smaller cities like Daltonganj, Giridih, Hazaribagh, etc as compared to Jamshedpur, Ranchi, and Dhanbad.
• Looks like most of the stores in Jharkhand will cross 10cr in the very first year of operations. The management works with a minimum expectation of 6cr. Most of the stores in Jharkhand are highly profitable from year 1.
• AVL has stores in the top 10 districts of Jharkhand population wise in its first year of operations. I think they have good visibility of 30+ stores in Jharkhand.
• Company is setting ambitious targets for the stores which sometimes lead to no incentives for the AVL store level staff but they seem very motivated and feel this is temporary and see good growth ahead.

Here is the detailed version-

Location: All the stores were in the major market of that particular area/region. All stores were on the main road with a large storefront and impossible to miss if you were passing by. Apart from one store, there was enough area to park the vehicle within a 100 metres of distance.

Store Aesthetics- All the stores look exactly the same and are very well maintained. All the stores are less than a year old and they looked very fresh. The stores were neat and clean. Average store size is 4500-5500 sq ft with one store in Dhanbad being more than 7000 sq ft.

• This is an advantage when we compare to 10-30 year old local competitors operating in the area with much smaller store size, very poor aesthetics, and worn down fixtures in the stores.

Store Display- The display at the stores was unmatched. It was at par with Reliance Digital. The local competition stands no chance when it comes to display of product categories and availability of brands. AVL focuses on 4 main product categories- TV, Fridge, AC, and Washing Machine. These take up 80-85% of the retail space with a small Aditya Vision Zip space for IT products and a small area for small appliances.

• This ensures that staff training can be done in a way where they are able to sell all the 4 main product categories to one customer (lesser number of staff required).
• They cover top 5-6 brands in the 4 main product categories and have at least 2 displays for those 5 brands. Most of the local competition has only 2-3 brands with not enough display. They would ask me to visit their own store in a different location if I inquired about a different brand.

Staff quality and conduct- I was pleasantly surprised with the staff’s quality and conduct. They were well groomed and courteous. They explained in detail about the features and helped me compare different brands. They would proudly talk about Aditya Vision and how the service, price, and other perks (like Buy & Win), are much better than any other store in the town.

• Staff salaries are very competitive and they mainly earn from the incentives. It is very clear for them- jaha sales zyada hum vaha kaam karna pasand karenge (we want to work with the store which can do higher sales as we will get higher incentives)

My major takeaways about the operations and competition-

• On an average, each store has 10-12 Aditya Vision employees. One Store Manager (SM), 3 Assistant SMs, 3 Floor Managers, 2 Cashiers, a few sales and utility staff.

  • Each store has 10-12 ISDs. ISDs are appointed by respective Brands like Samsung, LG, etc and are on the payroll of those particular brands.
  • ISDs earn incentives on sales from their own brands. I was surprised how well ISDs also spoke about Aditya Vision and one would have to ask them if they were AVL staff of ISDs.
  • Aditya Vision staff earn incentives on quarter targets set by the management.

• All the Store Managers have been working in the industry for more than 8-10 years with huge experience in sales. They were mostly hired from Reliance Digital stores or from local competitors. Most of the Assistant Store Managers were young and have been promoted from Sales Associate position at competition outlets.

• Reliance Digital and Croma have stores only in Jamshedpur, Ranchi, Bokaro, and Dhanbad. The other districts and areas don’t offer them the volumes currently they look for given their opex.

  • AVL sales staff guaranteed me a price match to Reliance Digital and Croma prices.

• Each district/city has its own local competition. For example the largest local player in Jamshedpur is National Electronics with 4 stores in Jamshedpur and 1 in Ranchi. Ranchi has Bharat Electronics. Similarly, Ramsons and Parikh Sales have stores in Dhanbad and Chas (Bokaro). Local players cover a maximum of one or two nearby districts/areas with maximun store count of 3-5 stores overall.

• These local competitors are themselves distributors of particular brands. For example, Parikh sales is a distributor of Sony and would offer good prices on Sony TVs and would have a wide range of displays of Sony TVs but would fail to compete in price and display with AVL on other brands. For Ramsons (another store) to sell Sony TV in Dhanbad or Chas, they would have to buy from Parikh Sales and would not make the distributor margin. Compare this to AVL who is directly buying from the brands.

  • AVL has a huge buying advantage in that sense. They get better deals and get better prices from OEMs.

• Tier 3 and Tier 4 cities are buying the same model of TV, Fridge, Washing Machine, etc that are sold in the Metros. In fact, the selling price of products is higher in these areas compared to Metros (lower competition) while the major costs (rent & employee) are significantly lower.

• AVL has stores in the top 10 districts of Jharkhand population wise in its first year of operations. I think they have good visibility of 30+ stores in Jharkhand.

• Since I was there as a customer and I did not purchase anything, they would ask for my number to contact later. This was done by other stores as well but AVL also sent me a whatsapp message indicating that I had visited their store and had inquired about TVs.

Other qualitative insights after speaking to employees-

• AVL employees are getting feedback that ISDs in nearby stores want to relocate if an AVL store has opened near them as AVL is taking away sales and market share. ISDs incentives on sales are higher than their base salaries.
• Inventory Management- The sales staff pitch for products/brands that have a high inventory. This is how they deal with ageing inventory. Once a product has crossed the 60 day mark at the warehouse, they put it on high alert and efforts are made to sell that product quickly. The staff is so well trained that they will sell one product over the other.
• They use sophisticated software to track inventory at the store and company level.
• Company’s USP according to the employees-
  • Price Match Guarantee- Company guarantees that they will either match the price whatever their competition is quoting or after buying a product, if a customer gets a better deal in the next 7 days then they will refund the excess amount.
    • I noticed that a lot of stores told me “we offer the lowest price in the area.” The way this works is that the brands set a Minimum Operating Price (MOP), below which it is not easy for any store to go. The brand allows discounts up to a certain limit. However, if a store is not buying directly from the brand then it is very difficult to make money at MOP. Given AVL is doing uniform buying for 90+ stores, it gives them a significant buying advantage.
  • Customer care and service- They claim that they are the only company with a Toll Free number which has a team of 50+ members which help with any customer query
  • Same day delivery & Installation- Most of the local competition can only give same day delivery but due to AVL’s relationship with brands, they can also offer same day installation as well
  • Buy & Win- AVL does a lottery every year at the end of year. They give 1 coupon on every 10K worth of purchases. This year they will give away 1001 bikes, 151 cars, and 3 homes (Ranchi, Patna, Varanasi).
    • Yes, they will enter UP in CY23.
  • Display & Stock availability- This just sets them apart from local competition and they spoil the customer for choices.

Generally, the management’s expectation of a new store is to do around 6-7cr sales in the first year, after speaking to the store managers, it seems like most of the stores in Jharkhand will cross 10cr sales in the first year. This helps with the higher rent cost in Jharkhand and ensures that the stores are highly profitable from the very first year.

A few things that the employees and store managers were unhappy with-

• The company is setting very high targets for AVL staff due to which they sometimes don’t get their quarterly incentives. This shows that the company is ambitious. Most of the SMs saw this as a challenge and realised that given the growth ahead, this is temporary.
• While negotiating with a customer, the sales staff need to go to the Assistant SMs or to the Store Manager to get the Minimum Operating Price (MOP) for a product. Which is to say that what is the best deal a customer can get from the sales staff. If a customer is persistent or a different store offers a lower price, the company still has some leeway to lower the price but that authority lies with Area Sales Managers or with someone in the management team.
  • A lot of staff felt like it would be better if they had access to the MOP then it helps with dealing with the customer much better. The SMs felt that there could be a better way to get to know the MOP since right now it comes in the pdf form and it is difficult to find the particular model in a long list.

Overall, I feel that the company has cracked the code for electronics retailing in Tier 3 & Tier 4 cities. They have been highly successful in Bihar and they are able to replicate this in Jharkhand. They will enter Uttar Pradesh in 2023 (MUCH BIGGER MARKET). As long as they stick to the format of opening 4000-5000 sq ft stores, focus on the 4 major product categories; TV, Fridge, AC, Washing Machine, in areas where there is a lot of buying power but only local competition, they should do really well.

Here are some pictures that I took during my visit-

Disc: Invested (no transactions in the last 30 days).