Business: Electronics; Talk About Thinking Big

India Today
Sep 14,1998

ELECTRONICS
Talk About Thinking Big

In less than five year's, the 'Akai man' has changed the way consumer electronics are sold in the country.

By V Shankar Aiyar

You almost expect some-one to shout "cut". Kabir Mulchandani, managing director, Baron International (BI), has that effect. Young and handsome, he dons an Armani, a Bulgari round his wrist and a cockiness normally associated with the glamour world. But there are no lights, no camera. Yet you feel he is acting a part. Surely this couldn't be the "Akai man".

Then as if on cue, Kabir speaks and the figures roll. Sales up from Rs 12.93 crore in 1993-94 to Rs 885.63 crore in 1997-98, net profit up from Rs 0.16 crore to Rs 48.15 crore, return on net worth from 2.6 per cent to 65.5 per cent, net worth from Rs 6 crore to Rs 97.50 crore and a market share in colour television sets from 1 per cent in 1994-95 to 17 per cent in 1997-98. All this from a college dropout, a boy who returned home because his family was in trouble, who candidly admits his CV "would fit on a palm", who will be just 26 next month.

"Do what you feel is best," was the only advice that senior Mulchandani gave him when he took charge of BI in 1993. Five years down the line, Kabir has done more. He has altered the way consumer durables are sold in the country and probably surprised even himself. "When I tied up with Akai, they wanted me to sell 3 lakh sets by the year 2001," Kabir recalls, adding with a measure of pride, "I sold 4.3 lakh last year and intend to take it up to 6 lakh this year."

How did he do it? When Kabir entered the business, black and white TV sets were outselling colour sets three to one. At the heart of this imbalance was the price. An average 21 inch colour set in 1993 cost nearly Rs 20,000, roughly four times the national per capita consumption expenditure. So, Kabir "incentivised" the shift to colour. Through gifts, financing schemes and exchange offers. He broke down the price barrier and brought colour television into lower middle class homes. In this he was helped by the cable revolution which bloomed in 1992-93. Kabir realised the potential of luring consumers if he could make it affordable. And he did just that.

Armed with a sizeable advertising budget -- it crossed Rs 120 crore last year -- Kabir used the media cost effectively to spread this message of affordability. His choice of the medium, mainly newspapers and large hoardings, was in itself unconventional. When Mumbai's hoardings went empty, Kabir offered to take them at less than 25 per cent of the rentals, gaining exposure at a fourth of the price. Similarly, his ads in papers are normally on week-ends. Rationale: big-tag shopping takes place with family in attendance on holidays. "I sell around 2,500 sets on Saturdays and Sundays as compared to 1,200 on weekdays," he explains.

In four years, BI has launched 13 different schemes to potential Akai TV buyers; the offers included free two-in-ones, gold coins, pagers, 14-inch sets, washing machines, mobile phones, refrigerators, even club memberships. The most effective was the exchange scheme that Kabir pioneered. Well aware of the national tradition of not discarding anything, Kabir decided to play on it. For as little as Rs 9,999, he goaded owners of old TV sets to trade them for brand new ones. Other manufacturers soon followed suit.

Even the competition acknowledges that Kabir has made a difference. "The consumer electronics market has periodically seen new marketing innovations," says BPL Director Rajeev Chandrashekar. "BI's exchange offers have certainly brought a new element into consumer durables marketing." Indeed, the exchange fever has gripped virtually every segment of the consumer market, even cars.

It wasn't just shrewd marketing on Kabir's part. The young entrepreneur's economic rationale demanded that the volumes be kept large. Huge investments in R&D and branding would have to be made. But Kabir knew the limitations. "We don't have the economies of a global scale," he argues. "Sony makes 12 million sets, the Chinese 5 million." He then opted for trade. The logic was simple: get technology at prices that are affordable and trade at low margins in order to gain on volumes.

"I didn't go for a dozen models. Just three and now four," Kabir reveals. BI imports the printed circuit boards and cracks deals on picture tubes pricing given the volumes. It has also been able to get cheap suppliers' credit while the shells and assembly are done locally. Consequently, BI's overheads are low. There is only a 11-day inventory, his debtors pay within 27 days and BI's cost per employee as percentage of revenue is 0.67 per cent.

"I am constantly counting dollars and cents," says the industrial engineering dropout from Stanford University. The fallout is a massive crash in colour TV prices. A 21-inch set that was being sold five years ago for Rs 20,000 now goes for around Rs 12,000, while the prices of 29-inch sets have fallen from about Rs 45,000 to Rs 25,000.

Dealers acknowledge it. "He has changed the course of the trade," says one Mumbai-based dealer. "Percentagewise, in terms of the market share, the others may have lost out, but their volumes would certainly not have grown without him." A vice-president at a multinational points out that Kabir has "been able to define the agenda in the television market. Very often the company which leads the agenda from the consumer's perspective is the one that benefits."

Some manufacturers are not convinced though. They sneer that he is a trader and not a manufacturer. Some allude to quality, while others speak of fudging. Kabir is unfazed. "Okay, if that is the case how is that every other TV maker is now offering lower prices?"

Kabir believes that it takes more than pricing to win. That one must be on one's toes to maintain an edge. Last Friday, he was on the phone, berating a Varanasi-based dealer who had sold just one set that day. "I delegate, but I also need to know why that guy sold just one set." His staff take the cue. Often, long after working hours, his senior officers are personally chasing payments in city suburbs, checking with dealers about sales figures. "My guys are motivated," says Kabir. "We have created an aura, we feel we can take on a Goliath everyday."

For how long? Mike Khanna, chief of Hindustan Thompson Associates, believes Kabir has an unconventional approach. "The interesting thing is everybody is talking about him though nobody has a clue a to how he has done it," he says. "In the short term it has worked. What remains to be seen is whether it will work in the long term." In this business it is not enough to get the consumer. There has to be quality and service too. Can Kabir service the growing volumes? Nirvik Singh, MD, Trikaya Grey Advertising, has no doubts. "He has a 20-20 vision," he says admiringly. "His dreams are big and he already has a plan for the year 2020."

Last week, Kabir tied up with AIWA of Japan and intends to make it "a Rs 1,000 crore brand. I am obsessed with technological obsolescence. There is great potential in it." And it won't be just audio and video. "Just think of an exchange scheme for mobile phones, computers ..." he tempts you, "and consumer finance on the counter." The endgame: to be the largest marketing network, "better than Walmart".

As of now, he can't remember the last time he had a holiday. "I only take a break when the others are not working," he quips. Then again as if on cue, he says:"I like to feel good about what I am doing." Camera or no camera, Kabir clearly has a script and is acting on it.

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