- February 7, 2017
Homegrown electrical major Bajaj Electricals Ltd is aggressively preparing for the next level of growth. It is making strategic moves by embracing technology, bringing a radical change in distribution, and being skeptical (not cynical) about some emerging trends. The Rs 4,612 crore company’s chairman and managing director Shekhar Bajaj minces no words as he spells out his game-plan.
By Mrinmoy Bhattacharjee
How are you strengthening your lighting leadership?
We realised that the world is rapidly changing in terms of technology, market place, and competition. Unless we differentiate ourselves and become a technology-oriented company and take quick decisions, it’s a matter of time when we will get wiped out. Therefore, in the lighting space, instead of being only a supplier we are looking to become a lighting solutions company. We are the only company in the space to have emerged as a comprehensive concern that is engaged in supplying, sourcing, manufacturing, and installation and erection. We have competency to do turnkey jobs. Our company is now a complete solution provider rather than a mere supplier.
You have launched a LED luminaires sub-brand ‘.nxt’ which you say is heralding the digital revolution and helping customers upgrade to the next level of achieving high energy-efficiency, besides realising ease of maintenance and operations. What’s your marketing approach for such tech-intensive solutions?
We are a market leader in the conventional street lighting segment. Our sales and marketing team that looks after the segment would be occupied with maintaining the leadership and achieving their targets, let’s says, by wining one or two tenders. They will not be able to allocate time and energy to pitch for technologically-advanced products such as ‘.nxt’. So, we have a separate team that thinks and dreams of such tech-oriented products. This team focuses on marketing such products by convincing clients about their benefits.
Since you have forayed into connected lighting or IoT-based lighting, how are you building your technology backbone? Are you forging alliances or partnerships with tech companies for the purpose?
We understand that the connected lighting is the future. It will take 3-5 years to penetrate the domestic lighting market. But, if we don’t start now, somebody else will take the lead and command the market. Therefore, we have to work very fast, and we are taking help from certain consultants who can help us in the area.
Our company is also talking to folks who have core competency in the technology space. We are speaking to new tech entrepreneurs and startups. Often, these startups have wonderful ideas but lack a marketing set-up and don’t have a financial backing. They are brilliant [Smiles]; they look for somebody to become a father figure of sorts and take care of their marketing and financing. We are eyeing to tap such talented folks who are also reliable. We may tie up with 5 to 10 startups, at least 2 to 3 will succeed and others may fail. But, how does that matter? It’s a part of the game!
A market for fans based on energy-efficient brushless direct current (BLDC) is evolving. Many say that the way LED has revolutionised the domestic lighting market, BLDC will transform the country’s fans market. How do you assess it, and is your company making any moves for introducing such breed of fans?
LED is a proven technology. It has gone through a real market product cycle and has proved to be a cheaper than CFLs, with longer lifespan, higher energy-efficiency, and environment-friendly owing to absence of mercury. On the other hand, BLDC has been recently developed. Its technological parameters are proven only in the lab. Where is its market lifecycle? We don’t know the product lifecycle of BLDCs. Will they wear out in 2-3 years or function beyond that period. Moreover, the price of these fans is twice the price of conventional fans. It’s difficult to market such fans to a price-sensitive market like India. The fans would find specific markets where fans are switched ‘on’ 24×7 applications areas, such as hotel lobbies and housing colonies, as their users or owners will realise a faster payback. But, areas that require fans to be functional only in summers, or eight hours a day, will have a longer payback time that will not be an attractive proposition for users. I am sure that it will not be a game changer like LED.
It has become a trend to foray into new product categories. For instance, a traditional lighting company is entering fans, switchgear, wire & cable, water heaters, air purifiers, and other consumer durables. This makes competition fiercer and battles are often fought on pricing. How are you countering the situation?
We are looking at long term sustainability. The game is about avoiding being copied; it’s about differentiation! We have decided that our differentiation will be ‘service and distribution’, not pricing. Not long ago a consumer major invested lots of monies in R&D and patented its air fryer at Rs 15,000. Later, a Chinese manufacturer changed a few screws and brought out a similar product at almost half the price. So, it’s not so difficult for someone to challenge on pricing.
We have notched Rs 2,000 crore in consumer durable business last year. We have 2,000 mechanics and 400 customer care folks. Our company provides home service for even irons in towns such as Chikmanglur. This costs us Rs 60 crore a year. We spend Rs 19 lakh in service, including demos. We sell three crore fans and appliances per year. So we can afford to have these overheads, and that can’t be matched by a Rs 500-crore company. It will take 3 to 5 years for them to match our service strength.
We have differentiation in distribution too. We are the first company in India to embrace an FMCG model. We no longer have separate channel partners for appliances, fans, and lighting businesses. We have combined these to form a consumer products business. We have done away with wholesalers. Now, a dealer will have to keep everything. You see, it’s not difficult for a dealer to sell a light bulb as consumers only query about wattages and other key features and don’t ask for technical specifications. We call it RREP, which stands for Range and Reach Expansion Programme. We have developed a centralised supply chain which takes care of all the businesses, that dreams and thinks of supplies, thinks of quality, of keeping new vendors busy.
The RREP was rolled out in April 2016. With that we changed our evaluation system as well; now a dealer is provided a 100% performance incentive even if he is doing 70% sales, because he is doing the right thing which is to expand product range. This programme is vastly expanding our distribution reach. We may incur short-term losses, but I don’t care as we will have long-term benefits. We will start reaping the benefits from the Q4 of the 2016-17 fiscal.
Also, how are you preparing for the Goods and Services Tax (GST)?
Even though the government is trying its best to introduce GST on April 1, 2017, I think its rollout will not be possible before October, as the GST Council is yet to iron out several issues pertaining to jurisdiction of the Union and state governments over assessees and legislation on IGST. I think the government will have done a great job even if GST is delayed by a few months. We are working with banks and consulting firms such as PWC to be ready by the time it comes into force. Once GST is implemented, it will boost ‘Ease of Doing Business’ for us.
This interview was originally published in November-December 2016 print edition of ‘Sourcing Electricals & Lighting’ magazine.