Innovative Companies

Innovative companies are always known to create their own markets rather than wait for the buyer to come to them. More so, when you are a market leader like HP, and operating in a market that is not exactly booming. While other companies were looking to snatch marketshare from HP, HP itself was looking at not only consolidating its leadership position but also at markets which were relatively untouched by others and could propel growth in a sluggish economic market.

Post merger with Compaq, HP propelled itself to the leadership position in the Indian branded PC segment. In the IT peripherals space, the company already had a huge mindshare with its range of printers and scanners. But while the company enjoyed a leadership position in the PC segment, it still had to compete with assemblers (white box manufacturers) in the PC segment, who controlled more than 60 percent of the PC market. HP knew that if it could snatch even a small percentage of the market from the assemblers it would have the volumes it needed in a sluggish market. But to tap into a market dominated by assemblers HP needed a radically different approach. Also, with PCs and associated peripherals increasingly reaching the home front, HP knew that it needed a way to brand itself on the same lines as that of a consumer goods company.

Ravi Aggarwal

A retail presence was the perfect way to not only take away marketshare from the white box manufacturers but also enhance HP's image as a consumer brand. In line with this strategy, around six months ago HP decided to go in for a marketing blitzkrieg by increasing the number of retail outlets from 450 to 1,000 in over 280 cities by October 2003. These outlets include concept stores that display the entire gamut of HP products, exclusive HP branded stores and exclusive imaging and printing product stores, in addition to multi-brand shops.

HP's decision was also aided by the fact that the fragmented retail industry in India was consolidating and adopting an organised structure. India's retail segment was ready to pull down the window-dressing and rake in the real cash. 60 new shopping malls were expected to come up in various parts of the country, pointing to the steady emergence of the organised retail industry in India. According to a study by CII and Mckinsey, the retail industry was expected to have a market size of $300 billion by 2010.

But when HP launched its retail initiatives, it did come in for criticism. Some analysts were not very confident of HP's retail strategy, simply because retail as an industry in India was extremely fragmented. Also, the image of the Indian consumer was that of a price conscious buyer who needed the free support provided by the assembler. However, the small but faithful band of informed buyers gave HP the confidence to embark on the retail path. This new class of buyers wanted the touch and feel of a product, a proper demonstration, and more importantly, the face of a vendor with organised post-sales services. A retail strategy was the perfect opportunity for HP to gain a competitive advantage and also cater to this new emerging class of knowledgeable buyers.

Explains Ravi Aggarwal, director, IPG at HP India, "India is witnessing a steady emergence of an organised retail industry for various categories of consumer products. A case in point is the number of shopping malls coming up across the country. Specific to IT products, the rapid growth in the home and SOHO segment is making us invest ahead of the curve, and to be prepared to meet the challenges of the retail revolution that India has started experiencing. More importantly,