EXECUTIVE SUMMARY Brio stands for happiness, vigor, vivacity and mostimportant, it stands for life. It also happens to be LGs new retail initiative along with @home. Established in 1997, LG Electronics India Pvt. Ltd., is a wholly owned subsidiary of LG Electronics, South Korea. In India for a decade now, LG is the market leader in consumer durables and recognized as a leading technology innovator in the information technology and mobile communications business. LG is the acknowledged trendsetter for the consumer durable industry in India with the fastest ever nationwide reach, latest global technology and product innovation. @home, A Nilkamal Limited enterprise provides worldclass furniture, furnishings, accessories, lights, kitchens, flooring, decorative wall finishes and more. According to The Rise of The Indian Consumer Market (A McKinsey report), the Indian consumer market is predicted to grow four times by 2025. As of September 2009, India continues to be among the most attractive countries for global retailers. With a worth of US $ 511 billion in 2008 the retail market is larger than ever and continues to draw both global and local retailers. Changing lifestyles, higher disposable income, greater product awareness, affordable pricing and a surge in advertising have been instrumental in changing theBusiness Plan for Brio-An LG Initiative
pattern and amount of consumer expenditure in India which has led to the robust growth of the consumer durables industry. The Indian consumer durables sector is estimated to be Rs. 41,500 cr as of November 2009. Keeping this in mind and with the results of the primary and secondary research conducted on consumer perception of LG, there was a need felt to come up with something new. Apart from having its presence in various electronic megastores, LG also has its exclusive retail stores and which extend to loyal customers be it for the products or services. Along with its current target audience, LG wants to cater to a higher income group in a different way, increasing its visibility and improving its perception in the process. And thus, Brand Brio was born. Through this novel undertaking, Brio aspires to give its customers a distinctive shopping experience. Its offerings include the entire LG product range as well as the classy and elegant home decors by @home, thus providing a refreshing mlange of quality technology consumer durables along with tasteful home furnishings. The objective is to empower the customer through customization, where they have the option to choose their own combinations of home electronics andPage 1
furnishings. They can walk into the store and either buy a single LG product or order an entire living room/kitchen set up.
Brio will go all out in its promotions pre, during and post its launch, making optimum use of the appropriate media platforms. It will have competitive pricing with
EXECUTIVE SUMMARYAfter its successful shoppes and exclusive stores, LG now proposes to set up a retail chain in association with the high end home lifestyle brand (@home) so as to distinguish itself from its competition by integrating superior technology and quality home furnishings in order to provide consumers with futuristic solutions to their living environment. This innovative venture will help strengthen its hold in the retail market and better the brand perception in the minds of the consumers. Brio is committed to providing quality with affordability. The ultimate objective of Brio is thus to build long-lasting relationships with its customers through a unique and satisfying experience of LGs innovative products and services. Brio aims to target various demographic, psychographic, geographic, behavioral and sequential segments which have been mentioned in detail as the plan progresses. It also intends to exceed its competition and stand apart from the other consumer durables retail outlets. It seeks to create a niche for itself in the retail sector. exciting and regular combo offers and freebies. In the short term, Brio intends to have two stores, one each in Mumbai and New Delhi. Depending on the success of these stores, it
will later venture out into the major metros making its presence felt in all parts of the country. LG has manufacturing units at Ranjangaon, Pune and at Greater Noida. Thus sourcing the products will not be a problem. @home goods will be sourced from the nearest stockist available or from their flagship stores if the need arises. It will follow the producer to customer method of distribution. Brio will be headed by the Vice President, Retail, LG with a team of efficient and dedicated professionals. It will also be equipped with an Advisory Board. The startup expenditure for Brio is estimated to be around 20 lakh (please see financial plan for details). Please read through the entire business plan for a better understanding and a detailed report on Brio.
Business Plan for Brio-An LG Initiative
billion in 2008 the retail market is larger than ever and continues to draw both global and local retailers. According to the Department of Industrial Policy and Promotion (DIPP), Foreign Direct Investment (FDI) inflows as of July 2009 in single brand retailing stood at approximately US $ 46.60 million. Being a country with high growth rates spending rose an impressive 75% in the last alone. One of the main reasons for this is the increase of the disposable income among population. consumer four years significant the youth
BUSINESS CASERETAIL SECTOR ANALYSIS A T Kearneys 8th Annual Global Retail Development Index (GRDI) of 2009 ranked the Indian market as the most promising emerging market for investment in the retail sector. The contribution of the retail trade in the countrys GDP which was between 8-10% in 2007 is now around 12% and is estimated to reach 22% by 2010. According to The Rise of The Indian Consumer Market (A McKinsey report), the Indian consumer market is predicted to grow four times by 2025. As of September 2009, India continues to be among the most attractive countries for global retailers. With a worth of US $ 511Business Plan for Brio-An LG Initiative2% 5
1% 520 07
10 % 5 % 0 % 20 07 20 09 21 00
20 09 21 00
BUSINESS CASECONSUMER DURABLES SECTOR ANALYSIS Changing lifestyles, higher disposable income, greater product awareness, affordable pricing and a surge in advertising have been instrumental in changing the pattern and amount of consumer expenditure in India which has led to the robust growth of the consumer durables industry. The Indian consumer durables sector is estimated to be Rs. 41,500 cr as of November 2009. The Indian consumer durables segment can be segregated into White goods like refrigerators, washing machines, air conditioners, speakers and audio equipment; Brown goods/Kitchen Appliances like mixers, grinders, microwave ovens, irons, electric fans, cooking range chimneys and Consumer Electronics like mobile phones, televisions, MP3/VCD/DVD players, computers and laptops. As per a survey conducted by FICCI on the Indian consumer durables industry, a shift in consumer preferences towards higher-end, technologically advanced branded products has been quite discernable. This shift can be explained by narrowing differentials between the prices of branded and
unbranded products added with the high quality of after sales service provided by the branded player. The consumer durable market in India is a dynamic and fast growing market. With disposable incomes increasing, there is an
increasing demand for these products. The market size in India is today estimated to be around Rs 25000 cr. The chart below gives a graphic representation of the market size of different segments of this industry.
Projected Growth Rates for the Consumer Durables Industry:
Business Plan for Brio-An LG Initiative
Local manufacturing competitive Challenges
BUSINESS CASEOpportunities & Challenges of the Consumer Durable Industry Opportunities Rising growth rate of GDP Rising purchasing power of people with higher propensity to consume with preference for sophisticated brands Increasing popularity of easily available consumer loans Phenomenal growth of media Vigorous marketing efforts being made by the domestic majors Reduction in import duties may significantly lower prices of productsBusiness Plan for Brio-An LG Initiative
Heavy taxation Threat of new entrants Imported raw materials Competitive rivalry Wide variety and choice for customers Risk of unbranded and cheaper products in the market
WHY LG WANTS BRIO? For South Korean consumer electronics major LG Electronics, India graphed the highest growth rate in terms of sales compared with its other markets in the last five months, beating global trends of slackened consumer spending due to recessionary fears. LG Electronics India Ltd (LGEIL) clocked a growth rate of 18 per cent in the last five months compared with the corresponding period of 2008, mostly driven byPage 5
increase in sale of products in the refrigeration and AC segments. The company is aiming at a 25 per cent growth in turnover for 2009 to touch about US$ 2.68 billion. For now, the moves by manufacturers into the world of bricks-and-mortar retailing arguably are the most interesting parts of the trend to watch. Manufacturers are trying to directly reach consumers who might select their products or service and give them an opportunity to touch and feel a variety of their products, and also to leave them feeling good about the brand experience. Company stores are most helpful for manufacturers that want to maintain more of a luxury or status image for their products. Also, the marketing efforts of the independent retailers tend to bene