[Dippy]

I visited the Skoda boutique showroom last week. The overall ambiance is quite different to what you see in a usual car dealership. These showrooms are not buzzing with action where people are flocking to buy or test drive a car. Infact while I was there, a customer walked in for a Fabia TD. He was welcomed and promptly guided to visit the bigger showroom in town.

Here, its more relaxed. There is a sitting area which is very well done up. You can sit here with a cup of coffee and discuss you next car purchase with the staff. There is an LCD TV which has the brand videos playing all the time but my most favourite was the merchandise section. Neatly displayed scale models and other merchandise which you can buy. All part of the "lifestyle" theme. I picked up Superb scale model but what I really found interesting was a soft toy of a Yeti. As for cars there was only one Superb inside with a Laura parked right next to the entrance outside.

I had a similar experience when I visited Infinity BMW at Worli. Very tastefully done up and though its not advertised as a boutique showroom, it certainly felt like one.

Hope the trend continues and we see more like these around.

[Arkin evoisrevo]

I read in ACI that skoda plans to open such outlets in other cities also as well as Bangalore

[GTO]

Originally Posted by shankar.balan

Just to share with our friends on TBHP, since Fore-warned in Fore-armed.

Thanks for an A+ post, Shankar. It was very informative and I enjoyed reading it.

Originally Posted by Dippy

The overall ambiance is quite different to what you see in a usual car dealership.

I thought as much. Perhaps, like a lounge?

Originally Posted by Arkin evoisrevo

I read in ACI that skoda plans to open such outlets in other cities also as well as Bangalore

I'm certain this trend is here to stay. Luxury brands will continue to target high-income neighborhoods with boutique showrooms. Hope we see some more interesting concepts though, the Indian auto industry is lacking in marketing innovation.

[n.devdath]

Originally Posted by shankar.balan

Therefore, notwithstanding whatever the big brands may keep saying, they are all quite open to some subtle negotiation and are finally available to one at a price. End of the day, everyone wants a Sale, the variable is only "at what cost/ profit to the retailer/ brand, such sale is achieved."

Just being a bit smart while shopping and being patient as well, thats all it really takes to save some seriously big bucks!

A very comprehensive and well worded reply Shankar.
Just one question which I think will hit the nail on the head.

India, as we know is a highly cost sensitive market. This cost sensitivity, more often than not, is displayed across all the customer segments. Do you, going by your experience and knowledge think, that customers of a luxury brand will succumb to the RRP model that works elsewhere?
If they don't, is this not a futile, short term step which, due to its failing ROI will end?
Looking forward to your and acidkill's inputs eagerly

[ampere]

@Shankar, Very well written! Very nice to read. Enjoyed fully. I guess many folks may know these aspects, but to pen them down with right measure is what separates one from the other.

[normally_crazy]

Looks like a plush place to buy lemons !

Nice concept though - having seen these kind of boutiques for higher end luxury cars, feels good to see it trickle down to mass market brands now.

[acidkill]

Originally Posted by GTO

Road presence surely is, but you need to reach out to the customer (via marketing activities) in the first place, to get your cars on the road. Boutique showrooms are just another part of marketing. To premium brands, its going closer to their target HNI market.



I disagree here. A larger showroom also has larger overheads.

Ok I would like to justify my earlier comment in more detail

1. Luxury market suffers from a high degree of novelty erosion. If we compare two respectable brands/products, Novelty erosion is the single largest factor that kills the sales volume of the competing luxe products. Eg: if the Accord was the popular car of 6 months ago, its the superb today - largely driven by the fact that it is perceived as newer, fresher and a better statement. Thus in the luxury market, its the on road presence that is the most important advertisement (as it enhances the novelty factor). The same logic applies to other products such as a a Louis Vouitton Bag or a Jimmy Choo Shoe. An innovative retail strategy is not necessarily a substitute for a product that is not in vogue. Also, its a losing battle simply because the sales volumes of the luxury product will not justify the increased retailing Cost. (Why increased cost ? Read below)

2. If you compare 10000 Sqft of a single showroom with 5 showrooms of 2000 sqft - the cummulative setup, overhead costs of the smaller showrooms are immediately higher. Substantiation: 1. Capex on Decor for greater amount of wall areas 2. Greater P. Sqft Airconditioning Setup Cost and less efficient air conditioning 3. Increased expenditure on repeated showroom modules like waiting lounge, billing areas etc (they have to be repeated in each store) 4. Increased security cost as there will be increased entry/exit points 5. More number of sales staff 6. More car inventory 7. Lesser revenue or profit from other operations like after sales service 8. Usually smaller stores are not in optimal condition so there is usually a high amount of civil work involved in brining it up to speed 9. The smaller frontage immediately victimises the store if the surrounding area is not very posch - hence you spend on the surroundings

3. To decide on increasing retailing cost on grounds of leakage in marketing cost ( ATL and BTL advertising) is rather risky. 1. One may enter your store to understand your product, but will that person convert into a purchase - its not necessary in the case of a car, because the the buyer is usually not in a hurry 2. Would a company prefer to get suck with a fixed retail cost, in case its product fails? 3. Would a company risk rationalization of the store rollout incase 2-3 showrooms fail to generate turnover (given that showroom closure impacts brand perception in the automarket)

Thus its my humble conclusion is that these stores don't substitute marketing cost. They complement them but as a pure retail strategy only

[shankar.balan]

acidkill - fair and pertinent set of points:
my small submissions are below next to yours in bold;

Originally Posted by acidkill

Ok I would like to justify my earlier comment in more detail

1. Luxury market suffers from a high degree of novelty erosion. If we compare two respectable brands/products, Novelty erosion is the single largest factor that kills the sales volume of the competing luxe products. Eg: if the Accord was the popular car of 6 months ago, its the superb today - largely driven by the fact that it is perceived as newer, fresher and a better statement. Thus in the luxury market, its the on road presence that is the most important advertisement (as it enhances the novelty factor). The same logic applies to other products such as a a Louis Vouitton Bag or a Jimmy Choo Shoe. An innovative retail strategy is not necessarily a substitute for a product that is not in vogue. Also, its a losing battle simply because the sales volumes of the luxury product will not justify the increased retailing Cost. (Why increased cost ? Read below) - This logic of "on the road" or "on the body" - is typically why luxe brands try and drive aspiration, by using celebrity endorsement as a "tool" to convert consumers. This is typically why a BTL POS In-Store poster works almost as well for them, as an ad. Additionally the brand is bolstered by "events", "celeb-shows" and so on. The retail strategy is definitely complementary and most brands cannot do without their share of ATL (traditional mass communication media). BTL methods and new media cannot wholly substitute mass media.
All brands, luxe or otherwise, have their share of "Core"/ "Perennial products" and "fashion/ Flash" products. The flash products are what help the brand create an impression of novelty/ speed of development and product innovation, but frankly,what sells best typically are the "Core", which is why these are perennially available.
Think about it, its the same logic when a designer showcases his/her latest creations at a Fashion Week - edgy, fashion forward stuff which creates the required "oohs and aahs" from the audience, but what finds its way to the shelves and sells to consumers is a watered down version. The showcased stuff is usually edgy and fashion forward - the saleable stuff is usually slightly more conservative.

2. If you compare 10000 Sqft of a single showroom with 5 showrooms of 2000 sqft - the cummulative setup, overhead costs of the smaller showrooms are immediately higher. Substantiation: 1. Capex on Decor for greater amount of wall areas 2. Greater P. Sqft Airconditioning Setup Cost and less efficient air conditioning 3. Increased expenditure on repeated showroom modules like waiting lounge, billing areas etc (they have to be repeated in each store) 4. Increased security cost as there will be increased entry/exit points 5. More number of sales staff 6. More car inventory 7. Lesser revenue or profit from other operations like after sales service 8. Usually smaller stores are not in optimal condition so there is usually a high amount of civil work involved in brining it up to speed 9. The smaller frontage immediately victimises the store if the surrounding area is not very posch - hence you spend on the surroundings - This is a fair point - in a way this is endorsed in my earlier post which talks about Anchor Stores - however, it is all subject to negotiation with the land owner/ space owner.

3. To decide on increasing retailing cost on grounds of leakage in marketing cost ( ATL and BTL advertising) is rather risky. 1. One may enter your store to understand your product, but will that person convert into a purchase - its not necessary in the case of a car, because the the buyer is usually not in a hurry 2. Would a company prefer to get suck with a fixed retail cost, in case its product fails? 3. Would a company risk rationalization of the store rollout incase 2-3 showrooms fail to generate turnover (given that showroom closure impacts brand perception in the automarket) - Store re-calibration/ closure/ movement impacts all types of brands, Premium, Super Premium, Luxe etc, not only the Auto Market. But there is another point - public memory is short and one can capitalize on that fact.
Therefore it is better to recognize quickly that a particular location may not be best, cut one's losses and move on sooner rather than later.
This applies even to a "destination store" - take for example the Levi's Rivet Store in the Leela Galleria in Bangalore which closed down some time back.
Or take Rodeo Drive on Richmond Road whose approach access and parking have become a complete mess. It is a destination watch store for luxe brands, but no one but an absolutely serious buyer who is getting a good deal will go there, especially when he/she has a high proliferation of product and shopping destination choices now, which werent there 5 years ago.
Consumer conversion is never guaranteed, which is why many brands are adopting innovative BTL strategies, especially with the advent of New Media, which is predominantly digital and interactive in nature - Twitter, Blogs, On line/ Mobile marketing etc.
The "short public memory and fickle-mindedness of consumers" is nowhere more evident than in the food and beverage industry - the capricious public stays with a restaurant only about as long as they remain innovative and perceived as the "hip" place to hang out. Which is why one finds fashionable restaurants forced to make themselves over with regular nip and tuck jobs, to retain their freshness! This is true across the world. It is no longer about the Core product alone, the packaging matters just as much if not more!

Thus its my humble conclusion is that these stores don't substitute marketing cost. They complement them but as a pure retail strategy only

[ampere]

We are increasingly noticing aspirational luxury items getting commoditized in the Indian market.

In the consumer electronics space, it is the time taken for such items to become a commodity when these products make money. This is because they can command high margins. Once the production shifts to "China", these guys need to start looking for a new product. iPhone/Android war being a case in point, which is leading such a finale (albeit not in a strict sense).

Fortunately or Unfortunately this has not started happening yet in automobile market in a large scale. Though we are witnessing Altos and i10s slowly becoming a commodity (or rather a necessity in homes) rather than a luxury items, yet in its entirety the situation is different compared to consumer electronics. The investment levels are higher in the automobile sector.

I agree with Shankar that boutique 5-Star places will continue to re-enforce brand equity, but I am not how sure how these showrooms will be able to transform/translate curious on-lookers to a prospective buyers.

Items like clothes, gadgets/gizmos etc can still be bought in the heat of the moment, but surely not a car. Thats my only point.

Would love to hear views : Shankar? Acidkill?

[devarshi84]

They better spend some bucks on new service centers too. Only showrooms wont help in the long run. Nice strategy nonetheless.

[acidkill]

@shankar - il pm u my details.. sorry i dint see that line earlier

see there are reasons why i view it differently from you shankar / ampere


1. its wrong to compare a 5 star retailing strategy for a fashion accessory with a car simply because the fashion accessory can keep updating itself every season or half year. the car has a life cycle of 5-8 years. it cant maintain that novelty. map that to the relatively low volume of luxury cars sold in India, you are always going to have the newer product winning

2. skoda is the budget brand of vw. its not a luxury brand. so if one were to take a '5 year' horizon on this strategy, i think it would fall flat on its knees. if either audi or vw were to launch products in skoda's price turf, the audience would immediately look to audi and vw. also skoda is not going to be a 'first aspiration' car for people as their incomes increase. i mean, the polo has already virtually killed the fabia. the jetta has induced enough confusion in the mind of the consumer while he is making the buying decising for the laura.

3.vw doesnt look to india, to make skoda a perennial brand. even now, skoda is not going to consider india as a relevant market to shape its future products design

4.while there maybe exceptions, 'in the heat of the moment' purchasing is not going to happen for cars as much as it will happen for food or fashion. its simply because the ticket size is much larger and the consumer is going to consider his needs more deeply

[az.shahulhameed]

Hi fellas,

Apart from the debate on the feasibility of such boutique shops, I think its a rich browsing/buying experience for us, petrolheads! So in that direction, I think Automobile corporations are heading straight for the satisfaction of the potential client, failing which he/she (client) could turn out to be a PR initiative. A win-win situation you could say.

But but, Skoda will have to fine tune its A.S.S better in order to leverage on such branding/sales excercise. Anyways, Skoda India cars in itself aren't bad fellas, its the brains which run them that are!

Car-passionately yours,
Shahul

[Mpower]

Shankar and acidkill, you guys are bombarding each other with fancy words and abbreviations pulled out of MBA textbooks... but I still fail to understand what your POV is what the conclusion is. How about just explaining in simple and clear english like GTO does. Is it a good idea or not ...if not why?

[holysmoke]

I would like to buy the chotu Superb. How much was it?

[BuBooMan]

Originally Posted by inreverse

It's hard to find the place to get everything done under one roof. Car Dealers are trying to mimic a studio/galleria for possible car buyers by presenting a better front-end, it is more that what meets the eye behind the back though.

For Eg: The Asset Auto dealership for Skoda is a spanky clean showroom at a prime location in Pune, but their service station is one heck of a bulldozed, bullet holed structure :(

Dude Asset Auto sucks big time. Have been a long time customer of his. Bought my first Octy in 2003. Another one in 2007. Might go for a Laura soon. Read and post your thoughts here : http://www.team-bhp.com/forum/indian...legance-4.html

Service is awful. showroom is NOT swanky sparkling clean and the sales people are total duds. Only thing going for him is the location.