Case Study

Music World: Redefining Indian Music Retailing

Music World Part of the Rama Prasad Goenka (RPG)

Group, a Rs.65 billion company (2000-01) Started in 1820’s by Ram Dutt Goenka &

British East India Company Divisions:

Power Tyre IT & Communication Life Sciences Retail Financial Services Chemicals & Specialty

Music World Old formats:

Retailers & distributors (Company had to shell out money for high margins)

Problem of Piracy of cassettes & Cd’s Company could not reach its full growth potential

1990-2000 CAGR 25% Partnerships with international companies

2001 Introduction of the organized retailing 58,573 employees Rs 66 billion turnover Rs 68 billion asset base

RPG Group

Spencer’s was set up in 1865 as a small store By 1940- 50 large stores spread across the

country 1947- unable to foresee demand for imported

goods & hence , started declining 1970- sold to an entrepreneur 1989- RPG bought Spencer’s RPG’s retail business was run by Spencer’s

Emergence of Music World Spencer’s undervalued real estate,

distribution network, profitable travel agency Many loss making divisions shut down 1991- Spencer’s store was redesigned and

modernized Three formats of the store

“Food World” “Health & Glow” “Music World”

Spencer’s

Food World

Health & Glow

Music World

Hyper Mart

June 2001• 61 stores of Food World, 13 Music

World outlets & 18 Health and Glow Shops

• Average earning – Rs.350 million per month

RPG GAURDIAN PVT LTD (Alliance between Spencer and Dairy Farm International)

JV between Spencer (57%) & Saregama (43%)

October 2001- “MUSIC WORLD” emerged as distinct identity

Why Retail Sector?

CII estimated that the Indian Retailing Industry will grow at the size of $180 billion.

By 2010, it will develop to a $300 billion industry

Less competition GCIL turned into a sick unit

Story of Saregama 1901- GCE started (British East India Company) 1931- Merged with Columbia Gramophone

Company to form Electrical & Musical Industries GCIL marketed its labels through HMV & Columbia HMV lost its monopoly 1990- RPG bought EMI stake in GCIL Diversified into Radio Broadcasting & Cinemas 1999- www.saregama.com was launched 2000- www.humaracd.com 2001- Entered global market Sales increased drastically

Promotion & Marketing Celebrity visits – Hrithik Roshan & Shaan Discounts on products during festivities Promotion of local artists – “The MusicWorld

unplugged” Tie up with Channel [V], hungama.com, Citibank

etc Neon signage ‘Santana Contest’ Website launch www.musicworld4u.com www.humaracd.com Mini studio in Pune Tie up with e-commerce websites

SWOT analysis

Strengths

Well planned marketing game plan

First mover advantage

Took advantage of Spencer’s undervalued property

Brand image of HMV Diversifi ed business Showroom designing Hired Expertise

Weaknesses

Failed to foresee the decline after 1947 for spencer’s

Pricing of records was high

Poor performance of saregama website

No new marketing strategies

Stopped long term focus

Distribution problems

SWOT analysis

Opportunities

Grabbing opportunity of growth in 2001

Bought loss making Spencer’s in 1970

Entered the radio broadcasting business in 1995

Tie up with channel [v], coca cola, Cadbury etc

Threats

1980’s new players started entering – increased competition

Music piracy E-commerce

revenues below estimates

Planet-M

Our Take

Soundtracks of Hindi films were flopping Piracy Before music world, only 50 distributors had

control over the market Supplies not available easily Customer convenience & satisfaction Tie-ups with popular departmental stores

helped in boosting the sales of Music World

Present Situation Music industry has

been growing at 3% over last 3 years

Assets worth Rs. 235 crores

Present CAGR of Music World is 30%

Over 79 outlets across India

More than 5 million consumers walk through Music World stores annually

41%

21%7%

8%

10%

6%8%

Genre-wise distribution of Music Sales in India

New film music Old Film Music Regional Film MusicPopular Music Devotional InternationalOthers

Source: Industry estimates

What more can be done? Cater to wide geographical areas Try to reduce the cost of their cd’s Diversifying into more products like

headphones etc Set up a jamming area in the store to increase

customer walk-ins Customized selling

Thank You