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May, 11 2016

Why Lenovo relies on franchising?

For Lenovo, about 85 per cent of its business comes from brick and mortar retailing and the remaining from the online channel.

Lenovo is not keen on applying for single brand retail licence and will rely on its network of more than 900 franchise stores to sell its products in India, said a top executive of the PC and smart phone maker, reported ET.

A licence for single brand retail will allow the Chinese company to open its own stores in India. "We have not applied to department of industrial policy and promotion ( DIPP) to open company owned stores. We have no such plans and we are doing nothing along these lines," said Ashok Nair, the company's director for home and small business.

"Opening company owned stores is simply against the strategy of the company", Nair said. "We have been a very strongly focused channel partnering company. We have always depended on our partners to do this (retailing) and we will continue to do that."

The government liberalised foreign direct investment rules on single brand retail in November, which included relaxing mandatory local procurement condition for high-tech companies and allowing single brand licence holders to sell their products directly online. Phone makers like Apple, Xiaomi and Gionee have shown interest in opening their own stores in the country.

Lenovo retail its products through about 4,000 stores, of which some 950 are Lenovo's exclusive franchised outlets comprising large format and small¬ or express format stores.

The company also has an ecommerce store but sales through it are yet to pick up. "We have an ecommerce store on which we are showcasing our products, but the bulk of our online business comes through third party online platforms. Right now, sales happening through our platform are fairly low in comparison to other ecommerce websites. It is not much but we have devised new strategies and plans for this year to increase engagement on our online store," said Nair.

For Lenovo, about 85 per cent of its business comes from brick and mortar retailing and the remaining from the online channel.

According to Nair, there is absolutely no dilution on Lenovo's focus on the traditional channel of retailing as it still comprises the major chunk of the sales for the brand. "We are totally committed to it. But we also recognized a fact that there is a emergence of a new channel which needs to be accepted and we need to engage with it and hence we ensured that there is a right level of focus which should be given to this channel as well," said Nair.

The computer ¬maker, which opened nearly 230 stores last year, will this year focus more on sustaining that expansion and enhancing customer experience at these stores. "For the last few years what we have normally done is we have followed a pattern where we go aggressive on ramping up the stores one year and the next year we look at sustaining it and ensuring that all the stores that we built are able to create the right shopping experience for customers, before moving again to increase the expansion capacity," Nair said.

Nair said last year the company set a goal of opening about 250 stores in 2016. "We have pretty much come close to that number by opening around 230 stores. So this year we will open stores only if they are absolute necessity and focus more on improving the customer experience in these stores." he said.

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