Segment has been growing despite overall economic downturn, with growth coming mainly from semi-rural and rural areas
In response to the rising demand for steel in rural India, primary steel producers are deploying aggressive marketing strategies. Among those trying to buttress their presence in the rural market are Essar Steel, Rashtriya Ispat Nigam, JSW Steel, Tata Steel, Steel Authority of India, and Jindal Steel & Power.
At present, the per capita consumption of steel in rural India stands at 10 kg, much lower than 60 kg in urban areas.
“We have tied up with 761 dealers across the country to supply our TMT (thermo-mechanically treated) rebars to the rural consumer,” said Y Sudhakar, general manager (marketing-retail sales) at Rashtriya Ispat Nigam Ltd. ”We also have a scheme for rural consumers to train the youth on how to use steel in terms of welding, drawing etc so that they get optimum benefit from the product procured,” he added.
The unlisted steel company aims at selling 50,000 tonnes through its retail segment in FY14. As on October 31, it has sold 22,000 tonnes.
TMT rebars
In rural India, steel demand is the strongest from the housing sector, where TMT rebars find wide application.
“We have a franchisee model for the retail segment and through this model we plan to penetrate deeper into several talukas of the country from the district level right now,” said Seshagiri Rao, joint managing director and group chief financial officer at JSW Steel. “We keep the staff motivated so that it brings in good sales and also provide them with lucrative incentives.”
TMT rebars, galvanised corrugated sheets, hot rolled coils, and colour-coated sheets are among the products offered by the Mumbai-based company, through its chain of outlets called JSW Shoppe.
“We have adopted what is known as a two-tier model comprising distributors and dealers,” said Jindal Steel & Power, which recently launched their TMT rebars under the brand of Jindal Panther. “We have already covered all the districts in the country, through a network of 40 distributors and about 1,000 dealers. We also have planned to expand our retail sale to cover our other products like light angles, channels and beams, so as to primarily cater to rural demand,” the company added.
Assured quality products, transparency in pricing and customised availability of material is a hurdle the rural consumer is currently grappling with. If the issues are addressed, it can only help a smooth break through into the market.
“The rural customer has become quality conscious and now knows where to look for, for the right kind of product,” said Rao of JSW Steel. “This has led to higher demand for steel from primary producers. The quality is assured at our end.”
To address the pricing issue, companies publish rates of steel products on their websites, helping bring about greater transparency, along with price discovery, said industry officials.
SAIL and Essar Steel regularly publish prices on their website.
“We also provide our rural dealers with a price list, which customers can refer to when they come for purchase,” said SAIL.
Since the retail requirement is relatively small compared to bulk demand, companies are also making products available in small quantities according to customer requirement.
“We have 23 branches across the country which have products available at its end. People from panchayats can come and lift the material from these branches,” said Sudhakar of Rashtriya Ispat. “This system takes care of sourcing material from the right supplier source.”
Tata Steel, which also has a strong presence in the retail segment, was not available for comment.
Essar Steel has the facility to allow customers to buy even a single sheet of steel plates to a few tonnes depending upon the requirement, said the company.
Retail boom
The retail segment has come as a boon for steel companies. Even in times of slowdown, this segment has been growing for most private players.
The retail segment contributes as much as 25 per cent to the total sales of Essar Steel, the first to enter this area, said Girish Rao, CEO of Essar Hypermart, which owns 68 stores and 300 franchisee outlets.
“We are currently consolidating out network and planning for growth through the existing outlets. Growth would come from new products and increased market shares,” said Rao.
Metros such as Mumbai, Ahmedabad and the national capital region (NCR) are the major markets for Essar Steel.
For JSW Steel, the retail segment contributes about one-fourth to the total sales, said Seshagiri Rao. For the company, which has 425 shops covering 600 districts, most of the growth comes from semi-urban and rural areas. “Next, we will go to every taluka level,” said Rao.
According to experts, with slow economic growth and slump in demand from major sectors such as infrastructure and auto, steel makers are going out to tap a new stream of revenues to overcome tough times and retail is one area with huge, untapped potential.
“This segment has grown year-on-year and in times of slowdown and volatility, it performs better,” Rao added.
Jayanta Rao, senior vice-president and co-head (corporate sector ratings) at ICRA, says: “Retail segment for steel has shown greater resilience compared to bulk buyers. When there is slowdown in the industry, bulk players defer their decisions. The retail shops service need-based customers. Mainly, the growth is coming from semi-rural and rural areas.”
With branded and customised steel products, this segment is becoming more of small customer-centric and some of the companies even offering delivery at doorsteps, he added.
JSPL, which recently forayed into this segment, expects the segment to contribute eight to 10 per cent to the total sales by the end of FY15. It has 661 retailers, according to managing director and CEO Ravi Uppal.
According to SAIL’s chairman and managing director C S Verma, the volume of branded products in SAIL’s retail channel will increase from 0.5 million tonnes per annum (mtpa) to one mtpa after the modernisation and expansion of SAIL’s IISCO Steel Plant and the launch of a new cold-rolling mill at Bokaro Steel Plant.
SAIL has 2,900 dealers in 611 districts to cater to small requirements of retail customers. The outlets have been given a distinct identity as Apna SAIL Shops and act as retail outlets for the company, Verma added.
The proportion of branded products in SAIL’s portfolio will go up from the present level of about 15 per cent to 25 per cent once the modernisation and expansion plans are complete.
At present, the per capita consumption of steel in rural India stands at 10 kg, much lower than 60 kg in urban areas.
“We have tied up with 761 dealers across the country to supply our TMT (thermo-mechanically treated) rebars to the rural consumer,” said Y Sudhakar, general manager (marketing-retail sales) at Rashtriya Ispat Nigam Ltd. ”We also have a scheme for rural consumers to train the youth on how to use steel in terms of welding, drawing etc so that they get optimum benefit from the product procured,” he added.
The unlisted steel company aims at selling 50,000 tonnes through its retail segment in FY14. As on October 31, it has sold 22,000 tonnes.
TMT rebars
In rural India, steel demand is the strongest from the housing sector, where TMT rebars find wide application.
“We have a franchisee model for the retail segment and through this model we plan to penetrate deeper into several talukas of the country from the district level right now,” said Seshagiri Rao, joint managing director and group chief financial officer at JSW Steel. “We keep the staff motivated so that it brings in good sales and also provide them with lucrative incentives.”
TMT rebars, galvanised corrugated sheets, hot rolled coils, and colour-coated sheets are among the products offered by the Mumbai-based company, through its chain of outlets called JSW Shoppe.
“We have adopted what is known as a two-tier model comprising distributors and dealers,” said Jindal Steel & Power, which recently launched their TMT rebars under the brand of Jindal Panther. “We have already covered all the districts in the country, through a network of 40 distributors and about 1,000 dealers. We also have planned to expand our retail sale to cover our other products like light angles, channels and beams, so as to primarily cater to rural demand,” the company added.
Assured quality products, transparency in pricing and customised availability of material is a hurdle the rural consumer is currently grappling with. If the issues are addressed, it can only help a smooth break through into the market.
“The rural customer has become quality conscious and now knows where to look for, for the right kind of product,” said Rao of JSW Steel. “This has led to higher demand for steel from primary producers. The quality is assured at our end.”
To address the pricing issue, companies publish rates of steel products on their websites, helping bring about greater transparency, along with price discovery, said industry officials.
SAIL and Essar Steel regularly publish prices on their website.
“We also provide our rural dealers with a price list, which customers can refer to when they come for purchase,” said SAIL.
Since the retail requirement is relatively small compared to bulk demand, companies are also making products available in small quantities according to customer requirement.
“We have 23 branches across the country which have products available at its end. People from panchayats can come and lift the material from these branches,” said Sudhakar of Rashtriya Ispat. “This system takes care of sourcing material from the right supplier source.”
Tata Steel, which also has a strong presence in the retail segment, was not available for comment.
Essar Steel has the facility to allow customers to buy even a single sheet of steel plates to a few tonnes depending upon the requirement, said the company.
Retail boom
The retail segment has come as a boon for steel companies. Even in times of slowdown, this segment has been growing for most private players.
The retail segment contributes as much as 25 per cent to the total sales of Essar Steel, the first to enter this area, said Girish Rao, CEO of Essar Hypermart, which owns 68 stores and 300 franchisee outlets.
“We are currently consolidating out network and planning for growth through the existing outlets. Growth would come from new products and increased market shares,” said Rao.
Metros such as Mumbai, Ahmedabad and the national capital region (NCR) are the major markets for Essar Steel.
For JSW Steel, the retail segment contributes about one-fourth to the total sales, said Seshagiri Rao. For the company, which has 425 shops covering 600 districts, most of the growth comes from semi-urban and rural areas. “Next, we will go to every taluka level,” said Rao.
According to experts, with slow economic growth and slump in demand from major sectors such as infrastructure and auto, steel makers are going out to tap a new stream of revenues to overcome tough times and retail is one area with huge, untapped potential.
“This segment has grown year-on-year and in times of slowdown and volatility, it performs better,” Rao added.
Jayanta Rao, senior vice-president and co-head (corporate sector ratings) at ICRA, says: “Retail segment for steel has shown greater resilience compared to bulk buyers. When there is slowdown in the industry, bulk players defer their decisions. The retail shops service need-based customers. Mainly, the growth is coming from semi-rural and rural areas.”
With branded and customised steel products, this segment is becoming more of small customer-centric and some of the companies even offering delivery at doorsteps, he added.
JSPL, which recently forayed into this segment, expects the segment to contribute eight to 10 per cent to the total sales by the end of FY15. It has 661 retailers, according to managing director and CEO Ravi Uppal.
According to SAIL’s chairman and managing director C S Verma, the volume of branded products in SAIL’s retail channel will increase from 0.5 million tonnes per annum (mtpa) to one mtpa after the modernisation and expansion of SAIL’s IISCO Steel Plant and the launch of a new cold-rolling mill at Bokaro Steel Plant.
SAIL has 2,900 dealers in 611 districts to cater to small requirements of retail customers. The outlets have been given a distinct identity as Apna SAIL Shops and act as retail outlets for the company, Verma added.
The proportion of branded products in SAIL’s portfolio will go up from the present level of about 15 per cent to 25 per cent once the modernisation and expansion plans are complete.
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