Maruti Suzuki India Ltd is eyeing small-format and mobile showrooms for its Nexa premium dealerships. The move will help MSIL reach newer markets, namely small towns and rural regions. At the same time, the investment for such a store is considerably lower than a big city brick and mortar showroom. A more prudent investment in improving business volume reduces the investment burden of dealers to improve profitability.
Maruti Suzuki India Limited (MSIL) launched Nexa in H2 2015. For that FY, the company targeted the opening of its first 100 Nexa showrooms. With Maruti crediting customer satisfaction to its overarching market share, as it strives to reach its two million annual sales by 2020, MSIL has been developing new initiatives in all business areas. This keeps the focus on new segments of customers.
Maruti now wants to take its Nexa customer experience to new audiences. In its 4th year of operation, Nexa sales already contribute upward of 20 percent of total MSIL sales, and there are already 360 outlets in 200 cities. Hard to miss in a big city having created a brand identity of its own with its typical style. Under the Nexa premium identity, the company sells S-cross, Ciaz, Baleno, and Ignis. With the products aimed at urban clientele, Nexa dealerships have made big cities their mainstay.
With this comes the burden of lower RoI in the face of high real estate costs, employee costs, operational expenses, and overheads. With a number of city dwellers being disenchanted with the notion of car ownership, and increasing commute options in the form of cab-hailing services, big city contribution towards sales volumes is competitive. Taking the premium experience to smaller cities and towns is aimed to help minimise dealer investment and improve profits.
In a statement to The Hindu, Maruti said, “We have been continuously getting requests from customers seeking the Nexa experience in the cities where we were not present. To serve these customers, we plan to establish smaller Nexa showrooms. These will have a 2-car display facility and will offer the same Nexa experience offered by our current Nexa outlets across the country.”
At the start of the current FY, it was reported that MSIL would build dealerships to be leased to dealers, who would need to bear operational costs. This move too is planned around dealer profitability. With this, MSIL would invest in real estate to set up dealerships by tapping into a cash reserve in the vicinity of 30k crore.
