Business Models for Tier 2 and 3 cities Presented by Ms. Delna Avari Head Nano Product Group

1. Business Models for Tier 2 and 3 cities  Presented by – Ms. Delna Avari Head (Nano Product Group)  

2. Tier II and Tier III cities are increasingly becoming attractive destination across industries Organized Retail is estimated to grow 50-60% per year Organized retail is estimated to grow at 50-60% per year in Tier II and III cities as compared to 35% growth in Tier 1 cities E – commerce industry has maximum growth from Tier II and III cities Snap deal, one of India’s major e-commerce portals is expecting at least 35% growth in sale in Tier II/III towns. Currently nearly, one-fourth of the company’s revenue is from these towns New destination for BPO industry Nasscom, BPOs in Tier II, III and rural areas have altogether generated around $10-million in revenues. By 2012, these BPOs are expected to generate 50,000 jobs. 61% of employment generation in India registered in these cities Car loans demand in these markets is expected to grow 20% in next couple of years vs India average of 13% Share of top 10 cities in Automobile Industry has dropped from 60-65% to 40-45% in last five years Car penetration is low in India (13) and this is half in non metro markets, indicating huge opportunity to grow 2

3. Growing investment in Tier II and III cities have multiple implications on the way these cities are changing to more urbanised format Growing organized retail and BPO investments will significant increase challenges in recruiting and retaining talent Customer becoming more sensitive about sales and service experience given the experience they are getting in their other walks of their life Growing ability and willingness of the consumers to invest in value added services will improve share of allied services to total business Similar to tier I cities, sales will witness increasing share of repeat and second vehicle business Emergence of newer customer segments driving growth ex youth because of BPO investments, corporate due to new industries coming up in tier II and II cities Increasing use of technology to derive information will increasing customer awareness about products before they connect with Dealers Rapid cost escalations in rental, manpower etc will necessitate focus on improved asset utilization 3

4. 4 Dealerships will need to build a flexible and adaptive organization with strong focus on key success factors for tier II and III cities Realign to tap existing markets – Learning from tier I cities – today’s “growth” locations rapidly turning obsolete replaced by new demand points. Dealers who didn’t realign to the emerging demand points found their growth stagnant Build customer centric business model – Tier II and III cities are witnessing rapid increase in number of dealers from both existing OEMs and new OEMs. Leveraging existing customer base will be key differentiation which will need building op model around customer ( e.g. org structure aligned to customer segments) Moving from Transaction based to customer wise profit focus - self explanatoryRealign to tap existing markets – Learning from tier I cities – today’s “growth” locations rapidly turning obsolete replaced by new demand points. Dealers who didn’t realign to the emerging demand points found their growth stagnant Build customer centric business model – Tier II and III cities are witnessing rapid increase in number of dealers from both existing OEMs and new OEMs. Leveraging existing customer base will be key differentiation which will need building op model around customer ( e.g. org structure aligned to customer segments) Moving from Transaction based to customer wise profit focus - self explanatory

5. Backup

6. Realign to emerging demand points 6

7. Build customer centric business model 7

8. Shift from transaction based to customer wise profit focus 8

9. Build Return on Asset focus 9 Breaking ROA metric to operating metrics will help dealers in understanding the key areas that impact ROA, and drive business viability

10. Invest in Talent 10 Quality manpower and retention is the key challenge faced with multiple job opportunities available in Tier I and II cities, hence investment in people would be the key area for dealers

11. Build dealership brand 11 Creating stature and brand in the market will not only provide the first mover advantage to the dealers but allow loyalty across employees and customers