In an interaction with The Dollar Business, Devita Saraf, CEO & Chief of Design, Vu Technologies, talks about her company’s edge in content and display platforms, her bet on exports through e-commerce, and her take on the ‘Import from China versus Made in India’ debate. Excerpts:

Steven Philip Warner | @TheDollarBiz

TDB: You have been a brand ambassador of Vu Technologies for over six years. How, in your view has the combined market of display, content and innovation progressed in India?

Devita Saraf (DS): The age old saying that “Content is King” is no more truer today than it ever was. Earlier, people would get content only on appointment viewing. What has happened with the co-existence of multiple devices is that people have become habituated to the concept of content snacking – so the entire day they can gain access to what, how and where they desire. Even the products that we make at Vu are not geared towards appointment viewing. It’s more about viewing content from an online content aggregation platform or from a device. This move towards content snacking has convinced us that we give to our consumers a technology hardware that enables them to view content of their choice, at their convenience. In terms of quantum leap, I think there has been the biggest change in content consumption pattern in India, even across non-Tier I & II locations. On the display front too there has been a considerable change. Consumers want to view content in the exact format in which it was shot. So be it 3D, Ultra HD, 4k – the demand is for good quality viewing of customised content. The customer has become picky.

TDB: Vu’s New Product Development Center has become popular for delivering technology on both content and display platforms. Can you share some recent innovations from Vu’s labs?

DS: I would like to bring two of our innovations to light. One is our range of Ultra HD televisions. It’s a September 2014 launch. We have four large screen variations of this product – 50-inch, 55-inch, 65-inch and an 85-inch. What is very interesting is that we are the only ones to have inbuilt 4K players. Last year when we launched the 84-inch, people said, “The TV is great, but content is missing”. So after a year of research, we’ve come up with an inbuilt 4K player, where the customer can download content directly from the Internet and play it. The second product is a SuperMac, which the first advanced computer-TV integration. It has been a hit.

TDB: Have you initiated an outreach exercise in markets outside India?

DS: We are already selling our brand in the US market. Also, starting this year, we have grown by leaps on the online platform. And that includes selling in markets around the world! We have used e-commerce platforms like Amazon, Flipkart, eBay, SnapDeal, and Homeshop18 to reach out to customers around the world. What is most interesting about this mode is that today, 55% of my global business comes from online sales. The company chose to expand through the online platform as expanding the physical retail chain is a task and also increases the retail price of the products by up to 40%. The online platform has enabled Vu to control product pricing and after-sales service. As compared to retail outlets, on the online platform, we sell LED TVs at prices that are 40% less, and still make profits!  

TDB: What is your take on Brazil and other parts of Latin America as export markets for Vu products?

DS: The world talks of these places given the fast-rising income levels in these economies. But demand for Vu products outside India presently originate from US, Europe and Australia. As we promote the brand, we will find new markets to discover, including South America.

TDB: For players in the LED manufacturing industry, rupee devaluation in recent times has led to a rise in cost of imports. Many in the LED industry have voiced concern over this issue. It’s a problem for you too, isn’t it?

DS: The rupee fluctuation has definitely impacted us. Being an importer of goods (for TVs sold in India), this is natural. What is however interesting to note is that the price increases have happened more in the large screen-size category. There has been a panel shortage worldwide for 24-inch and 32-inch panels. So, a lot of budget players are getting affected. But a company like ours, one that has a very strong distribution, we continue to sell products of the same quality at the same price points. But if the rupee depreciates by 10-20%, we take the hit. The customer is not willing to suddenly pay more for the same product. And we anyway import our products in advance, so the orders are already placed. You import it at a certain calculation and by the time it hits the port, the rupee has fallen! If our import bill rises, our profits fall too. India is where you can expect to be hit by an unpleasant surprise.

TDB: At present, Vu imports all products that are assembled and either sold domestically or exported. Mostly from China. Do we expect this supply-side strategy to change?

DS: We import all our inputs. And that will continue because at the end of the day, you have to source from the best places. And while the Modi government is talking about manufacturing in India – and that’s a great initiative – the cost of manufacturing LED panels is extremely high. The plant set up cost itself is about $3 billion! And I don’t think I will be investing that much any time soon. But I must add that even today, a lot of development and customisation of the final Vu product takes place in India.

TDB: Many hardware giants have stayed away way from setting up plants in India in recent years. What is the biggest problem in this case?

DS: Let me elaborate this with an example. The government has given cess benefits to export manufacturing units in Baddi (Solan district) in Himachal Pradesh. Never ending power interruption problems, logistics hurdle, lack of skilled manpower, etc., are only some of the infrastructural bottlenecks faced by manufacturing units in these regions. A lot of the manufacturing benefits are very patchy. So it makes more sense to import. It is primarily for this reason that imports under HS Code 85 [Electrical machinery and equipment and parts thereof; of sound recorders, TVs, and parts] has continued to be three times that of exports of products under the same head!  Last year we imported over Rs.1,76,460 crore under this category, while our exports stood at just Rs.62,428 crore. For instance, it costs a seller 5% less to import a phone than to manufacture it in India. For manufacturing excellence, we need an ecosystem, depending on the industry you are talking about. If you are producing the derivative of a chemical, you can set up the plant and you import the inputs and sell it away. That is easy. But in case of electronics, if you take the case of Shenzhen and Guangd?ng in China or Hsinchu in Taiwan, what happens is that if I have a factory for TVs, whether I want to buy plastics or panels or semiconductor chips, the purchase  and procurement point is just two kilometres away. You cannot set up a manufacturing plant for a high-tech good in a silo. The big concern is that our country is already so far behind in this respect, the only asset we can offer is labour. And labour for making high-end products is definitely more skilled and relatively hard to find.

TDB: But you would want your company to be one that is fully reliant on its captive plants in India. Won’t you?

DS: Depending on the rise in our company’s exports, we will do more manufacturing and assembly out of India. There are two reasons. First, we will save on time and costs – both connected to compliance and transport. Two, India has a lot of expertise. The government needs to give us a lot of benefits rather than punish us for manufacturing. Incentive schemes for high-tech manufacturing could be a good start. And we don’t even get much benefit from the various duty exemption or remission schemes like DFIA, Advance Authorisation or even DBK Schemes.

TDB: What factor has created the maximum impact in catalysing your growth across foreign markets?

DS: E-commerce, for sure. Whether I sell a TV in Orissa or in Australia, my margins remain almost the same on e-commerce platforms.

TDB: How big a headache is compliance cost for Vu?

DS: It peels off our margins. Second, it makes the ride bumpy. There are many forms that we are required to be filled in India, like C-forms, Road forms, etc. So what happens is that many B2B and B2C customers get affected due to delays in deliveries because permits have to be obtained. VAT is another issue!

TDB: In terms of volumes, with you foraying into online retail, your market share is expected to rise fast. What is your target?

DS: We want to corner 15% of the large size television market in India in another year. When I say large size, I mean the 50-inch and plus category of TVs.  

 TDB: Going back to your focus on American consumers, how is your company’s approach different as compared to selling in the domestic market?

DS: In US, we are trying to reach out more to the B2B segment. And the focus is more on the B2C segment in India. Talking about US, there the biggest challenge is high labour costs. Their concern is in terms of installation and after-sales service support. Whereas in India. labour cost is not a problem. [In India, local service providers fill the demand-supply gap.] Concern is – here people want discounts. So there lies the prime difference and therefore our prime focus while catering to buyers in these two very different markets. In US, people don’t haggle – their concern is less about getting a 15% off on price and more about having to pay 15% more on labour charges, which are absurdly high!

TDB: So what do you do to offset the “service” concern in export markets like US and EU?

DS: In US and EU, we have various types of AMC contracts all across. We are the only one in this industry who has captive ISO 9001 certified service centres in these markets. So we offer various post-sales services.

TDB: In terms of manufacturing – keeping in mind that you’d want to set your own production plant in India in future – what is India’s strength?

DS: I’ve maintained this for quite a long time now. India’s strength is in fabrication of lower volumes – anything which is labour and skill intensive and does not require economies of scale, we are definitely better. A small scale B2B buyer who wants to order say, chairs, needs to place a minimum order of 1,000 units if he wants it from China. But from India, he can get a supplier who can do them all different and even five units each. So ‘Made in India’ is most special because it implies a custom-made, bespoke, handmade, attention-to-detail product, rather than a mass product rolled-out in thousands for those who can do without made-to-order products.