Jumbo is one of the UAE’s oldest home-grown brands. Despite its fortunes being linked closely to that of its suppliers, new chief executive Vishesh Bhatia says he has a plan to take the firm into the next decade
When Jumbo Electronics Company was founded in 1974 in Dubai the era of the personal home computer had just begun. Today’s market leaders such as Samsung were only five years old and the creation of Steve Jobs’ Apple empire was still two years away.
Fast forward 40 years and the consumer electronics retailer, part of the $1.5bn Jumbo Group, is now a diverse operation spanning retail, distribution and IT solutions, as well as a manufacturing and air conditioning divisions.
While the Commodore 64 has made way for present-day hot-ticket items such as the iPad and, more recently, Google Glass, the need to innovate to keep up with the latest trends has remained as pertinent as ever in a $1.6 trillion global consumer electronics market.
Vishesh Bhatia, who took over as CEO of the company in 2012, says after a modest diversification strategy Jumbo last year started looking to medium-sized acquisitions to fuel the group’s growth.
It has 27 retail stores and nine service centres across the emirates, but the question was being asked as to whether the strategy the firm had followed since its inception was the right one to take it to the next level.
“We were based on electronics distribution and other allied products and should we really be? Let’s diversify and get away from this base,” he tells Arabian Business.
As a result, Jumbo chose to explore a franchise venture in the competitive food and beverage sector.
“But starting from zero and getting to know that business wasn’t easy to be honest,” Bhatia says. “So, we kept looking, getting knowledge of the industry, speaking to a lot of people, we recruited a few guys… and I guess Q3 of last year we said the details don’t look so handsome.
“You’ve got to really scale it up far, so you’ve got to go GCC and although we have presence in Oman, Qatar and Bahrain and Kuwait it didn’t make sense, so we kind of put that on the backburner without abandoning it.”
Instead, he says the company decided to seek out new opportunities for its existing ten-year-old subsidiary — Jumbo Engineering, a mechanical, electrical and plumbing (MEP) business.
Bhatia, who was previously Jumbo’s chief operating officer before leaving for a brief stint at the Al Futtaim Group, says it was an area of the business that “sort of languished” during the global financial crisis, but is being resurrected.
“We’re building that one up and putting money into that business,” he says. “I see that - in another three years’ time - to be a significant part of our portfolio.”
The second aspect of its shift in focus has been on its B2B business through its value-adding enterprise business division, which focuses on areas such as print management processes, IT services and computer and copying supplies.
“We have great contracts with the likes of Emirates Airline, Etihad, ADNOC has just been opened up, Travel Report, Abu Dhabi Airport,” Bhatia says.
Currently Jumbo Engineering and the B2B business make up about 15 percent of Jumbo Group turnover.
However, Bhatia says he will be happy if it grows to 25 percent within three years.
Jumbo Electronics was founded in Dubai by the late Indian entrepreneur MR Chhabria with a modest capital base. Before his sudden death in 2002, which left the business to his wife and three daughters, he spoke of an “exciting millennium” ahead and “a sea change taking place”.
“Looking back has never been our style. Too often companies with a rear-view mirror approach have been overtaken by the rapid pace of change taking place globally,” he said in a message published on the company’s website.
Jumbo’s core business, its retail operations, which makes up a third of its business (distribution and general trading make up the other two thirds), is also restructuring with a view to its long-term game.
Bhatia says the current retail environment is challenging, with the “big-box formats” that have become synonymous with shop fronts selling electronics and white goods now shrinking.
It is, he explains, the result of several factors. Televisions, for a start, have become smaller in size, meaning less retail floor space is needed to sell the product.
“My belief is that we shrink our store size. Having retail real estate in a shopping mall is madly expensive, so I can’t afford to pay those rents. Shrink it, get better value from each square foot of space that I’ve got,” he explains.
Jumbo has just opened a store at Dalma Mall in Abu Dhabi and is in talks with developers of the under-construction Yas Mall. Bhatia says its market focus is the UAE and other GCC countries, especially Oman and, potentially, Kuwait down the track.
It also has 15 stores coming up in India, which Bhatia sees as a new frontier given it is “up against the big boys out there”.
However, Jumbo is still pursuing new geographies with plans for the wider Middle East, including the oil-rich northern Iraqi region, Kurdistan, in a reflection of the wider influx of recent business into the recovering economy.
“We’ve established a presence out there. Initially, we’ll do some distribution — we’ve got a service centre, warehouse and office — and we’ll build that out into a retail,” Bhatia says, adding that it is investigating potential joint venture projects for “structured organised retailing”, which is missing in Iraq.
Across the border, however, and Iran is also firmly in Bhatia’s sights if economic sanctions are lifted.
“We’re preparing ourselves in the event that the country across the waters is accepted by the West and there are no sanctions against it and if that happens then we are kind of poised to do business out there,” he says.
“Background discussions are taking place with various people and, if it happens, they are ready to go on from the next day onwards.”
Echoing sentiment expressed from UAE leaders as high as Investment Corporation of Dubai CEO Mohammed Al Shaibani, who has welcomed the business opportunities offered by a resumption in trade to Iran, Bhatia says the potential is exciting.
“[Iran has] 80 million people, well educated and was always there as a country of note and you can’t ignore it,” Bhatia says. “For Dubai, particularly, from a purely economic point of view, there are huge opportunities for everybody. And not just for Dubai but the West — particularly Europe and the States — which could be great suppliers of equipment and airplanes or power plants, you name it. People realise it, that there’s going to be opportunity and I just say ‘watch this space’.”
As part of the rapid consumer tech revolution, Bhatia predicts wearable devices such as action cameras and smart watches as well as a form of “hybrid” laptop and tablet will lead consumer electronic trends in 2014.
Bhatia says tablets and smartphones — dominated by Apple and Samsung — remain the “player of the month”.
He says next year these two brands alone are forecast to make up about 43 percent of the $1.6 trillion global consumer electronics market.
“Our smartphone is our life now, you have everything on it — you can watch a movie, do any app you want, dine, exercise, track your heart rate, do anything you want,” he says.
However, he predicts in 2014 “the next big wave” in consumer electronics will be wearable technology such as Go-Pro action cameras and Google Glass, as well as wrist devices such as Sony’s Smartwatch.
“It just transforms what’s happening today,” he says. “Think of the impossible and it will happen.”
Bhatia says laptops are “sliding” in popularity but he believes the curve is now flattening.
“There is always some demand from people for a keyboard — you can’t do something just on a tablet,” he says.
This could be achieved through so-called hybrids, which combined the best features of a laptop and keyboard. “You’ve got your keyboard, you’ve got your screen, but you just want to do some browsing and you can unlock it,” he says.
“Hybrids are still not quite there with the consumer, it’s a bit heavy, and a bit expensive. But like anything else it will drop in price and I see that also being a great other device that people will buy and if it looks nice especially.”
Bhatia says where previously a four-screen strategy existed based on a person using a mobile phone, tablet, computer and television “now you’re watching your TV and you’ve got your smartphone or your tablet and you’re playing around with it”.
“The formula going forward is a smaller footprint, value-added products and lots of accessories that people embellish and want to be different,” he says.
Bhatia says Jumbo is aware of the need to establish an online shopping facility, which it plans to launch by April.
“That is a big investment,” Bhatia says. “We studied it for eight months.”
However, asked how much of the retail business will eventually be driven by an e-commerce platform, he says “I’ll let the customer decide”, though with his logistics background he argues it’s a matter of convenience and efficient service.
Bhatia says he expects the company to record “just under double-digit growth” for the year, which it calculates as ending 31 March 2014, after a challenging 2013, and forecasts 20 percent growth in 2014-15.
He says contributing to its underperformance in 2013-14 has been its role as a Sony distributor.
The Japanese electronics company, which is the maker of Bravia TVs and Playstation game consoles, last month forecast a net loss this fiscal year of $1.13bn — its fifth net loss within six years — in what has been a horrid run as it struggles to compete with deep-pocketed industry giants Apple and Samsung.
However, following a similar path to local peers Panasonic and Sharp, a restructure being led by Sony CEO Kazuo Hirai includes plans to spin off TV operations, which have lost $7.8bn in the past ten years alone, into a new business and sell its Vaio personal computer division.
In Panasonic’s case, Reuters reported that its restructure resulted in a turnaround from losses of $15bn over two years to March 2013 to a forecast net profit of $294m this year.
“I’m only as good as my suppliers, I can’t do any more,” Bhatia says. “It has, in all honesty proved to be a bit of a challenge, but I think we’ve navigated our way through that reasonably well and we’ve picked up momentum in the other divisions — quite deliberately, not by accident, just to balance it out.”
However, Jumbo clearly believes the electronics company can recover. In January it signed a new micro distribution channel deal with Sony mobiles, continuing a partnership which began at Jumbo’s inception, and Bhatia hopes another major distribution deal is around the corner.
“They make a damn good product, without question,” he says of Sony. “Whatever they make is superb, in particular televisions, that’s their big strength and they’ve got some great cameras now and they can compete just about with Nikon and Canon or even Canon on the SLR side. I guess they’re determined to survive out there and their CEO in Japan has made very strong statements.”
He is also optimistic that Jumbo’s own change in direction will be a winning formula.
“This is an odd business,” he muses. “Globally, tell me who doesn’t have a touch point with technology. Everybody. And it’s ubiquitous — it’s across countries, across nations, across people — yet if you see the industry right from the manufacturers to the retailers, how do they make serious money? It’s really strange. So, it’s a high-volume business, wretchedly low margins and you’ve got to be super efficient to really make some money.
“You really have to train yourself to be disciplined when you do this business. But there is money to be made and it is going to grow.”