Slowdown or not, value retailers are still making money by selling discounted merchandise under one roof.
Slowdown or not, value retailers are still making money by selling discounted merchandise under one roof. Though relatively new to the game, they account for almost 50% of the sector’s turnover.
Future Group’s discount format, Brand Factory, which operates 2 outlets in Bangalore, has seen brisk business in the recent past. A snap poll of retailers found that most stores get 25% of revenues from discount retailing. Rajesh Seth, vice-president (marketing), for Central and Brand Factory, said, “Our turnover in apparel and footwear segments is almost the same as large lifestyle retailers.”
Brand Factory will add 1,20,000 sq ft to its existing 1,50,000 sq ft in Bangalore in the first quarter of fiscal 2009-10. Seth said, “We have seen tremendous growth in the last four weeks and are touching double-digit growth.”
Pegged at Rs 12,000 crore, value retailing is expected to grow by 35%, according to Evalueserve data. It provides an avenue for lifestyle firms to clear unsold stock. On an average, a value retailer gets 22-30% margins on the products.
Viney Singh, managing director of the Landmark Group’s discount store, Max Hypermarket Ltd, said, “We haven’t seen any significant impact on our sales and there is no drop in footfalls.”
Efficient supply chain management and lower operating costs help these retailers grow their revenue despite slender margins. Arvind Brands, which operates Megamart, has more tricks up its sleeves. K E Venkatchalapathy, chief operating officer, Megamart, said, “We are in the process of sub-licensing/leasing shop space as it is not possible for the retailer to cut across all segments.” The discount retailer is planning to sub-lease 15% of floor space in Pune, Chennai & Bangalore stores.
The latest entrant to the segment is Prestige Group’s 3,00,000 sq ft Forum Value Mall, which will have 70 stores and is slated to open by mid-June in Bangalore.
Around 70% of the brands there will be on discount. S Raghunandan, CEO (retail), Prestige Group, said, “There are many factory outlets spread across the city and through this format, we will bring them together under one roof.”
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