Aug 28, 2008

Business - Discount Retail Chains benefit

BANGALORE: As mainline retail players slug it out with steep discounts and wafer-thin profit margins, value retailers, which sell only discounted merchandise, can’t stop smiling.Though relatively new to the game, value retailers already account for almost 50% of the industry turnover and are now looking to cater to a larger price-sensitive clientele by expanding into hinterland.Jay Gupta, managing director, Loot India Pvt Ltd, which runs a multibranded retail chain by the same name, said in July sales soared to Rs 4 crore compared with Rs 2.5 crore in the same period last year.“September-January accounts for over 60% of our annual revenues,” he said.Loot is aiming at a turnover of Rs 100 crore by 2009.The chain, which has 38 outlets across India, is looking to go public next year to raise over Rs 300 crore to finance expansion.It plans to enhance presence in Tier I, II & III cities by March 2009.The flurry of discount sales by bigger chains have not rattled the cut-price players.The bullish outlook comes even as they hiked discounts recently to outdo the bigger chains.For example, Brand Factory, Future Group’s discount retail format store, increased discounts from an earlier 30-35% to 40-45% now.“Value retailing is the next big thing with more footfalls coming its way,” said Rajesh Seth, vice-president, marketing, of both Central and Brand Factory stores.Central is Future’s higher-end chain.Viney Singh, managing director of Max Hypermarket Ltd, the Landmark Group’s discount store, said consumer response has been “overwhelming”.“We plan to take it to next level now,” Singh said.The company has rolled out 2 hypermarket stores is last 10 months and sees a footfall of 120,000 every month.B Vijayalakshmi, assistant vice-president, retail and consumer goods at Evalueserve, a consultancy, said discount chains in the country will grow at an annual rate of around 40% over the next five years.In contrast, the industry is projected to grow at just around 35%.The organised retail industry does a business of Rs 26,000 crore every year, while the value retail segment is pegged at Rs 12,000 crore, according to Evalueserve data.Apart from firming up of plans to enter the car accessories market, Brand Factory plans to increase outlets from 7 now to 50 by 2010-11 at an estimated investment of Rs 500 crore. It is eyeing a turnover of Rs 250 crore this year.Despite slender margins, efficient supply chain management and lower unit value and operating cost ensures these retailers are able to grow their revenue kitty without taking a hit on bottomlines.The Grab Stores, which made its debut in Mumbai early this year, will be testing waters in value retailing in other metros and Tier II & III towns.It has earmarked Rs 400 crore for setting up 50 outlets measuring a minimum 5,000 sq ft each over the next 2-3 years.The company sells 55 brands and offers 25-80% discounts throughout the year.“We try to maintain our margins by increasing the volumes,” said Sanjay Tayal promoter, Krishna Group, which owns K Lifestyle.

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