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How value retail is emerging as high profit business?

value retail stores meet their profits by virtue of large scale reach and unique target audience segmentation.

Tags: value retail, 1-India Family Mart, organised retail

BY Guest author  |  Nov 01, 2018  |  comments ( 0 )  | 
How value retail is emerging as high profit business?

A decade ago if a product was sold in the market at a discounted rate, it would arouse suspicions in the consumers’ minds. However today, this behaviour has changed with the emergence of the Value Retailing concept.

The buying behaviour for any segment can be divided into utility and luxury. Commercialization, however, offers the consumer a plethora of different options wherein goods bought for utility can also be categorised based on quality and price. The concept of “Value Retail” caters to this aspirational and pocket-friendly requirement of the buyers, bringing high street designs at affordable prices for the multitude while premium brands maintain their exclusive tag by maintaining presence in select areas. In this scenario, value retail stores meet their profits by virtue of large scale reach and unique target audience segmentation. What is noteworthy here is that value retailers manage to maintain quality products at affordable prices.

Shift in the consumer behaviour

The genesis of value retailing can be linked to market recession times where innovation was key to survive the market downturn. The recession had caused a shift in consumer buying habits triggering a negative growth in the retail sector. Consumers restricted their shopping budgets, and opted to buy goods at discount sales, and during promotional offers. As the world recovered from recession, the consumers who were used to buying products on discounts and offers still continue to seek the same. They preferred to buy quality items at prices that are comparatively less than branded ones. This helped in the resurgence of retail and larger format value retail concept stores. Today, value retailing is a big format store concept, where branded products and accessories are sold under best deals. Unlike premium brands which use 3x multipliers to recover their cost, value retailing use only 1.5x multipliers to provide the customers with maximum cost benefit. This concept is planned mainly for tier II and III cities wherein retail stores offer products with an inexpensive price tag.

Consumers, today, are seeking for options to reduce their apparel purchase expenditures demanding and expecting good quality at inexpensive pricing. They are seeking value. There is a noticeable shift in their shopping preferences with more importance given to product pricing. The success of the value retailing concept works on the approach of providing quality goods at factoryprices. The products on display in any value retail store are on par with the on going fashion for that season in any premium brand. The value retailers bring the latest trends and styles from across the globe and make it accessible to the tier-II & III segment. The market for the tier-II & III segment in India has been penetrated by a few players in the retail sector.

How to deal with the situation

The key to the operational success of value retail stores is the consistent product outreach & demand and managing supply chain. Since the stores cater to the tier-II & III segment, the product segment caters to the demands that are specific to the region. India being a multicultural land, different cultures have different festivities for various seasons, while South of India celebrates Onam, North India is celebrating Baisakhi. Adhering to the niche requirement, value retailers serve the segment with choicest goods that are the need of the hour. Adding more flavour, colours and joy to the myriads of festivities in India, making the most of the opportune moment.

Growth in the retail sector

The surge of ideas in the retail sector has brought an upsurge on the economic front as well. The retail sector in India contributes to 10% of the GDP. Until 2010, rural India was facing a lack of organised sector players. Retail in rural India largely comprised of local corner shops, owner manned general stores, convenience stores, departmental stores, hand cart and pavement vendors, etc. Lack of innovation and new-age infrastructure has hindered the rise of organised retail in rural areas.

India’s retail market is expected to increase by 60 per cent to reach US$ 1.1 trillion by 2020, on the back of factors like rising incomes and lifestyle changes by middle class and increased digital connectivity. While the overall retail market is expected to grow at 12 per cent per annum, modern trade would expand twice as fast at 20 per cent per annum and traditional trade at 10 per cent. Indian retail market is divided into “Organised Retail Market” which is valued at $60 billion which is only 9 per cent of the total sector and “Unorganised Retail Market” constitutes the rest which is 91 per cent of the sector.

Conclusion

Last but not the least, value retail does not mean that consumers have to compromise in terms of the shopping experience, ambience and customer service. Value retail offers the very same experience to shoppers who walk into departmental stores in Tier I cities.

As Sir Philip Green said, “People are always going to go shopping. A lot of our effort is just, “How do we make the retail experience a great one”.

The article has been penned down by Jay Prakash Shukla, Co-Founder & CEO, 1-India Family Mart

 





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