The world is undergoing a major crisis currently. The pandemic led by Covid-19 has sent shockwaves across the world, dislocated international supply chains, and has led to an economic crisis. Consumers have become more anxious than ever and these developments are fundamentally reshaping how consumers perceive value and seek affordability in the post-Covid era.
Value perception which is a combination of price, quality, and service offered, has long been a major factor in consumers’ decision-making process and going forward, it will be even more critical as the world is slowly trying to emerge from the ongoing crisis. The pandemic has changed consumer buying behavior. They have become more comfortable with the concept of value retail.
The concept of 'value retail' caters to the pocket-friendly requirement of the buyers, offering high-street designs at affordable prices. While this may seem like there definitely is a catch but value retail brands meet their profits by virtue of large-scale reach and unique target audience segmentation. What makes this segment popular among the masses is that value retailers manage to maintain quality products at affordable prices.
The overall retail industry has gone for a major transformation in recent times. What was once all about the premium and international brands in metro cities or unbranded products at the local store in smaller towns, has changed for good and the premiums have now entered the Tier-II and beyond areas at affordable prices by what is now a new trend called ‘value retailing’.
Value retail stores are a big format store concept offering branded products and accessories under best deals and without taking a back seat on quality. Founded in 2002, V-Mart is one such value retail store chain offering apparel, footwear and accessories for men, women and kids and also a wide range of home furnishings, general merchandise, toys, tableware, utensils, and other home utility items, through its 285 retail stores.
Lalit Agarwal, Chairman and Managing Director, V-Mart Retail Ltd, maintains, “When we say value retail, we are referring to a more affordable retail format. In fashion apparel, we typically have an average selling price that is 25-30 percent lower than that of the national level retailers, who are not value retailers but are delivering value in their own way. Value is taking over the whole retail industry, as we talk. I feel that the value retail industry will certainly witness growth in double digits year-over-year. Consumers moving to organized retail will roughly give a boost of around 1-15 percent, and besides this, even as on the demand side, where consumers are shifting to value retailing formats in organized retail, on the supply side, retailers are either launching their value retail format or changing their business model itself to deliver higher value. Therefore, on both demand and supply side, despite the slowdown and recession, etc., the industry is poised for healthy double-digit growth rate.”
The average ticket size at V-Mart is Rs 700, but for fashion, it's anywhere between Rs 300- 350.
The Acquisition
While the pandemic has had its impact on the entirety of the retail segment, value-chain retail companies such as V-Mart and others saw a blip of slowdown and soon overcame on the back of pent-up demand and courtesy their pivot strategies and technological integration in the functioning of the brand.
In order to expand its reach further to the south and west Indian markets, V-Mart announced the acquisition of Unlimited from Arvind Lifestyle Brands Ltd. The two parties signed a definitive agreement that will give ALBL’s value-fashion retail chain Unlimited to V-Mart Retail Ltd for an estimated Rs 150 crore in an all-cash transaction. Unlimited operates stores across South and West India and retails fashion apparel and accessories for men, women, and children.
Talking about the acquisition, Lalit Agarwal asserts, “As part of the transaction, V-Mart will acquire fixed assets of all running stores and warehouses, leases, less than one-year-old inventory, and other current assets of the Unlimited business along with the store brand Unlimited. Initially, the stores will be operated as Unlimited, but gradually we will change it to V-Mart and see it as one brand, one India focus. The re-branding will happen gradually. While most of the stores will remain the same in terms of their interiors, few of the old outlets would require little work; however, the products and assortments will change towards the value market and customer segment. We will take a final call after 4-5 months. With Unlimited, we will now have 356 stores with estimated revenue of over Rs 2,000 crore.”
V-Mart currently invests Rs 2 crore (including Rs 1 crore in cap-ex and Rs 1 crore in inventory) in any of its new stores and this acquisition allows the company to acquire 74 existing Unlimited stores in new territory at a very similar cost.
The Tech Push
V-Mart has had an 8 percent increase in basket size during Q4 FY21 and the value retail brand is working on sustaining this momentum with the use of technology and digital upgradation.
“Through our online channel, we have access to some rich data, and we are analyzing this to understand the needs of consumers. We have seen 65-70 percent growth in business from our repeat customers. To keep this growth intact, we are introducing offers and shopping vouchers. We are also strengthening our product line - we will be launching our home décor segment, and introducing FMCG products on our platform, both offline and online. Despite protocols and lockdown restrictions in cities, our overall business has recovered by 90 percent in July this year, in comparison to pre-Covid times. We have noticed that the new-age customers are eager to engage with brands through chats and video calls. We have started offering the facility of shopping through video calls as well and then we deliver the products to the customers’ homes. Our focus is to digitize our processes holistically. Since last year, we have made improvements to our D2C platform, Vmartretail.com, and have also tied up with marketplaces like Amazon. We have also partnered with companies and are using their skills and expertise to make V-Mart an omnichannel brand. We have also collaborated with multiple players in other smaller areas for shipping, logistics, customer relationship development, etc.,” explains Lalit Agarwal.
While integrating technology and omnichannel strategies in order to offer a seamless shopping experience to the consumers, V-Mart is also ensuring that the brand offers the best quality products to its customer base. V-Mart sources from its pool of more than 400 suppliers, based in different geographies of the country, and all of them are experts in their product categories. V-Mart ensures that it gives proper guidance in the manufacturing process in order to keep the cost low without compromising on the quality parameters.
Covid Impact & the Road Ahead
The pandemic has made the overall retail industry realize that it has the potential to navigate through the worst of situations. While the situation was not even close to stable, the industry pivoted continuously addressing changing consumer behavior, workable retail formats, business models, online retailing, et al, and played out quite well in establishing the right models viably tapping the consumer demands and expectations.
“The pandemic is not a good time for anyone, and it has affected everyone. But largely at V-Mart, we have used this time to bring the team together, build more proximity with the team, community, and customers, and help them wherever required. We have used digitization to the maximum, collaborated on digital mode, did a lot of home deliveries, online commerce, and helped customers do hyper-local shopping. We also did community service like opening hospitals, helping people access the hospital and oxygen,” tells Lalit Agarwal.
While the value retail chain brand continued to navigate throughout the pandemic, it definitely wasn’t spared during the slowdown. The recovery in the December quarter took a pause during the second Covid wave towards the end of the March quarter.
“Reflecting the covid-impacted performance and the added impact of Ind AS 116 induced lease rent accounting, the company reported its first-ever yearly loss at Rs 6 crore in its 19-year history," the company had said.
While the footfall fell by 125 year-on-year, but an 8 percent expansion in basket size and increased customer conversions helped drive revenue growth. Furthermore, the brand expects to achieve high growth numbers with the help of recently acquired Unlimited stores, and opening up 40 new stores in the coming months, while the current approach is to stabilize the stock inventory across Unlimited stores.
Copyright © 2009 - 2024 Franchise India Holdings Ltd