V-Mart introduces its 17th store in Lucknow

India's value fashion retailer V-Mart Retail has launched its 17th store in Lucknow, continuing with its accelerated expansion.

Samir Misra, COO of V-Mart Retail, said, “We are glad to announce the launch of our 17th store in Lucknow. It is another step by V-Mart which demonstrates that the company has been a pioneer in providing access to value fashion to the aspiring class in Tier II, III & IV cities in India. We have continued to believe in fulfilling the fashion aspiration of youth and young families in emerging India by launching relevant and differentiated fashion, at unmatched price points, which they can easily and conveniently accessible.”

“We are getting an overwhelming response from our existing stores and we expect that our new store in the city also proves to be a milestone in our endeavor to take fashion to the nooks and corners of the city,” he further stated.

Retailers targeting Tier-2 and 3 cities for expansion

Retail expansion is on a steady dedicated rise in Tier-2 and 3 cities, catering to around 68% of India’s population. Grabbing this opportunity, well-established fashion retail brands are looking at aggressive expansion in this arena.

The major reason why renowned fashion brands are chasing expansion in tier-2 and 3 cities is that they will have a greater chance of success and profit, due to factors such as high demand, less competition, and low rentals and expenditure. Hence, brands are not wasting any more time and moving to tier2 and 3 cities to gain the early mover's advantage.

Business Model

Since the locations of these cities are mostly unexplored, real estate prices tend to be 30-40% lower than metros or tier-1 cities, which is a definite pull for retail brands. The store format of a retail outlet in tier-2 or 3 cities will range from 600 to 900 Sq. Ft. The overall investment for a franchise fashion retail outlet would range from Rs30 Lac-50 lakhs. This would include land rentals, inventory worth Rs 15-20 lakhs, interiors, and fixtures worth 12 lakhs, and various other business expenses including IT, licenses and registration, franchisee security fee, etc.

The monthly operational cost of fashion retail store would approximately be 2-2.5 lakhs, which includes up to Rs. 60,000-80,000 in rent, 4-5 staff with salaries of approximately Rs 50000-60000 in total, and other bills including electricity, sanitation and water. Taking into account these expenses, a store in a tier-2 or3 city can generate revenues of up to 15 lakhs per month. The profit margins would range between 30-40% based on product popularity.