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Value retailer V-Mart Retail Ltd said it will focus on the high margin categories — fashion and lifestyle and plans to exit the FMCG category going forward.
“We plan to open 60 new stores in next two years. Most of our new stores will have only apparels and lifestyle fashion products as they fetch better revenue margins. Of late we have been opening stores without the food and grocery segment. FMCG companies don’t want to give too much margins and this impacts our profitability,” Lalit Agarwal, CMD, V-Mart Retail Ltd said.
“This made us tweak our model slightly,” he added.
Agarwal, who started V-Mart in 2002, said almost 80 per cent of its revenue comes from the fashion business while FMCG accounted for a mere 16 per cent. The company’s turnover stood at Rs 390 crore for fiscal 2013. “This year we are looking at 35 per cent growth over last year,” he added.
V-Mart had raised Rs 122 crore through an initial public offer earlier this year to fund its expansion plans. Post-IPO, the promoters hold 59 per cent stake in the company, while Aditya Birla Group's private equity fund Naman Finance & Investment owns 9 per cent stake. Rest was diluted to public during the IPO.
The company has 80 company-owned-company-operated stores largely in northern and eastern India.
Speaking about its business model, Agarwal claimed that the company was profitable due to its model. The company never opened stores in a mall and largely followed a cluster-approach in expanding its business.
“Some of the learning from our early experience in retail business has been that no two V-Mart stores should be more than 150 km apart. This helps us manage the supply chain and logistics better. It helps us understand the regional balances better,” he said adding that India’s consumption story is still intact. V-Mart stores offer apparels, footwear, accessories, luggage, home wares, toys and games.
Overseas venture
Agarwal said it is also looking the possibility of setting up stores in neighbouring countries such as Bangladesh and Nepal, besides expanding presence in the eastern region.
“Retail is under-served in these locations and there is a huge potential in these virgin territories,” he said. The value segment or mass will largely be targeted at people who have the aspiration to buy but don’t have the bandwidth to go to a big departmental chain, he added.
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