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Arvind Lifestyle, which operates fashion retail chain Megamart, says it will consolidate this year and not open outlets randomly. The Bangalore-based retailer, promoted by textile and denim maker Arvind Ltd, is going for expansion through the saturation model.
Simply put, the company will focus on a particular geography and consolidate its position before moving into a new territory.
Megamart, known to be driven by discounts, is also busy repositioning itself as a value retailer with the latest fashions.
“We will expand cluster by cluster. At present, our focus is South India. We will later look at expanding our base in Maharashtra and Gujarat, and in another two years we will move to North and East,” said Arvind Lifestyle’s Chief Financial Officer J. Suresh.
The company plans to open 10-15 outlets this year in the South. At present, Arvind has about 225 Megamart outlets in the country, of which more than half are in the South. It is eyeing Rs 650-crore revenues in FY13 against Rs 550 crore last fiscal.
“Most companies are looking at a saturation model to prevent competition, as concentrating on a particular geography helps reduce sourcing and logistics costs by almost 30 per cent, aiding companies to break even faster at the store level,” said retail consultant, Mohan Mahajan, of Mahajan and Aibara.
He said the real estate market in the South was comparatively cheaper than Mumbai and Delhi.
Retailers such as More of Aditya Birla Retail (ABRL) and newer entrants such as Promart, too, are looking at expanding in a similar way. Most retailers say it will also help them in promoting the brand.
ABRL pulled down the shutters of all its 25 stores in Mumbai this year and several others in Delhi and the NCR as high rentals and low margins began to bite, said sector analysts.
High density models
“Most of these companies are focusing on saturation or high-density models as a part of their larger strategy. If they are exiting one city, it doesn’t mean that they are closing stores,” said Rachna Nath, Leader (Retail) at PriceWaterhouse Coopers.
Talking to Business Line earlier, Promart’s Chief Operating Officer Punit Agarwal said that as a part of their saturation strategy, the company was focusing on Gujarat, and would open stores in Ahmedabad, Vadodara, Vapi and Rajkot.
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