V-Mart Retail – ‘V’ for value – Poised for Growth

V-Mart RetailV-Mart Retail (V-Mart) has adopted the strategy of focussing in tier 2 and 3 towns where competition is minimal (no large-format stores, FDI-backed outlets), but growth potential is high. Its USP is the cluster-based strategy, with inter stores distance being < 150 kms, which facilitates excellent inventory management. Going forward, V-mart intends to focus on North and East India, which are relatively under-penetrated (as over 70% of modern trade is in South and West). Thus, its capex per sq ft could be limited to just `1,300 versus `3,000 for its peer set who usually focus on tier 1 cities. V-Mart stores, are open 13 hours a day, seven days a week, 365 days. Membership cards, acceptance of debit and credit cards, and shopping vouchers are other benefits offered. As modern shopping outlets are a new concept in small towns, V-Mart has been able to consistently grow its same store sales (SSS) at 10% over the past four years.

It’s positioning affords the advantage of having limited focus on low RoI segments like cold chains and private labels, which are imperative for attracting footfalls but lifestyle shopping helps to drive footfalls upwards. Regional/vernacular media campaigns offer massive savings on ad-spends. It also enjoys the first-mover advantage in its cities of operation and has secured it long-term leases (9-10 years) at prime locations, thereby shielding it from rental inflation.

The company sources the apparels from ~2,000 suppliers and no supplier accounts for more than 1% of purchase. This gives a strong bargaining power to V-Mart to source at best possible rates. The company also sources the products for all the stores in bulk which also results in lower sourcing rates. Also V-Mart does not have any system of selling goods on consignment basis and 100% of apparels are purchased and sold. We believe this also allows the company to sell only fast selling apparels. The company has a policy of measuring physical inventory once every year and twice in 18 months. This results in shrinkage ratio moving up in those quarters when the actual stock taking happens.

V-Mart Loyalty Program
The company has created a loyalty programme to reward regular customers, tracking their mobile numbers. Depending on monthly and
annual purchases, customers get discounts.

Leave a Reply

Your email address will not be published. Required fields are marked *