V-Mart Retail Shows Festive Cheer Hasn't Arrived Just Yet For Everyone
The apparel and discretionary segments were among the worst-hit during the pandemic and the slowest to recover.
Apparel retailers have been preparing to ride an anticipated bounce-back this festive season after two-and-a-half years of the pandemic-led disruptions. But not everyone is cheering just yet.
Same-store-sales are 15-20% lower versus pre-pandemic levels, Dolat Capital said in a report citing its recent interaction with Anand Agarwal, chief financial officer at V-Mart Retail Ltd.
“Durga Puja isn’t going well in the east with sales seeing higher degrowth than the national average,” the Dolat report said. It expects Diwali sales to also remain “weak” versus pre-Covid due to feeble consumer sentiment amid steep increase in prices.
Apparel and discretionary segments were among the worst-hit during the pandemic and the slowest to recover in the consumer space. Sales rebounded in the quarter ended March as reopening of schools and social gatherings necessitated wardrobe refresh. But high inflation has slowed the momentum. More so in smaller cities as low-income consumers are still cautious about spending.
What's Ailing Tier-2 Retailers
V-Mart, too, is grappling with a slow rebound. Most of its stores are in tier-2 cities. Dolat Capital, citing interaction with the company's Uttar Pradesh zone head, explained the economics of these outlets.
The retailer's Lucknow stores generate an annual revenue of Rs 6-7 crore, Dolat Capital said.
Here's how it works:
Daily footfalls of 250-300 on weekdays and 500-600 on weekends.
Conversion ratio of 60%.
Basket size of Rs 800
Average selling price of Rs 230.
The retailer, however, has seen a decline in revenue largely on account of a drop in footfalls. While sales are down in the range of 15-20%, there are other pressures too. Like in Varanasi, where V-Mart has eight stores.
One reason is expansion even as the pandemic slowed demand. The region has seen the highest impact partly “due to an increase in the number of stores from 30 to 80-90 in the past couple of years," the brokerage said. Also, according to the report, rentals have moved up from Rs 38 per sq ft to Rs 60 per sq ft for V-Mart on renewal.
Store profitability has also been impacted also because the city has a lot of students who migrated back to hometowns during Covid-19 and haven't returned yet.
Most mass-market retailers, including Max Fashion, Tata Trent-owned Zudio and Pantaloons rolled out some or the other kind of schemes and promotions ahead of the festive season of Navratri and Diwali, according to the Dolat report. V-Mart, for instance, had put up billboards of its own scheme.
Yet, according to Dolat Capital, "40-50% bill cuts happen below the threshold, while 35% up to Rs 1,999 and 15% above Rs 5,999”.
V-mart opened a big-format store in Kolkata and plans to open another in Bhubaneshwar. “These high-street stores had been vacated by Big-Bazaar and had been more of an opportunistic expansion,” said the report.
V-Mart has yet to respond to BQ Prime’s emailed queries.
No Major Threat From Online
According to the Dolat report, V-Mart has not seen a major impact from online platforms such as Meesho. “Customers on Meesho are like one-time buyers. They are not happy with the garment quality,” the report said. “On the other hand, we found pricing of V-Mart to be quite attractive versus peers and a key strength against the local and national players. These are especially for the quality of the garment that V-Mart offer.”
V-Mart is also trying to test and push its customers to shop online by giving additional offers, but “traction has been limited”, the report said.
A handful of V-Mart stores that are listed on e-commerce platforms such as Myntra, Flipkart and Amazon sell close to Rs 3 lakh worth of apparel per month, contributing about 4-5% of physical sales, said Dolat. In all, the retailer gets 20-25 orders a day from these platforms for the listed stores.
Online, retailers, however, are seeing robust uptick in sales during the festival period.
Amazon, Walmart-backed Flipkart, Meesho, Ajio, Nykaa and Myntra, kickstarted their festive sales last week.
Advisory firm Redseer estimates Rs 5,500 crore worth of fashion was sold in the first four days and the category saw a 4.5x jump in daily gross merchandise value over usual business days. “Fashion continues on its growth journey fuelled by the consumer need of wardrobe improvement,” Redseer said in a report.
Offline Competition Intensifies
The V-Mart head, according to the Dolat report, said rival Trent-owned Zudio is not a major threat and has limited footprint in Uttar Pradesh.
“Zudio, too, has not been doing well with its sales being 30% lower than V-Mart in some of the nearby stores like Jhansi,” the report said. Zudio’s target segment is young crowd versus families for V-Mart.
The key challenge for Zudio is lower number of stock-keeping units. V-Mart displays seven pieces per sq ft versus three for Zudio.
“Also, Zudio doesn’t run any offer which is necessary to attract customers but just full-price sales,” the report said. Dolat Capital got a similar feedback from store manager of Landmark Group-owned Max Fashion.
But a manager at Max, with whom Dolat interacted, highlighted that Zudio has aggressive store addition plans in north which could be challenging for V-Mart.
According to Dolat Capital, the most common feedback from both the Max and V-mart store managers was that Aditya Birla Fashion & Retail Ltd.-owned Pantaloons also face higher higher rentals and lack of inventory refresh, among others, according to the report.
Reliance Trends opened a lot of stores during the Covid period but haven’t seen a complete cycle yet.
Aditya Birla Fashion & Retail, Reliance Trends and Zudio have yet to respond to BQ Prime’s emailed queries.
Reliance, meanwhile, is converting Future Group’s department store format Central into Centro in locations where lease was taken over by the company after the Future Group defaulted on rentals. The first Centro store opened in Delhi on Tuesday. But these stores would compete more with Shoppers Stop and Lifestyle than the likes of V-Mart.