RC Agarwal, a small retailer who bet his fortune on a retail chain only to be stuck in a maze of expansion shocks and policy glitches, is trying to start anew after selling off the Megamart division of Vishal Retail, the supermarket chain he founded, to private equity firms Texas Pacific Group and Chennai-based Shriram Group.
This time, he has traded his value-friendly multi-product chain for an apparel store, V2, which will use a low-cost strategy to foray into remote areas to avoid high real estate rental costs that are critical for the retail business. Megamart had run into serious problems after its rental bills shot up in face of competition from the likes of Future group’s Big Bazaar and the Aditya Birla group’s More chains.
“Our strategy is to be present in the best location matching our target group. We are closing all deals where real estate prices are reasonable,” said Ram Chandra Agarwal, chief managing director, Vishal Retail.
With 10 V2 stores, the retail firm is eyeing Tier II and Tier III cities for expansion. The company is looking at rentals to the tune of Rs5-60 per square feet.
“Our long-term vision will unfold in phases and only when V2 takes off. Once these stores show profit we’ll be in a position to say that the strategy is working. That is when the next phase kicks off,” said Agarwal.
At present, the company is funding its expansion plans through internal accruals and the sale of properties.
Source : Hindustan Times