Banking on higher returns

01 Feb 2010

The 'Regional Retailers Conclave' at the India Fashion Forum '10 (IFF '10) was quite an invigorating and insightful session. Successful retail entrepreneurs from various parts of the country congregated at a single platform to discuss the learnings from success stories of franchisee and independent retail formats.

Amid discussions on the better profitability between regional retail stores and multi-brand outlets (MBOs), the audience cheered to the thought put forward by Sandeep Jalan, a regional retail entrepreneur, "We (regional retailers) monitor our resources and revenues ourselves. However, the MBOs understand it through the management."

Samir Sahni owner of Ritu Wears (Delhi-store), Darpan Kapoor of Kapsons (Chandigarh-store) and Gurpreet Singh of G&B (Delhi-store) along with other panelists opined that the slowdown did not affect the regional retailers but big brands. The panelists agreed that during the economic downturn many regional retailers reduced their costs, which in turn fetched them with higher returns. However, MBOs did face the music.

There was a mixed reaction amongst the panelists on being defined as an 'unorganised' retailers. Some felt that they are more organised than the MBOs as they understand the customer's pulse by building up relation with them. Also, they are at an advantage of managing a better connect with the customers since they are very regional in their nature.

The panelists pointed that they do not face tough competition from their larger counterparts while some were of the view that malls are the markets of future. They agreed to the fact that the malls have better facilities and ambiance to serve the new generation of customers and give them a high-class shopping experience.

Vijay Jain, owner of Big Shop, Ranchi expressed that over a period of time government's attitude has also changed towards them. "Earlier, the banks never used to lend us money. We were not discussed in budgets and government did not have a priority for us. But now the situation has improved considerably," stated Jain.

The panelists did agree to the fact that as the number of stores increases in a particular region, cannibalisation too increases in the same proportion. However, retailers follow the rent-to-revenue model for each store, which balances the revenue generation on an average basis.

Some of the retailers have also launched their captive brands. They agreed that captive brands apparently fetch higher returns than foreign brands. So, they often launch collective discount schemes in the store to attract customers to the indigenous brands.

-- Pragya Gupta, Mumbai Bureau