By Vipin Agnihotri
Everyone in India is talking of ‘Retail’ being the next sunrise sector but there is a real danger that one mega player is approaching sunset unless, it alters course. Yes you guess it right! We are talking about the Vishal Mega Mart, who has captured imaginations of wannabe entrepreneurs.
At this moment of time, Vishal Retail boasts of 53 showrooms in 41 cities splattered across 18 states on the Indian map. Generally speaking, company is more into the tier II and tier III cities. You may ask: Why? There are two reasons behind this strategy. First and foremost, the lower real estate and infrastructural costs in these cities. Secondly, the virgin markets in such places make the markets conducive for players like Vishal Mega Mart.
In terms of statistics, company recorded a turnover of Rs 6.03 billion during financial year 2006-07 with an aggressive CAGR of 86 percent. What’s more, company profit figures during the same period also shot past the Rs 250 million mark. You may think that these figures are absolutely stunning but when you compare these figures with the prime competitor of Vishal you will realize why there is tough road ahead for Vishal Retail.
Pantaloons Retail last year managed a sales turnover figure of Rs 19.0 billion, clearly outshining Vishal. If experts are to be believed, down market and low profile cloud surrounding Vishal stores is the main reason behind all this. Furthermore, with Indian middle class going truly urban, Vishal may just soon question its present strategy of risking too much on its value for money offering.
In my opinion, the young adults of India are ambitious and have money to spend on their lifestyle. It is worth mentioning in this regard that they are also brand conscious and internationally aware of what their counterparts in the west are wearing. This is a danger sign for Vishal.
With names such as Reliance, Bharti-Walmart and Bombay Dyeing eyeing the fertile Indian retail space, the going will only get tougher for Vishal. Creating sub-brands can do the trick for Vishal. In addition, Vishal should diversify into the food retailing business, which is clearly making waves around the country.
Making matter worse for Vishal is the politicians of India who just because of some votes are opposing the entry of big business houses in the retail sector. It is worthwhile pointing that UP government has already banned Reliance Fresh from the state and some other states are also thinking to do the same. Clearly, tough time ahead for Vishal Mega Mart and other big business houses who are interested in investing in the retail sector of India.
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