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Consumer preferences have evolved over time and keeping up with them has been the key ingredient which ensures that one would ride the growth chariot. With increased awareness of fashion trends and greater social media penetration, the retail ecosystem is leveraging the increase in demand among the consumers. Highlighting one such trend, Akash Agarwal, Whole-Time Director, V2 Retail pointed out that fast and affordable fashion has changed the retail landscape and led to an increase in the frequency of purchases that a consumer makes during a calendar year.
In an exclusive interview with BW Businessworld, Agarwal shed light on various subjects ranging from the current state of the retail industry to company’s expansion plans along with the rising participation from the non-metro cities. He also shared insights on the growth prospects of V2 Retail.
Excerpts-
How would you describe the current state of India’s retail Industry, taking into consideration the recent ecommerce wave that has taken over?
-So, I would say ecommerce has penetrated more in higher average selling price points rather than in our space. So in the value fashion space, I don't think there is any big, large ecommerce player who is selling at an average selling price of about Rs 300. Because of logistics, delivery charges, RTO charges, cash collection charges, it is not financially feasible for any ecommerce player to be selling cheaper products online and be profitable. So, ecommerce is still very under penetrated in this segment. People who will be able to do ecommerce in this segment will be people who adopt omni-channel and who use their store inventory to do the deliveries.
What is the update or progress on the omni-channel strategy front and when is it expected to be operational?
-Okay, since it's technology and we don't have a very large in-house technology team, so we are dependent on third party developers. So, it is taking us slightly longer than expected and we will pilot from Delhi NCR to start with but I think it's going to go to fourth quarter. So it should be around February or March that we will be ready with the technology needed for this.
How has the shopping behaviour of the consumers changed over the years and how has their choices and preferences evolved over time?
-One biggest change that we have seen is that consumers are more aware of the latest fashion trends now. That may be because of social media penetration or following their social media influencers. Earlier, you could get away with selling what was not in current fashion but now they want up to date fashion, what the celebrities are wearing or what they are seeing their favourite celebrities wear in movies. Second, I would say now the frequency of purchases have increased because of fast fashion. Earlier, our customers used to buy every five and a half months but now they are buying every four months and for a little premium brand, it is even much quicker, people are buying every two months. So, I think because of fast fashion and affordable fashion, people are buying more number of garments in a calendar year.
What has been the response during this festive season and what were the footfalls you were expecting?
-So, in the first six months of the year, our same store sales growth (SSSG) was almost 34 per cent and we saw footfalls increase by almost 30 per cent. We have seen that trend continue through Durga Puja and hopefully till Diwali also. So, we have seen the consumers coming back to the market and we have seen a slight increase in APV, which means each customer is spending more. This festive season has been at par with our expectations and we are happy and that's why we are keeping a positive outlook in the future as well.
Which segments or categories have driven the growth this season in terms of sales or any other parameters?
-The highest growing category for us has been women's ethnic wear. kurtis, kurti sets have been the highest growing category for us. Men's denims and men's casual trousers has been the second best category for us.
How do you see the rising stature of non-metro cities (tier-2 and 3) in the shopping ecosystem and has there been an increase in their participation?
-Yeah, most of our stores are in tier 2, so whatever numbers I am talking about reflects the demand in tier 2 and tier 3 because we have only 10 to 12 stores in tier 1. All the numbers, all the stores, all the footfalls are in tier 2, tier 3. There is a lot of spending power in these tiers and that is why we are focusing on tier 2 and tier 3 cities in future expansion also.
Since you plan to open 50 new stores this year. What has been the strategy around that and how are you ensuring that the profitability remains the same and the operational efficiency does not get compromised?
-So yes, we have already opened 27 stores this year and the plan is to open around 25-30 more. We are opening most of these stores in the existing clusters, so it really gives us synergy in terms of marketing cost and a brand presence. People already know about the brand V2. People already can relate with the brand, so it makes it easier, we can spend less and still expect a lot of footfalls. So that has been our strategy and that is why, for example, now in Bhubaneswar, we have five stores. In Jamshedpur, we have four stores and in Patna we have six stores. So, we are trying to use the density in the existing clusters where we do well. That has been a very successful approach and has given us good results.
How are you strengthening your inventory processes to ensure that the budget and space limitations are aligned with the supply needs of the market? How are you actually integrating them into your business model?
-The biggest metric for us is per square feet EBITDA, so we calculate that for each and every category that we keep in our store. For example, Kurti sets, last year, took only 3 per cent of the space and it was giving us a 50 per cent higher EBITDA per square feet than the other categories. So, we increased the space from 3 per cent to 5 per cent for kurti sets because it was giving us a higher profitability. So we do this for each and every category and we do this for each and every attribute of an article. For example, if cream color is giving me a higher per square feet EBITDA, then we increase the number of options in Cream color, so it takes up more space and hence helps us increase sales and profitability.
On the revenue and growth front, has the performance been better as compared to the last year?
-Last year, we grew at 47 per cent in the third quarter, so obviously the pace has changed now, we won't be able to beat the growth percentage of last year because you know the per square feet moved from 800 to almost 1100. So, this year our target for the next six months of the year was 20 per cent SSSG. So, even with that we are getting a very good profitability number, so that is the number we are chasing but till now, like even for the first six months of the year, our target was 20 per cent SSSG but we beat that and we got 34 per cent. So hopefully that continues through the rest of the year.
