The Ahmedabad based textiles major Arvind Ltd has rebranded its existing chain Megamart as a new value department chain branded 'Unlimited' and plans to have 125 stores under the new format in five years. The existing chain Megamart has been struggling to shed its 'discount format' image.
J Suresh, managing director and CEO of Arvind Lifestyle said that they realised that even though they have sort of changed their proposition, still people associate the name (Megamart) with discounts.
Megamart started as a discount outlet to liquidate old stocks in 1995. Arvind transitioned the Rs 600-crore Megamart chain into a value retailer three years ago and started optimising it to improve profitability. As a result, its store count has come down from 216 in in FY12 to about 130 at present, but it could not really get rid of the discount format tag.
Arvindâ€™s new value department chain branded 'Unlimited' will sell not only premium brands such as Arrow and US Polo but will focus more on mass-priced franchise brands such as Geoffrey Beene and Cherokee.
The stores will mostly stock full priced merchandise with an added focus on women and kids wear. Space for women and kids will nearly double at their new stores compared to earlier which was mainly focussed on men's range.
According to Devangshu Dutta, chief executive at retail consulting firm Third Eyesight , the whole discounting trend is owned by ecommerce sites now. For any physical retailer if there is an opportunity to use real estate cost, then it's better to look at something with better prices and better margins.
Arvind now plans to halt expansion of smaller Megamart stores as they earn just 1.5% EBIDTA margins and have been a drag in sales too with 2% growth last fiscal.
Instead, the company will only open large format stores that operate with 8% margin. The existing Unlimited stores contributed nearly Rs 300 crore in annual revenues.
In India, the value department store chain format is less crowded with only three large players â€” Tatas' Westside, Reliance Trendz and Landmark Group's Max â€” currently operating in the segment.
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