Timely decisions, defined strategy, and a futuristic approach, clubbed with an understanding of consumers’ needs as also the ability to create one, are the qualities that mark out the best retail companies.
From a nondescript 50 square feet shop to a chain of stores carpeting roughly 1,735,000 square feet, Vishal Retail India Limited (VRIL) is a company that probably overturned every stone to create milestones in the business of retail. Ramchandra Agarwal, managing director, VRIL, in an exclusive talk with Ranjan Kaplish, shares his strategic mantras.
Q: Where do the roots of VRIL lie, and how did this journey of mapping retail space start?
A: I had no prior experience of retailing, but always wanted to do a business of my own. My first try in the business of retail was through Vishal Garments, set up in 1985 as a mere 50 square feet store in Kolkata. That was a time when consumers’ focus was shifting towards readymade garments. The concept was simple; I picked up lots of seconds from branded stores, along with not-so-popular labels from different parts of the country. As I bought bulk and paid in cash, I had the advantage of higher profit margins, providing an edge over competitors.
Since I offered more variety and that too on lower prices, Vishal Garments got going. I even started putting up sales at various locations, wherever I thought a potential buyer could be.
Later, we opened our biggest store at Tiger Cinema Hall, Kolkata. The store became very popular for its ambience, variety and value-for-money proposition; this was reiterated by the profits it made.
Q: From apparel to consumer goods, and now speciality stores perhaps… What encouraged you to diversify into other segments of retailing?
A: I made it a point to closely monitor the business of retail across the globe. I studied the Wal-Mart concept, thoroughly peeped into the Carrefour system, and then tried placing these in the context of the Indian mindset.
We believed that we understood the needs of mass consumers in India, and tried bringing all his requirements under one roof. From apparel business we diversified to the mega mart format and brought everything from apparel to consumer durables, to grocery and even sports and fitness equipment, under the Vishal brand name.
The policy of value-for-money was retained. Every product under Vishal brand name was picked, liked and trusted. The confidence in our pricing policy and product quality prompted us to expand.
A business that was started with internal accruals finally went public. Our growth from grassroots was known, and people invested with confidence, resulting in a successful IPO.
Q: VRIL is a public listed company, which means it is not only you who’s concerned about performance. So many unknown investors too keep a close eye… With foreign giants entering the business, how do you see the competition in future? Any planned programme to tackle the expected challenge?
A: Clichéd though it sounds, competition is good. When we entered the business, there was competition of a different sort at a different level. Vishal emerged as a successful brand. Now that we are much more organised and established, we have different obstacles to deal with, and that is what will help us grow.
However many companies enter the business, we will always have the first-mover advantage. The retail space that we have acquired and the loyalty of consumes that we have build over the years, will be our advantage. We are also in the process of strengthening our private labels portfolio. Our apparel and home appliances labels are very popular, and in the recent past we have launched water, flour and toilet-cleaner labels also.
Secondly, irrespective of who enters the business of retail, they all will have to source from the same vendors and will have to retail the same products, at the same operating costs. We collect our products from leading manufacturers in India and abroad. So, if the product quality and the operating costs remain same, even we can pose threat to the giants in the business of retail.
Q: Is it possible that a private label becomes bigger than the brand under which it is nurtured? For instance, can a private label for shirts from Vishal become a bigger brand than Vishal, and move out of Vishal store to retail through its own exclusive outlets?
A: This should be the focus actually. Strengthening of labels means making them so strong that they have their own appeal and generate customer loyalty. This is what we are focusing on. We hope our labels, be it an apparel label or a grocery, become so popular that we open speciality or exclusive stores to retail only those labels. As the volume of sales increases, a private label will become a national brand, too.
Q: You mentioned speciality stores. Are they also on the cards?
A: Yes, our next target is speciality stores; soon, you will see us opening exclusive stores for various segments including apparel, grocery and durables. We are working on the concept. We might open only jewellery or footwear stores, or they can be a combo of footwear and apparel, or a lifestyle store as a whole.
Q: Expansions require space. The real-estate rates are rising, is it a deterrent to growth?
A: Right now, we are buying all our property and also working on a lease model. Real-estate rates are not hampering the growth as such; it is a parallel industry that is growing with the retail industry. If the need arises, we might launch our own real-estate company that will benefit us in acquiring good retail space and also be an additional revenue generator.
Q: There’s a lot of potential in our traditional handicraft. Every state has at least one famous craft. Have you ever thought of branding any of the traditional or ethnic product? This can benefit the craftsmen, who’ll have a buyer, and also Vishal as it gets a unique product to retail under its banner.
A: This sounds like an interesting idea. We can think of this as a unique SKU in the store. We had not thought about it, but certainly will look into the potential of retailing handicrafts. We can actually use our chain of stores for promotion of our heritage and also make business out of them.
Q: What does VRIL have in reserve for its consumers in the near future?
A: We are expanding and our aim is to have about one crore square feet of retail space by 2010. Also coming up are the speciality stores, and later we will launch a hypermarket, offering value for money
Also in queue is Vishal Minimart, which will be the small format of a hypermarket. It will be spread across 10,000-20,000 square feet, and will retail all product categories.
