V-Mart needs to be the most aspirational value retailer of Bharat: Lalit Agarwal

“We see normal economics coming back to the stores which is in terms of the sales per square feet, the cost incurred per square feet and the EBTIDA per square feet. So we will have our numbers back in the coming year and we will open another 50 to 60 stores next year. That is how we are planning 16-17% square feet addition,” says Lalit Agarwal, Founder & MD, V-Mart Retail.



The data shows there is a rural slowdown; FMCG companies are almost crying for help. They are saying margins are under pressure and there’s no demand. The rural economy is going through a churn. Are you also experiencing what the other companies are experiencing because of demand and rural slowdown?
There is a pain in the system. We all know what has gone through in the last 24 months and the smaller or the lower middle class consumers have suffered the most and they have not been able to regain the lost income that they had in the past. So there is a sign of saving. There’s a little more insecurity as people hear about war and inflation. The inflation is also eating into their wallet. So there is a concern right now but as of March, we saw some businesses coming back. For the first time, we saw the pre-Covid levels getting crossed but still those are inflation-led growth and not quantitative growth. We hope to see some more quantum growth coming in next year,

Calendar year or next financial year?
In the coming financial year.

Urban retailers are saying that demand has come back. The rural retailer is saying the demand never suffered. So what are you talking about a comeback? Is there truth in it?
There was never a complete lockdown for a longer period in rural India the way it was in urban retail as malls were closed. So overall business was down and as we have reported in the last two-three-four quarters, business was not normal because consumption was not normal, lifestyle was not normal. People were not going to colleges, schools and there were no holidays or outings. There were a lot of lifestyle issues which are now coming back. People celebrated Holi for the first time in the last two years.

That is how consumption will also come back. Smaller towns largely depend on festivals and events for which they consume. They do not have enough extra income to consume any time they please.

Diwali is far off. What is the next big festival to boost demand?
We have Eid in the coming month which is once again going to get celebrated after two years. April, which is Ramadan month, is going to be very good and then there will be weddings. These are also aspirational drivers. People want to look good when they want to attend weddings. That that is the culture of India and that is what rural or semi-urban is all about.

There is also mehangai or inflation. How is that being managed and how is that impacting demand?
We had not witnessed any hike in the prices of raw material, commodity prices of our product which is apparel. This is the first time that raw cotton price increased in such a big way. Overall we have also taken a 15-17% price rise in the last two years or one-and-a-half years.

Once again, discussion is going on about GST prices because below Rs 1000, GST rates are 5%. Once again the government has deferred it but they will once again bring it back to 12% which means another inflation. All these things are definitely going to eat away some of the demand and there will be some losses. It is the quantitative demand which is supposed to come back but that will come back only when the customer is able to earn extra money which they are spending right now.

What about your store economics? What about new store openings?
We have opened stores in this financial year as well and we opened almost seven to eight stores in this particular quarter. We have our plans in place. We are going ahead with our plans and these stores are not for short term but for long term. We need to be the most aspirational value retailer of Bharat. That, we believe, is a long term story.

So we will continue with our operations, the stores are doing well now. We see normal economics coming back to the stores which is in terms of the sales per square feet, the cost incurred per square feet and the EBTIDA per square feet. So we will have our numbers back in the coming year and we will open another 50 to 60 stores next year. That is how we are planning 16-17% square feet addition.

Where will we see V-Mart in the next five years as opposed to where it is right now?
I think we have got a big plan to penetrate Bharat. We are nearest to the district and the villages so we would now move to the block levels and tehsil and become denser in the bigger cities and bigger towns wherever there is a higher amount of population.We plan to do at least three times of what we are doing in the next five years.

We believe we are just scratching the surface because Bharat is too deep. We are talking of right now of a $2000 per capita income which is supposed to go up and whenever it goes above $2,700 or $2,600 a tsunami of consumption is going to come in and most of it is going to become aspirational consumption.

What is the role of e-commerce here? You have now launched on Amazon as well as Myntra. How much of your sales percentage would come from ecommerce platforms?
We are almost nearing 1.5-2% of our digital sales and that is how we term ourselves. We are still not a great proposition for online because our average selling price (ASP) is very low. We operate at around Rs 350 average selling price which at ecommerce is not so good. We do try to change the model a bit. We have integrated all our stores from where the deliveries to the nearest customer happens and that is how we are able to serve those customers digitally at a very low price.

So right now we are at 2%. We would definitely target 5-10%. That is how we want to be. We launched on Myntra last month and in Amazon three, four months back. We are yet to have a good runway there. We have a great plan on our dotcom business as well because we need to be a very strong retailer and not just be an offline retailer.