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May, 01 2019

GO FOR LIFESTYLE VARIETY RETAIL

The organised variety retail market in India is dominated by Japanese, Korean and Chinese brands. In fact, the business model of variety retail is perfectly suited for the franchise investors.

If there is one big thing that has undergone a tremen­dous change in India over the past three to four years, it is consumption of variety retail. This has also been due to the advent of Japanese and Korean brands like Miniso, 2358, and Mumuso. With no direct threat from local players and strategically low-priced, the brands are rapidly attracting millennials looking for something affordable, fun and quirky. On an average, these variety retailers generate about Rs 15,000-20,000 sales on a daily basis, while on weekends the sales double.

At a 2358 store in the posh Indiranagar locality in Bengaluru, it seems like a section of college students are eagerly waiting for the clock to strike 11 am. As soon as the store opens and is ready for customers, they run to the racks. Thirty minutes into the store opening, a group of another 7-8 student barge inside, looking for a ‘special gift’ for a friend celebrating a birthday. From bags, shoes to cutlery, cosmetics and even tech accessories, they round off the store in one go.

“Most of our mornings and early evenings are busy when students are not in college, while there is a lean office crowd that visits the store during lunch hours. On a daily basis, we have around 50-80 customer walk-ins at the store and during weekends it doubles up. The average billing varies from Rs 500-2,000,” says the 2358 store owner, not willing to be named.

MARKET DYNAMICS

Commenting on the growing popularity of organised players in this segment, Karthikeyan V, CEO, 2358 India, says, “There is huge scope for variety retail brands in India as the market is getting more organised. The brands are succeeding because the product quality is high, pricing is low, and the product categories are diverse.” He rightly observes that the geographical lines have blurred and the designs that are available in international markets are easily available in Indian stores too, which increases the popularity quotient.

Further, Karthikeyan highlights that over the next 4-5 years the organised players will substantially grow and thrive, which makes a good investment opportunity. At a time when online penetration is high in Tier II and III cities, Karthikeyan maintains that for now e-commerce sales is less than 10% of the overall sales and online channels don’t pose a threat to variety retail.

In fact, variety retail brands like Miniso and Mumuso have big plans to expand in the Indian market and the expansion is not just limited to the Metro cities.

Young Liu, Chief Business Development Officer, Miniso India, says, “Our aim is to have 800 stores by 2020 in India and the brand has a huge potential not just in metros but also in tier II and tier III cities.” After having launched over 70 stores in India, Miniso is considering to bring Mini Home and Nome, its premium brands, in India.

Meanwhile, South Korean brand Mumuso plans to add more than 300 outlets in India by mid-2022 with an aim to have a business turnover of Rs 1,000 crore.

THE BUSINESS MODEL

The investment required to open a 1,000 sq. feet variety retail store in a metro city would be around Rs 70-90 lakhs. This investment would include land rentals, inventory worth Rs 30 lakhs, interior and fixtures cost of Rs 15 lakhs, and miscellaneous expenses. The monthly operational costs of the store approximately work out to Rs 4 lakhs, which includes Rs 2 lakhs in rent for a metro city, six staff with total salaries of Rs 1 lakh, and other bills including electricity, sanitary and water.

 Juxtaposed against these expenses, a store in any metro city can generate revenues of as much as Rs 20 lakhs per month. The profit margins vary between 30-40 % depending on the product category. Further, while stores in metro cities will have high sales volumes, stores in Tier I and II cities will have high profitability due to reasons like lesser rentals and expenditures.

FRANCHISING PUSH

For Korean brand Beccos, which opened its first store in New Delhi recently, the country holds a lot of potential. By the end of next year, the brand plans to open about 200 stores across the India. “We are planning to open 50 stores in India by mid-2019. These stores will be a mix of company-owned and franchised stores. We are targeting an investment of over Rs 100 crores and planned revenues of Rs 200-250 crores by the end of FY 2019-20,” informs Dabin Wang, CEO, Beccos.

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