Videocon Industries promoted Next Retail plans to move out of the metros and re-locate its stores in tier 2 and 3 cities. At present, the six-year-old retail chain has about 600 stores out of which 85 are located in the metros. This year, the company curtailed expansion. There were also indications of a stake sale in the company to a foreign partner.
K.S Raman, Director, Next Retail said, “It may be easier to create a brand image in retail in the metros, but these markets are always costlier. Today, we are in the process of re-locating to smaller cities and towns. The promoters of the company are definitely looking at tier 2 and 3 towns with population between 50,000 and 1 lakh. There is potential in smaller towns and the gestation period is faster, giving better chances to attain profitability.”
Besides, in smaller towns there is greater acceptability of home-grown brands such as Videocon and Onida. “Consumers in smaller towns have an emotional connect with indigenous brands such as Videocon and there is a demand for home-grown brands and we would be pushing such brands in these markets,” he adds.
Out of the 85 stores in metros, 60 are company-owned while the rest are franchises. Raman said, “We are also in the process of evaluating whether we should have stores at malls or shift to high streets as footfalls have been falling. We would rather have standalone stores than be present in malls where the general business has been going down.”
With durables getting lesser margins (estimated between 10 and 12 per cent) than grocery or apparel, most retailers have been struggling in this category.
Next Retail has also tapped into the online space such as other durable retailers, but sales have been negligible.
“Online sales have a long way to go and are not adequate at the moment,” he said.
While Next Retail did not increase the number of stores, Videocon Group’s other retail format Digiworld continued its expansion spree. Digiworld sells only Videocon brands and is poised to increase its stores from the current 400 to 1,000 stores this year and will continue to have a thriving presence in the metro markets. Positioned as a ‘smart neighbourhood’ electronics store, Digiworld is expected to be the new growth engine in retail for the Videocon Group in the future.