Bernstein has reinforced its stance that Trent Ltd. and Avenue Supermarts Ltd's DMart continue to set benchmarks across operational metrics in India's organised retail sector. Vishal Mega Mart and V2 Retail have entered the competition with notable performances, the note said.
Vishal Mega Mart's initial public offer will hit the streets on Wednesday and its promoter Samayat Services LLP is offering shares worth up to Rs 8,000 crore. Bernstein shares how these players stack up against retail giants Trent and DMart.
Both Vishal Mega Mart and V2 Retail are leveraging efficient cost structures by catering to the next-30% of the income pyramid. They also have high private label mixes to cater to the value-focused segment. However, the two also face challenges in scaling profitability and navigating intensifying competition in key markets.
The report notes three key metrics used to evaluate operational performance: gross margin per square foot, inventory turnover, and cost efficiency. It identifies Trent and DMart as leaders across these parameters.
The analysis also notes the shift among value retailers towards omnichannel strategies inspired by the success of platforms like Meesho, though online sales currently contribute less than 1% of total revenue.
According to the report, Vishal Mega Mart and V2 Retail demonstrated noteworthy performance among peers, leveraging distinct strategies to cater to the next-30% of the income pyramid.
Vishal Mega Mart is a multi-category retailer targeting cost-conscious consumers and benefits from a high private label mix of 72% and an efficient cost structure.
However, challenges such as low revenue density and gross margins impact its profitability. The retailer's presence is growing in DMart's stronghold regions, including Maharashtra and Gujarat, which means competition is intensifying on the field.
V2 Retail has positioned itself as a pure-play apparel retailer with a reported average selling price of approximately Rs 300. It commands the highest gross margin and revenue per square foot among its peers, driven by its extensive Stock Keeping Unit range and strong customer pull.
VMart and Style Baazar, meanwhile, are navigating other hurdles. VMart, with a significant focus on Tier 2 and 3 cities, is working to integrate post-Covid growth initiatives and acquisitions such as Unlimited and LimeRoad, which have strained profitability in recent years. Style Baazar, concentrated in East India, has been transitioning to a private label-heavy portfolio but faces cost pressures due to high rentals and inventory challenges.
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