Size doesn’t matter – Business Model does

You have already read in our coverage last week how various leading retailers in India stack up against each other.

We say that it is not the size that matters in doing retail business in India but its is the business model itself. For instance, Trent, which is largely a retailer of private label apparels (estimated at 70-75% of sales) generates very high gross margins, both in terms of % sales and Rs/ sf. Likewise, Shoppers Stop’s higher gross margins over Pantaloon are largely due to higher share of apparels and other lifestyle products. Apparels contribute 57% of Shoppers sales, while it is 40% in Pantaloon. Lifestyle segment is 30% of Pantaloon’s sales cf. 100% for Shopper’s.

Spencer’s Retail for which FMCG and food and grocery forms 70% of sales has the lowest gross margins, both in terms of % sales and Rs/ sf. Now this explains the huge loss with Aditya Birla’s More retail and Reliance Fresh.

You can also read about individual retail businesses analysis,
Discount Model of Retail Business
India Retail Business Analysis – 1 and India Retail Business Analysis – 2