economics

Most Profitable India Store Taking Winning Small-Town Bet Online

  • V-Mart also plans to add 40 stores each year in small cities
  • V-Mart’s return on equity is the highest among its India peers

V-Mart Retail Ltd., India’s most-profitable department store chain, is planning to sell apparel and other goods online in a bid to attract youth in villages and small towns.

The retail store, which runs medium-sized stores that sell clothes, accessories, footwear and everyday staples, is also planning to add 30 to 40 stores every year to its current 177 stores, Samir Misra, the Harvard University-educated chief operating officer of the retailer, said in an interview. About 80 percent of V-Mart’s stores are located in cities with a population below one million.

“We are in the process of an omni-channel strategy,” Misra said, referring to integrating both online and physical shops. “We will be finalizing our e-commerce strategy and omni-channel model in an year.”

Tractor makers to department store chains are wooing residents of India’s villages, where about 70 percent of the nation’s population resides, on expectations that normal monsoon rains for a third-straight year will increase farm output and boost disposable income. V-Mart doesn’t plan to expand in larger cities because of the demand from smaller cities, said Misra.

To read about Bloomberg Economics view on growth in rural India, click here

“Metro market is also big indeed. But we have no intention to head there at this point of time," Misra said. “We would continue to proliferate stores” in smaller towns, he said.

Return on equity, a measure of how well shareholder money is reinvested, was 25 percent at the company, the highest among its peers, while another measure of profitability, return on capital was at 24 percent in the year ended March, according to data compiled by Bloomberg. The company’s shares have risen 60 percent this year and closed last week at 2,392.75 rupees.

India has very few apparel retailers and brands who have rightly understood middle class consumers, Wazir Advisors, a consultancy said in a June 2017 report. Two-thirds of consumers reside in smaller cities, which are emerging as attractive apparel markets.

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