Mr. Ramchandra Agarwal, the Chairman & Managing Director of V2 Retail Store, shares an inspiring story on how a retailer can grow his business using a variety of strategies, tips, and tricks.
Journey
Journey of Mr. Ramchandra Agarwal
– Mr. Ramchandra Agarwal was born in Kolkata. While pursuing his graduation, he started a job (instead of joining his father’s business).
– After one year, he left the job as he understood that he won’t be able to fulfill his dreams with this job.
– He took a 50 square feet shop on rent and started his business. He has done various types of businesses in this shop like Xerox machine, selling Coco Cola, etc. but all these businesses were flopped.
– At that time, customers have started moving from fabric to readymade garments. So, Mr. Ramchandra Agarwal started the business of garments, which proved to be a super-duper hit business for him.
– He earned Rs. 1 crore in one year in this 50 square feet shop. This is a world record according to per square feet.
– Later, he also started exhibitions cum sale in his shop. He used to buy products at discount from different brands and then put these products on sale.
– Customers get value for money on these products as they get a shirt in Rs. 80-100.
– This business of Mr. Ramchandra Agarwal worked pretty well.
– Gradually, he opened a big shop in 1996-97. In 2001, he came to Delhi and became the first player of bringing value retail.
– V2 retail has made great contributions to bring Modern Retail to India.
Key Success Factors for an Entrepreneur
When Mr. Ramchandra Agarwal initiated his entrepreneurial journey, he lacked knowledge of essential business strategies due to his early entry into the entrepreneurial world. Despite this, he managed to achieve success by focusing on specific aspects. Initially, his attention was directed towards two key factors: team building and the strategy of acquiring products at a low cost and selling them at an affordable price. These two elements were pivotal in his early success.
While conventional wisdom suggests that entrepreneurs should prioritize various aspects such as team building, discipline, proper planning, technology integration, review mechanisms, and cash flow management, Mr. Agarwal’s experience demonstrates that success can be achieved by focusing intensely on a selected few factors, rather than attempting to excel in all areas simultaneously.
Details of Retail Business to make Your Business Successful
In the following points, Mr. Ramchandra Agarwal provides comprehensive insights into the strategies and best practices for stabilizing and effectively managing retail operations to ensure the success of your business.
Product
When running a retail business, it is crucial to carefully consider the products you offer. Understanding your clientele’s needs and preferences is essential. This involves identifying the types of fashion items that are in demand, as well as the price points that your customers are willing to pay.
In addition to this, it’s important to analyze which colors and sizes of products are selling well. Furthermore, understanding whether print designs or check designs are more popular can provide valuable insights.
To gain a deeper understanding of these factors, assortment planning is essential. This involves conducting demand forecasting by analyzing trends over the last 2-5 years and carrying out market surveys. By doing so, you can gain valuable insights into which products are selling well and adjust your inventory accordingly.
Product value
When we talk about product value, we are referring to the ability to offer greater benefits to customers in comparison to competitors. In order to enhance the value provided to customers, it is essential to focus on the following key aspects:
1. Managing and minimizing retailing costs to ensure efficiency and cost-effectiveness.
2. Offering products to customers at competitive prices, even if it means operating on lower profit margins. This approach can help attract and retain customers by providing them with affordability and value for their money.
Cost Control
V2 retail stores have managed to keep their costing at an impressive Rs. 165-170 per square feet, significantly lower than the Rs. 300 per square feet costing of other big retailers. This is due to several factors:
– V2 retail stores strategically choose locations in high streets with lower rental rates.
– They keep their staffing costs low by hiring employees at lower salaries and maintaining a smaller workforce.
– The stores save on operational costs by minimizing electricity and transportation expenses.
– They also benefit from purchasing inventory at lower prices by making cash payments.
These cost-saving measures enable V2 retail store to offer products at competitive prices, selling a product priced at Rs. 1 for Rs. 1.60, while other retailers worldwide typically sell the same product for at least Rs. 2-5
This success has contributed to the rising trend of value retailing.
Technology
In the retail industry, implementing an Enterprise Resource Planning (ERP) system can greatly benefit your business by streamlining various operations. An ERP system can assist in managing inventory, planning expenses, forecasting sales, handling finance, and optimizing merchandising. Additionally, integrating technologies such as Artificial Intelligence and demand forecasting can further enhance the efficiency and accuracy of these processes.
Don’t be intimidated by the prospect of adopting ERP, Artificial Intelligence, or demand forecasting technologies. Each of these tools is ultimately rooted in logic and can be harnessed to overcome challenges and drive success in your retail business. By utilizing logic and embracing these technological solutions, you can navigate and conquer the obstacles that come your way.
Zero working capital debt based expansion”: A Strength of V2 retail
The strength of V2 Retail lies in their approach of zero working capital debt-based expansion. This means that if the assured return on investment (ROI) in the company is 25%-30% and the debt is available at 10%, then taking on debt is not a bad idea. However, it becomes detrimental when a company expands solely based on debt, accumulating huge debts without a strong business model to support the expansion. Therefore, it’s crucial to focus on developing a strong and indispensable business model before considering expansion.
Retailers often make the mistake of achieving success with 3-5 stores and then rapidly opening more stores. In the rush to expand, they take on significant debt, only to realize that the new stores are not yielding sufficient returns. This results in a debt trap and works against the business. The key takeaway here is to be cautious about overexpansion and to ensure that expansion is supported by a solid business model and a clear path to sustainable returns.
Review Mechanism
The review mechanism for small and large businesses differs significantly. Let’s take a look at the specific processes for each.
Small Businesses:
For a small business, the owner typically spends the entire day at the shop. At the end of the day, they conduct a review by checking the following:
– The opening balance for the day
– The initial inventory and the amount sold throughout the day
– The total sales made
– The day’s earnings
This straightforward review process provides small business owners with a clear understanding of their daily operations and financial performance.
Big businesses:
For large corporations, having an effective Management Information System (MIS) is crucial for overseeing various business operations such as inventory management, sales tracking, purchasing, and expenditure analysis. The MIS enables business owners to make informed decisions by providing comprehensive insights into the organization’s performance and processes. Therefore, it is essential for big businesses to invest in a robust MIS system to effectively manage and review their operations and drive strategic decision-making.
The review mechanism in big businesses involves a structured process to ensure that the business operations are running smoothly and efficiently. This process typically begins with the Management Information System (MIS) providing comprehensive reports on various aspects of the business to the heads of departments. These reports contain key information such as sales performance, inventory levels, profit margins, and purchasing activities.
Upon receiving these reports, the heads of the departments carefully review the data and identify specific areas that require attention or improvement. For instance, they may note that sales are decreasing or that inventory levels are increasing beyond optimal levels. These observations are then used to formulate actionable points that require intervention.
Subsequently, the heads of the departments engage in discussions with the business owner or senior management to deliberate on the identified issues and devise appropriate strategies to address them. This collaborative process is instrumental in making informed decisions and rectifying any existing loopholes in the business operations.
The MIS serves as a critical tool in providing a comprehensive overview of the business’s status across different parameters, including inventory levels, profitability, sales performance, and procurement activities. By highlighting problem areas and potential inefficiencies, the MIS enables proactive identification of issues and facilitates the implementation of corrective measures to ensure the smooth functioning of the business.
For example, if the MIS indicates that the inventory levels are higher than optimal, the management can strategize on how to reduce the surplus inventory. Similarly, if the MIS reveals that purchasing activities are lagging, the relevant departments can take steps to streamline and expedite the procurement process.
Retail Store Operations
In the realm of retail store operations, it is crucial for a retailer to possess a comprehensive understanding of their shop’s layout and fixtures. Let’s consider a hypothetical scenario in which a shop spans 10,000 square feet and houses 1,000 fixtures. In this context, each individual fixture can be likened to a standalone shop, thereby creating an environment with 1,000 distinct “shops” within the larger retail space.
For effective management, the retailer must delve into the specifics of each fixture. This involves determining the type of stock housed in each fixture, gauging the monthly output of the fixture, and deciding what items should be prominently displayed within it. Addressing these questions for all 1,000 fixtures is imperative for operational success.
A successful retailer is one who possesses a deep understanding of the items to be displayed in each fixture and the monthly output associated with each one. This knowledge empowers the retailer to make informed decisions about product placement and seasonal displays, ultimately contributing to significant business growth.
This approach is often referred to as per square feet transaction, per square feet profitability, or per square feet inventory turnover, highlighting the emphasis placed on maximizing the potential of every square foot of retail space.
Understanding the Supply Chain Process
The supply chain is a critical aspect of any business operation, involving the intricate process of making a specific product available at the right time and place. Let’s take a closer look at the supply chain process using the example of sourcing 20 varieties of round neck T-shirts for a shop in Patna in March.
When managing the supply chain for this scenario, it’s essential to consider the following key points:
– Determining the optimal time to place the order for the T-shirts
– Estimating the manufacturing lead time for the T-shirts
– Planning for the arrival of the order at the warehouse
– Scheduling the dispatch of the order from the warehouse
– Ensuring timely delivery of the order to the shop in Patna
– Verifying successful receipt of the order at the shop in Patna
It’s important to recognize that the supply chain is a pivotal component of a successful business operation. Effective supply chain planning and continuous monitoring are essential to ensure the timely delivery of products. Regularly evaluating the efficiency and effectiveness of the supply chain process is crucial to avoid delays, excessive inventory, and increased costs.
Please remember to consider the following points:
– Analyze market trends and customer preferences to decide which products to display and sell at specific times.
– Explore opportunities to enhance the value proposition for your customers, such as offering personalized services or unique product bundles.
– Implement cost-control measures to ensure that you can offer competitive prices to your customers while maintaining healthy profit margins.
– Leverage technology solutions to streamline business operations, such as inventory management systems, point-of-sale software, and customer relationship management tools.
– Develop a robust business model that accounts for potential challenges and opportunities in your industry.
– Approach business expansion thoughtfully, considering factors such as market demand, operational capacity, and financial feasibility.
– Avoid taking on excessive debt that could strain your financial resources and hinder your ability to grow sustainably.
– Establish a regular review process to monitor and evaluate your business processes, allowing for continuous improvement and adaptation to changing market conditions.