Prateek Apparels Pvt. Ltd, which opened a discount mall, its first, in Bangalore last month, has ambitious plans in discount retailing and will set up 50 more malls across the country by 2010 at a cost of Rs400-500 crore. Prateek, a manufacturer of apparels for several domestic brands, plans to sell shares within the next two years to fund its investment.
“Discount chains are a natural extension of the growth of organized retail,” says Harminder Sahni, managing director, Technopak Consultants, a New Delhi-based consulting firm. “As organized retailers grow, they will have fresh products every season and can dispose old material,” he adds.
Coupon Malls will have a Coupon Store, which will sell the previous season’s apparel and home furnishings sourced from 140 brands at discounts of 20-50%; a My Dollar store that will sell discounted toys, cosmetics and groceries; and a food court.
Others have had the same idea. K. Raheja Corp.’s Inorbit Malls India Pvt. Ltd and West Pioneer Properties Ltd, the mall development firm of Amit Jatia—the western India franchisee for McDonalds—also plan such chains.
“We thought of this as a solution for retailers,” says Prateek managing director Pradeep Agarwal. “We can help them get rid of old stock.”
Prateek has said its malls will come up on the outskirts of metros and smaller cities. After Bangalore, Coupon plans to open in Raipur, then Indore and Bhubaneswar. West Pioneer plans to open discount malls in Kalyan, Aurangabad, and Nashik.
“Value malls are bound to do better, particularly in smaller cities, because they appeal to a broader section of people and rentals are usually cheaper,” says Jay Gupta, managing director of The Loot India Pvt. Ltd, a 25-store discount chain which will have outlets in West Pioneer’s Kalyan mall.
Not everyone is convinced. According to Hemant Kalbag, the head of the retail practice at consulting firm A.T. Kearney, the Indian market may not be ready for discount formats yet. “In a discount format, margins could be half the regular stores; this is made up by efficiencies in the back-end. We know that there is demand for this, but I am not sure the infrastructure is there to sustain this.”
Apart from growing its Coupon chain, Prateek will also bring a German children’s wear company, Kanz, and a European lingerie company to India this year, setting up dedicated stores for them.