RETAIL MANAGEMENT

DISCOUNT STORES

BY

POORNIMA.V

STALIN.M

2nd year MBA ‘B’

A discount store is a type of department store, which sells products at prices lower than those
asked by traditional retail outlets. Most discount department stores offer a wide assortment of
goods; others specialize in such merchandise as jewelry, electronic equipment, or electrical
appliances. Discount stores are not variety stores, which sell goods at a single price-point or
multiples thereof (£1, $2, etc.).

Discount stores differ from variety stores in that they sell many name-brand products, and
because of the wide price range of the items offered. Discount stores are more popular in the
United States than other countries.

Currently Wal-Mart, the largest retailer in the world, operates more than 1,300 discount stores in
the U.S. Target and Kmart are Wal-Mart's top competitors.

During the period from the 1950s to the late 1980s, discount stores were more popular than the
average supermarket or department store in the United States. There were hundreds of discount
stores in operation, with their most successful period occurring during the mid-1960s in the U.S.
with discount store chains such as Kmart, Ames, E. J. Korvette, Fisher's Big Wheel, Zayre,
Howard Brothers Discount Stores, Kuhn's-Big K (sold to Wal-Mart in 1981), TG&Y and
Woolco (closed in 1983, part sold to Wal-Mart) among others.[citation needed]

Wal-Mart, Kmart, and Target all opened their first locations in 1962. Other retail companies
branched out into the discount store business around that time as adjuncts to their older store
concepts. As examples, Woolworth opened a Woolco chain; Montgomery Ward opened
Jefferson Ward; Chicago-based Jewel launched Turn Style; and Central Indiana-based L. S.
Ayres created Ayr-Way. J.C. Penney opened discount stores called Treasure Island or The
Treasury, and Atlanta-based Rich's owned discount stores called Richway. During the late 1970s
and the 1980s, these chains typically were either shut down or sold to a larger competitor. Kmart
and Target themselves are examples of adjuncts, although their growth prompted their respective
parent companies to abandon their older concepts (the S.S. Kresge five and dime store
disappeared, while the Dayton-Hudson Corporation eventually divested itself of its department
store holdings and renamed itself Target Corporation).[citation needed]

In the United States, discount stores had 42% of overall retail market share in 1987; in 2010,
they had 87%.[1]

Many of the major discounters now operate "supercenters", which add a full-service grocery
store to the traditional format. The Meijer chain in the Midwest consists entirely of supercenters,
while Wal-Mart and Target have focused on the format as of the 1990s as a key to their
continued growth. Although discount stores and department stores have different retailing goals
and different markets, a recent development in retailing is the "discount department store", such
as Sears Essentials, which is a combination of the Kmart and Sears formats, following the
companies' merger as Sears Holdings Corporation.

Many of the world's largest hypermarkets are also discount stores. But not all of the world's
largest discount store chains are hypermarkets. Discount stores are defined by their pricing
model, which is substantially lower than their competitors. The prices of most of the
merchandise in a discount store are below manufacturer's suggested retail prices.

Six of the fourteen discount store chains that are the largest in the world are located in Europe.
The U.S. has only three retail chains that are strictly discount chains on the current world's
largest list. Most of the largest discount chains in the U.S. are classified as hypermarkets.

As organized retailing takes off in India, so do discount chains

Some 45% of branded products are estimated to be sold at discounted rates; retailers typically
offer 25-80% discount

Bangalore: Mayank C., a 27-year-old engineer, loves shopping and confesses to indulging in
retail “therapy” every fortnight.

Nothing unusual really, except that Mayank never steps into the upmarket outlets near his home.
Instead, he travels the 10km it takes to get to a discount mall.

“Why should I spend Rs3,800 for the same Reebok shoes that I can get for Rs2,400 here?” he
reasons.

Turns out, Mayank is not alone among India’s young shoppers looking for famous brands at
reduced prices.

Expansion mode: The LOOT plans to invest Rs100 crore by

March 2009 to expand its footprint across the country. The group
currently has 30 stores and plans to raise the number to 100
within a year.

With half of the country’s population under 25 and two-thirds

under 35, the knowledge and aspiration for international brands is
on the rise as is the quest for bargains. Even as branded retail
itself is starting to take off, there is already a surge in branded
discount outlets in India.

A year ago, there were some three prominent discount retailers in

the country, but in the last few months, there have been four new
entrants and, they are all on an expansion spree.

Pantaloon Retail (India) Ltd’s Brand Factory, Arvind Mills Ltd’s

Megamart, Vishal Megamart, the discount store chain of Vishal
Retail Ltd, and Provogue (India) Ltd’s Promart have been the most prominent players in the
field.
A number of relatively newer players, such as The Loot (India) Pvt. Ltd, which operates The
LOOT outlets, Krishna Group’s The Grab Store and Prateek Apparels Pvt. Ltd’s Coupon have
started in the last few months.

Some 45% of branded products are estimated to be sold at discounted rates.

Brand discount retailers typically offer 25-80% discount on products through the year and insist
they do not sell counterfeits or factory seconds, or products typically rejected by stores.

They claim they are able to buy at reduced prices as they purchase odd sizes, end-of-season
surplus items and, often, make payments in cash to the manufacturer or distributor. The products
generally include formal and semi formal as well as casual clothing, footwear and accessories.

The most visible Indian and international fashion brands at discount outlets include Reebok,
Nike, Adidas, Van Heusen, Arrow, Levis, Lee, Pepe Jeans, Allen Solly, Reid and Taylor,
Wrangler, Puma and Louis Phillip.

The size of the country’s retail industry is estimated to be Rs12 trillion, of which about Rs55,000
crore is contributed by the organized sector.

Pantaloon Retail, which currently has six Brand Factory stores, plans to have 40-45 stores in the
two years. Megamart, which has 91 stores, plans to have 200-250 stores in four-five years, by
investing Rs400-500 crore. It also plans to have 30-35 large format stores with a size of about
50,000 sq. ft. The Grab Store currently has one store and plans to have 50 stores by March next
year. The company’s marketing head Snigdha Kar says each store would have an investment of
Rs90 lakh.

The LOOT plans to invest Rs100 crore by March 2009 to expand its footprint across the country.
It currently has 30 stores and plans to raise the number to 100 within a year. Prateek Apparels,
which has two stores, plans to set up 50 more discount malls by 2010 at a cost of Rs400-500
crore, according to Sudeep Menon, director, Prateek Lifestyle.

“As the retail industry is booming, everyone wants to follow the precedent of a successful
format,” says Jay Gupta, managing director, The LOOT.

Brandhouse Retails Ltd, the brand-specific retail unit of apparel company S. Kumars Nationwide
Ltd, is also planning to enter multi-brand, large-format, discount outlets. Meanwhile, the country
will also see its first chain of discount malls, to be called Stadia Supercenters, soon.

Retailers say although the profit margins of a discount retail format are much less than a full
priced retail store, the higher sales volumes in a discounted format compensate the cash flow.
The profit margin in a discount retail chain is 6-10% says Ganesh Raman, marketing head,
Megamart. He refused to divulge the profit margin of full priced retail stores.

The discount retailers, however, agree that success would not come easily to them.
“So many people are trying to avail the opportunity, but the success of a retailer lies in his ability
and capacity for sourcing, manufacturing and designing of the apparel,” says Menon.

But discount retailers are already facing stiff competition from exclusive factory outlets,
seconds’ stores and seasonal sales at regular stores.

“When it comes to positioning, discount retailers do not pose a threat to us. People who are
fashion-conscious and want to buy products when they are in vogue will anyway come to us. But
yes, they are a threat when it comes to value share and wallet share. If a customer gets the same
product at lesser price, it is obvious that they will go for cheaper options,” says Govind
Shrikhande, chief executive officer of Shopper’s Stop, a multi-brand retailer.

Shoppers such as Shruti Sharma have tried discount retailers, but find the lack of a full range—
especially of sizes—a problem. “Small size fits me,” she says. “But I can only find large and
extra large-sized clothes here. The shoes here are available at 40% discount, but none is in size
less than foot size six.”

As a result, discount stores won’t necessarily eat into market share of other retailers, says
Purnendu Kumar, associate vice-president, KSA Technopak, a management consulting firm.
“Discount outlets are what we can call as working capital solution for brands owners,” he says.
“The discount stores sell products, which are mostly leftovers, or at least a season old. The
customers get to buy them at a cheaper rate, so where does the question of cannibalism come
from.”

Kumar predicts discount retailing will grow at the 25-30% and would become more specialized
in future.

LOOT

Jay gupta – md and ceo

Loot has chain of hotels, banks, retail stores

It is a multi branded outlet.

Fisrst loot started in the year 2004 in Mumbai.

It is multi brand and multi locational discount chain offering customers a wide range of
products in apparel , footwear and accessories for men and women and discounts rangin
between 25% to 60% throughout the year on the top national and international brands to
meet the aspirations of the common man at an affordable price.
Megamart

Megamart, a pioneer in the apparel value-retail segment, is today the largest value-retail
company in India.

Megamart, a pioneer in the apparel value-retail segment, is today the largest value-retail chain in
India. By offering customers complete value-for-money through best of deals throughout the
year with some of the top international and national apparel brands all at fabulous deals. The
chain is spread over 60 cities with around 160 stores across the country giving you a guarantee of
mega brands and mega savings.
Setup in 1996, Megamart is a venture of the prestigious Arvind Ltd. In spite of being a value
retail chain, Megamart boasts of providing an excellent shopping experience. The brand believes
that 'no frills' ought not to come at the cost of great ambience, customer-friendly store layouts
and well designed interiors.

Megamart arrived at a time when multi-brand discount outlets were still an unheard of
phenomenon and changed the rules of the retailing in India. By keeping overheads and other
costs to a bare minimum, it was able to pass on maximum savings to customers. Today,
Megamart is the largest player in this segment.

Megamart operates in 2 formats – Megamart stores that occupy around 2000 – 4000 sq. ft. and
BIG Megamart stores that occupy 30,000 – 60,000 sq. ft.

BIG Megamart stores have on offer more than 200 of the top international & national brands
with fabulous offers throughout the year. Add to this some of the best deals around and you have
a shopping experience that is truly unparalleled.

Megamart store network is growing at a rapid pace by adding 5000 Sq. ft. every week.