How to Start a Retail Business By Mr. Ramchandra Agarwal
Overview
Mr. Ramchandra Agarwal, the Chairman & Managing Director of V2 Retail Store, explains how a retailer can grow his business by using different strategies, tips, and tricks.
Learnings
1. 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 photocopying, selling Coca Cola, etc. but all these businesses flopped.
- At that time, customers had 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 that set a world record.
- Later, he also started exhibitions cum sales in his shop. He used to buy products at discounts from different brands and then put these products on sale.
- Customers got value for money on these products as they could buy a shirt for Rs. 80-100.
- Gradually, he opened a big shop in 1996-97. In 2001, he came to Delhi and became the first player in bringing value to retail.
- V2 retail has made great contributions to bring Modern Retail to India.
2. Points of Success for an Entrepreneur
To be successful in any business, an entrepreneur should focus on the following points:
- Team Building
- Discipline
- Proper planning
- Technology
- Review Mechanism
- Cash Flow management
Mr. Ramchandra Agarwal focused on the following two things:
- Team building
- Buying the product at low cost and selling it at low cost
3. Details of Retail Business to Make Your Business Successful
Mr. Ramchandra Agarwal has explained how to stabilize and manage your retail operations in the following points.
i. Product
What you should sell?
In the retail business, you need to identify the following things:
- Which type of fashion does your customer want?
- What price point does your customer want?
- Which color sells more?
- What size sells more?
- Whether print design or check design sells more?
To determine the answers to the above questions, you need to do assortment planning by:
- Analyzing the last 2-5 years market trend
- Conducting market survey
ii. Product value
Product value means how you can provide more value to your customers as compared to your competitors.
To provide more value to your customers, you need to:
- Control your retailing costs
- Provide product to your customers at low margins
iii. Cost Control
Other big retailers have the cost of Rs. 300 per square feet while the cost of a V2 retail store is Rs. 165-170 per square feet because:
- V2 retail stores take shops in high street at cheaper rates.
- They hire low-paid staff.
- They hire less number of people.
- They save electricity and transportation expenses.
Thus, the V2 retail store can reduce their cost of retailing and sell a product of Rs. 1 in Rs. 1.60 while other retailers (worldwide) sell Rs. 1 product in at least Rs. 2-5.
iv. Technology
In the retail business, you can install an ERP system to manage all your retail operations. ERP will help you in:
- Inventory management
- Inventory planning
- Expense planning
- Sales forecasting
- Finance
- Merchandising
Don't get afraid of ERP, Artificial Intelligence, Demand forecasting, Technology, etc. Each of these things is all about logic.
If you use logic, then you can overcome all the hurdles.
v. "Zero working capital debt-based expansion": A Strength of V2 retail
- If your assured ROI in the company is 25%-30% and debt is at 10%, then debt is not bad.
- But, when you go for expansion based on huge debts, it will be harmful to your business.
- So, till the time you have a good ROI and strong business model, then you should not go for expansion.
Thus, you should:
- Focus on your business model
- Make a strong business model
- Make an indispensable business model
Mistakes done by retailers:
- If a retailer gets success in 3-5 stores, then he starts opening stores very rapidly.
- For opening stores, they start taking debt and get stuck in a debt trap because new shops are not providing that much return.
- So, everything starts getting against the business.
vi. Review Mechanism
Review mechanisms of small and big businesses are different.
a. Small businesses: A small businessman sits in his shop for the whole day and before closing the shop he checks:
- What was his opening balance today?
- How much inventory he had in the morning and how much he has sold?
- How much sell he has done?
- How much money he had earned today?
b. Big businesses: If you have a large business, then to manage and review the different business operations like inventory, sales, purchase, expenditure, etc. you will require an MIS.
So, a big businessman should use MIS system to make good business decisions.
Process of review mechanism in big businesses:
- MIS provides a crisp report of the business operations to the heads of departments.
- The heads of the department can review the reports and make the points on which action needs to be taken. These action points can be like sales are decreasing, inventory is increasing, etc.
- The head of the departments can discuss these pointers with the business owner and take the right decision. It also helps in removing all the loopholes.
For example:
- MIS tells you that your inventory is more, so, you can decide how you can dilute it.
- MIS tells you that your purchase is less, so, you can decide how you can make your purchase on time.
vii. Retail Store Operations
If you have a shop of 10,000 square feet with 1,000 fixtures, then a retailer should consider one fixture as one shop, and thus, you have 1,000 shops.
In every fixture, a retailer needs to determine:
- Which type of stock is in the fixture?
- What is the monthly output of the fixture?
- What should be displayed in the fixture?
All the above questions need to be answered for all the 1,000 fixtures.
The retailer, who knows the items to be displayed in every fixture and the monthly output of every fixture in his shop, is successful.
As he knows which product should be displayed in which fixture and at what time of the year, so, he can plan accordingly and can grow his business multiple times.
This is also called per square feet transaction, per square feet profitability, or square feet inventory turnover.
viii. Supply Chain
A supply chain means making a particular product available at a particular time and a particular place.
For example:
You require 20 varieties of round neck T-shirts in March in your shop at Patna. So, you need to determine the following things:
- When you should place the order for the T-shirts?
- When you will get the manufactured T-shirts?
- When the order will reach the warehouse?
- When the order will be dispatched from the warehouse?
- When does the order should reach the shop in Patna?
- Does the order reaches the shop in Patna or not?
To sum up:
- The supply chain is very crucial for every business.
- You should plan your supply chain effectively and monitor it timely and plan actions regularly.
- You should check whether your supply chain is working as per your planning or not.
It is important to make your supply chain efficient otherwise you will not receive the product on time and your cost will be increased.
Key Learnings
- Decide which product you should display and sell at a particular time
- Control your cost to provide products to your customers at cheaper prices
- Take the help of technology to manage your business operations
- Develop a strong business model
- Don’t take huge debts that you won’t be able to payback
- Develop a review mechanism in place to monitor your business processes regularly