In a bid to compete with Zudio, Yousta recently opened its first store in Hyderabad’s Sarath City Mall. Both Yousta and Zudio are tapping into the growing trend of affordable fashion and lifestyle products. But ask any consumer about their ownership, and not many would be able to answer that their parent companies are Reliance Retail and Tata Group, respectively.
Zudio was launched in 2016 but it has been making waves only in the past couple of years, thanks to its aggressive expansion and unique pricing model. The brand is cashing in on a space called value retail, which reflects the changing consumer landscape in the country. With more consumers —especially youth and those in tier II and III cities—looking for affordable yet stylish options, the demand for value retail is on the rise.
At the FY23 annual general meeting, Trent (the Tata Group company that operates Zudio) said it would open 200 Zudio stores in FY24, much higher than analyst estimates. In FY 23, it opened 117 stores, taking the store count to 352, including store in stores. The average price of Zudio’s products is Rs 500.
Similarly, most consumers would be aware of Pantaloons, but they may not know that Aditya Birla Fashion and Retail (ABFRL), the company that retails the fashion brand, runs another chain of fashion stores —StyleUp.
StyleUp typically operates large-format stores, sized between 6,000 sq ft and 8,000 sq ft, selling western and ethnic apparel and accessories in the price range of Rs 500-Rs 600.
Let’s look at some figures to support the growing trend. According to a report by Technopak, the value retail market in India is expected to grow at a CAGR of 15% to reach $280 billion by 2025. A study by NielsenIQ found that the value of the retail market in India is dominated by unorganised players, which account for over 80% of the market share. However, the organised value retail market is growing rapidly and is expected to account for over 20% of the market share by 2025.
The success story of Zudio has forced major retailers to relook their business strategies. Reliance Retail’s Yousta has contemporary technology-enabled store layouts offering high fashion at affordable prices. All products, for instance, are priced below Rs 999, with a majority of them priced below Rs 499. Yousta’s outlets boast several tech-touch points, including QR-enabled screens for information sharing, self-checkout counters and charging stations, announced the launch of its youth-focused fashion retail format, a press release from the company said.
Recently, Shoppers Stop, the country’s oldest department store chain, also launched a new affordable retail format called Intune to lure consumers opting for low-priced garments and accessories, the firm said in an investor presentation. Two stores in Hyderabad and one in Dombivali near Mumbai have been launched, as per the company, with three more to be opened shortly. Shoppers Stop’s Intune offers clothes, accessories, etc, in the Rs 500 bracket.
Meanwhile, Max Fashion, the value fashion brand of the Dubai-based Landmark Group, is also said to set up 100 stores in the next one year, taking its outlet count to close to 600, as per reports.
Commenting on the factors that are spurring the rise of value retailing in India, Rajat Wahi, partner, Deloitte India, said: “The disposable incomes of Indian consumers have been rising steadily in recent years, thanks to factors such as economic growth, increasing urbanisation, and rising employment opportunities. This has led to an increase in demand for affordable yet stylish fashion options.”
The popularity of online shopping has also been a major driver of the value retail market. “Online retailers offer a wide range of products at competitive prices, which make them a popular choice for budget-conscious consumers,” said Wahi, adding: “The retail industry in India is becoming increasingly competitive, as more and more retailers (Indian and global brands) enter the market. This has forced retailers to offer more competitive prices and better value to customers to stay ahead of the competition. The growth of tier-II and tier-III cities is also creating new opportunities for value retailers.”
With the tremendous success of Zudio, value retail has come on the top of the agenda for fashion retailers. “Value retail is growing on the back of a large young population, 24/7 social media exposure, increase in income levels in tier- II and tier-III towns and a shift from unorganised to the organised segment,” said Shiv Kumar Sharma of retail consulting firm Kanvic Consulting.
Incidentally, Trent operates Zudio in a market where it already runs a similar format, Westside— its flagship retail business. So, how does the strategy work and doesn’t it lead to market cannibalisation? This question may hold true for ABFRL’s StyleUp too, as it operates Pantaloons alongside. Explaining the rationale, Sharma of Kanvic said: “Retailers are operating two different brands under the value format to serve different customer segments with a highly targeted value proposition. For example, the target segments for Zudio and Westside are very different. Even their price points have limited overlap.”
However, not all value retail businesses have been sustainable. In 2017, Tata Group company Titan consolidated its jewellery portfolio by merging its affordable brand GoldPlus with larger brand Tanishq. GoldPlus, which was hailed as the ‘Nano’ of the jewellery market, was launched in 2005 aimed at small towns in south India so that it could cater better to the more traditional needs of customers in those areas, it had said in a BSE filing then. It had 30 stores under the brand spread across Andhra Pradesh, Telangana, Tamil Nadu, Karnataka and Maharashtra.
However, “in the last decade, the tastes and aspirations of consumers in some of these cities have evolved and Titan’s main brand Tanishq has kept pace with that evolution,” the company added, explaining its decision to merge the two.
Wahi of Deloitte India said some of the reasons why value retail businesses have had to shut shop in India in general include competition, non-profitability, changing consumer preferences and poor execution. “The preferences of consumers are constantly changing, and value retail businesses may not be able to keep up with these changes due to supply chain and sourcing constraints. This can lead to a decline in sales, and the business may be forced to shut down. The success of a value retail business depends on a number of factors, such as the right location, the right products, frequent changes in assortment and range, and the right marketing strategy. If the business is not executed well, it may be forced to shut down,” he added.