Feature

End of discount stores

They started off with a bang and traded in large volumes but discount stores across the country have folded up

It’s a sunny afternoon in south Mumbai and the monsoon is still a few weeks away. A group of teenagers walk into a store that promises some very fancy deals. They spend a few minutes looking around and do not seem too impressed by what is on offer. After taking a quick look, the teens decide to look elsewhere. By the sound of their conversation, it is clear that one of them is looking for a pair of jeans and thinks the range is quite limited at this outlet. Incidentally, the store — The Loot — was once a big name in the business of selling discounted brands.

Today, this is its only outlet across the country. At its peak, The Loot had 150 outlets spread over 60 cities that stocked a gamut of brands across categories such as apparels, shoes and accessories. While a fraction of this merchandise is still available at the brand’s sole outlet, stock is extremely limited and most of the brands look hopelessly out of sync with what is likely to sell today. The disappointment of the teenagers, then, is not hard to comprehend.

A little while later, the beleaguered entity’s managing director Jay Gupta climbs down from his office a floor above the showroom and has a quiet conversation with one of the salesmen. In early May, SBI decided to auction The Loot’s property in Mahim, a suburb at the edge of western Mumbai, for a reserve price of ₹7.5 crore after the company failed to pay its dues of ₹43 crore, not including interest. Understandably, Gupta is annoyed. He snaps when asked why his company’s strategy failed and refuses to answer questions, saying his lawyers are looking into the issue. Gupta’s is not the only case of failure in the discount store space in India — many others have fallen by the wayside as well.

The reasons behind this are many, starting with the inability to maintain a strict cost structure, limited supplies from large brands and a faulty understanding of the business. Consequently, margins suffered while costs continued to zoom out of control, largely on the back of high rentals. By 2009, the game was up for players such as Promart and Vishal Retail. The lucky ones managed to sell out, while some — like Gupta — have been less fortunate. Others — like Megamart — have chosen to reposition themselves. But the results are yet to be seen.

Things fall apart

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