Discount stores : in & out

Discount Store: Any store that sells 60-70% of its merchandise at 15-25% or more below the MRP, all through the year qualifies to be a discount store.Analysts say that discount retailing space will peak at Rs 30,000 crore by 2012.

Lets us understand why this growth and what is it in and out as a business Structure.

Starting off in 1991 as Charlie Creations, Koutons grew from strength to strength in the last two decades and spread its retail presence across the country. With its USP as “Value for Money and High on Fashion”

Since Koutons is a manufacturer-cum-retailer they make the merchandise available form the unsold stock and by selecting surplus fabrics and transforming them into merchandise.It shifted from manufacturer-distributor- retailer to manufacturer-retailer through its EBOs. It operates through franchisee route. The franchisee arrangement of the company is based on 3 models –COCO (company owned & company leased), COFO (Company owned & franchisee operated) & FOFO (franchisee owned & franchisee operated).Aggressive expansion plans resulted in blockage of funds.In the year 2009 they had a high level of inventory which. It was also the year that Koutons was under huge debt.While the business model is that of a manufacturer-retailer the inventory management has not been efficient.

•Future plans include opening of 300 new stores including 200 family concept stores by the end of 2012.
•Plans to add leather footwear and other accessories.
•Expanding stand alone stores in Middle East & China by the year end.
It has been observed that while multi branded discount stores are highly dependent other private labels the EBOs are highly self sufficient.Discount stores are quite recession proof.A win – win situation for three parties.

According to me it should continue providing good quality and variety in merchandise, controlling the issue of all sizes are not available, launch more of private labels, aggressive expansion plans should be put on hold.