Created a comparison of all electronic retailers:
a) AVL has one of the highest gross margins, which is attributed to volume discounts from OEMs, premium pricing & better product mix
b) Better EBITDA margins are led by lower rentals and labor cost. Rental costs are lower than other retailers, as they are located more in Tier 2/3 cities and prefer opening stores in high streets rather than in malls.
c) Efficient store economics and higher margins translate to a superior RoCE and RoE for the company
d) Store Sales/sqft/day remain low at ~INR 97, compared to peer’s ~INR 115-125, due to aggressive store expansion over the last 3 years. Similarly, inventory days are inflated at 70 days (vs ~40 days in FY18-20)
e) The avg. store size of AVL is 50% smaller compared to its peers, as most of the stores are located in Tier 2/3 cities.
f) AVL generates ~40% of revenues through the financing option (low compared to listed competitor, Electronic Mart, which generates 55%+ of its sales via financing). A store typically pays ~25% of the financing cost (subvention cost).
g) While the giants Reliance Digital & Croma have store only in Tier 1/2 cities like Patna, Gaya, Jamshedpur, Ranchi, etc. both are now focusing on increasing presence in Tier 2/3 cities & have recently opened stores in smaller cities like Vijayapura, Vadodara, Solapur etc. Reliance/Croma aims to add 3,000+/100+ stores each year, majorly in these smaller cities
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