Facing by stiff competition from online shoppers and high-profile brick and mortar chains, Shoppers Stop Ltd (SSL), the country’s oldest department store chain plans to infuse a fresh lease of life by reinventing its operations and increasing profitability. Rajiv Suri, CEO of the retail chain has five core business priorities: to engage with its over five million customers who account for 75 per cent of sales; provide a delightful customer experience through the personal shopper service; improve the share of private labels to 17 per cent in the next three years; strengthen the company’s omni-channel play; and accelerate the beauty business.
Expanding to new segments
However, achieving these goals will not be easy for Suri as the K Raheja Corp-promoted premium department store chain, has over the years, spread itself thin by investing in newer entities and expanded across segments to apparel and non-apparel across 38 cities with an operating space of 4.4 million sq. ft.
However, not all these expansions have fructified. While its core apparel business performed well, widening losses and high debt levels at grocery retailer Hypercity Retail (India) drove down growth. The retail chain rejigged its business in FY18 and divested stakes in Hypercity, family entertainment centre chain Timezone Entertainment, and Nuance Group India, a dutyfree airport retailing joint venture with Swiss major Nuance Group.
Strengthening private labels
Another strategy that Suri plans to adopt is to strengthen private labels. He feels retailers selling largely private labels at low prices can attract a certain section of customers. But he cautions against SSL going overboard with the plan lest it dilutes its identity, for it has always sold multiple brands. He suggests that 15-18 per cent of private labels and another 5-10 per cent of exclusive brands would be a great combination to create that distinction and remain on the top.
Suri has a three-pronged strategy for his private labels business to make SSL improve fabrics, collections, and designs for existing private brands; add more celebrity brands; and rope in international brands as exclusive. The company is already making strategic investments to strengthen the private labels team, the design studio, sourcing, product mix, pricing, and brand positioning.
Omni-channel retail to lead growth
SSL also wants to use e-commerce to promote its private brands. Experts from the company believe the next horizon of growth will come from a mix of offline and online retail led by omni-channel retailers. While offline retail is appealing to a younger, lower income demographic and is comparatively more profitable, Edelweiss Securities in its FY19 second quarter results update note predicted the tie-up with Amazon was likely to accelerate Shoppers Stop’s omni-channel growth plan at a CAGR of 100 per cent over the next two-three years.
SSL plans to open four to six departmental stores every year for the next three years. Suri is also working on a revival plan for loss-making Crossword Bookstores, a wholly owned subsidiary of SSL. To maintain the momentum amid skyrocketing real estate prices, SSL is operating through a revenue-sharing arrangement with mall developers under which they pay a minimum guarantee amount as rent or a percentage of total revenue, whichever is higher, especially in Tier I, II cities like Lucknow and Ranchi. India’s first large retailer was also among the first to try new things such as entering the groceries or the airport retailing businesses. However, the successive management of the e-tail companies was not able to adapt and grow the business. Whether it succeeds this time remains to be seen.