shoppers stop

14
s. Frisking ards at the n the past , Andreas successor, over for a en head of .isees at an id Punjab, ranchising his change -fiting, say' . Sourcing l had come -re by 1999 :lropped to Iy. Indeed, fit with the andas were -r company vever, Nanz ply did not estions) permarket/ country like first mover CAS E 6 SHOPPER'S STOP-BUILDING A RETAIL BRAND 'To be a global retailer in India and maintain No. 1 position in the Indian market in departmental store category.' This is the vision with which the foundation of Shopper's Stop was laid. Shopper's Stop has grown from one store in 1991 to twenty four stores across India in 2007. It has managed to establish itself as a household name in the markets it chooses to operate in and is committed to retailing superior quality products and services and above all, creating a complete shopping experience. With an unparalleled assortment of the leading international and national brands in clothing for men, women and kids; accessories, fragrances, cosmetics, footwear; home furnishing and decor products, the stores aim to provide shoppers a truly international shopping environment. It is a term synonymous with 'lifestyle' retailing, a co-ordinated product offering and a superior shopping experience. This perhaps is the reason that it is the only retailer from India to become a member of the Intercontinental Group of Departmental Stores (IGDS),along with 29 other retailers across the world, including Selfridges (UK), Karstadt (Germany), Takashimaya (Japan) and Lamcy Plaza (Dubai) to name a few. Creating a strong retail brand has been achieved through the synthesis of various elements within the organisation. Providing the right product mix, adopting the right systems and processes and providing the customer with a unique shopping experience has helped create a strong Indian retail brand. In the year 2008, the company embarked on a repositioning strategy in the light of the changing retail environment in the country. This case study examines the journey of this strong retail brand over a time frame spanning seventeen years. COMPANY HISTORY Shoppers' Stop was founded in 1991 by the K. Raheja Group of companies, one of the largest players in the country in the business of real estate development and hotels. From one store occupying 2,800 sq.ft and retailing only men's wear, it has grown to a chain of 24 stores offering Men's wear, Women's wear, Children's wear, Home products, Accessories, Cosmetics, Perfumes and Jewellery. Besides, the stores also offer a music corner (Planet M), a book corner (Crossword)and a coffee shop. , Shopper's Stop Ltd. has today metamorphosed from being a chain of retail stores to emerging as a Fashion & Lifestyle destination, which now includes retail concepts such as bookstores, cafes and high-end lifestyle merchandise for the growing affluent middle class in India. The company's flagship business of department stores is manifest in Shoppers' Stop. A pioneer of organised retail in India, Shoppers' Stop today, is the country's biggest department store chain. It houses a host of international and domestic brands, across categories such as apparel, accessories, cosmetics, home & kitchenware, as also its own private brands.

Upload: arpit-srivastava

Post on 15-Nov-2014

1.014 views

Category:

Documents


4 download

TRANSCRIPT

Page 1: Shoppers Stop

s. Friskingards at then the past, Andreassuccessor,over for aen head of

.isees at anid Punjab,ranchisinghis change-fiting, say'. Sourcingl had come-re by 1999:lropped toIy. Indeed,

fit with theandas were-r companyvever, Nanzply did not

estions)permarket/

country like

first mover

CAS E 6

SHOPPER'S STOP-BUILDING A RETAIL BRAND

'To be a global retailer in India and maintain No. 1 position in the Indian market indepartmental store category.' This is the vision with which the foundation of Shopper's Stop waslaid. Shopper's Stop has grown from one store in 1991 to twenty four stores across India in 2007.It has managed to establish itself as a household name in the markets it chooses to operate in and iscommitted to retailing superior quality products and services and above all, creating a completeshopping experience.

With an unparalleled assortment of the leading international and national brands in clothingfor men, women and kids; accessories, fragrances, cosmetics, footwear; home furnishing and decorproducts, the stores aim to provide shoppers a truly international shopping environment. It is aterm synonymous with 'lifestyle' retailing, a co-ordinated product offering and a superior shoppingexperience. This perhaps is the reason that it is the only retailer from India to become a member ofthe Intercontinental Group of Departmental Stores (IGDS),along with 29 other retailers across theworld, including Selfridges (UK), Karstadt (Germany), Takashimaya (Japan) and Lamcy Plaza(Dubai) to name a few.

Creating a strong retail brand has been achieved through the synthesis of various elementswithin the organisation. Providing the right product mix, adopting the right systems and processesand providing the customer with a unique shopping experience has helped create a strong Indianretail brand. In the year 2008, the company embarked on a repositioning strategy in the light of thechanging retail environment in the country.

This case study examines the journey of this strong retail brand over a time frame spanningseventeen years.

COMPANY HISTORYShoppers' Stop was founded in 1991 by the K. Raheja Group of companies, one of the largestplayers in the country in the business of real estate development and hotels. From one storeoccupying 2,800 sq.ft and retailing only men's wear, it has grown to a chain of 24 stores offeringMen's wear, Women's wear, Children's wear, Home products, Accessories, Cosmetics, Perfumes andJewellery. Besides, the stores also offer a music corner (Planet M), a book corner (Crossword)and acoffee shop. ,

Shopper's Stop Ltd. has today metamorphosed from being a chain of retail stores to emergingas a Fashion & Lifestyle destination, which now includes retail concepts such as bookstores, cafesand high-end lifestylemerchandise for the growing affluent middle class in India. The company'sflagship business of department stores is manifest in Shoppers' Stop. A pioneer of organised retailin India, Shoppers' Stop today, is the country's biggest department store chain. It houses a host ofinternational and domestic brands, across categories such as apparel, accessories, cosmetics, home& kitchenware, as also its own private brands.

Page 2: Shoppers Stop

550 Retailing Management

FORMATS IN OPERATION

Shoppers' Stop has launched Home Stop, a first-of-its-kind premium home concept store offeringa wide range of products and some of the most reputed national and international brands. It is aone-stop-shop for all home needs ranging from home decor to furniture & recliners, bathaccessories to bedroom furnishings, mattresses to draperies, carpets, kitchen accessories andappliances to modular kitchens & health equipment all under one roof. The store is positioned as acomplete home solution store which offers designs and style, quality and convenience. A typicalHome Stop store is spread over 30,000 square feet. Home Stop houses some of the most reputednational and international brands under one roof. For example, high end crockery from Corelle,premium steel utensils from Magpie and Artinox, exclusive down feather pillows and fine beddingfrom Paradies, Germany, bed linen and furnishing from Stop, Ivy, Fern, Portico, Maspar, BombayDyeing and home appliances from Phillips and Morphy Richards, bathroom linen from Welspun.

Shoppers' Stop is the franchisee for the global retailer of baby products, Mothercare, who is theleading specialist retailer for the mother-to-be & the parents of young children, offering the widestrange of clothing, hardware & toys for the Pre-School child, in the UK and internationally.

The Mothercare franchise fits well with Shoppers' Stop overall strategy as its department storesalso target similar high-income consumers. The company plans to open 25 Mothercare outletswithin its department stores and as standalones over the next 5 years. Although this brand is niche-focused, it plays an important role in enhancing the company's overall portfolio quality.

The stores are 3000-6000 sqft and have a complete offering of the Mothercare product rangeand offer the widest choice to the consumers. The company also plans to operate large format FlagShips in select cities with an average size of not less than 5000 sq ft. Mothercare operates Shop inShops in most of the key Shoppers' Stop locations. These are generally 1800-2000 sqft.

The Mothercare India lines are in keeping with the absolute latest trend directionsinternationally. With this goal in mind, over 70% of products sold in India are sourced from globalvendors in over 13 countries. All products conform to rigid European quality standards. Even Indiamade products are subject to Mothercare's international quality parameters and are made inMothercare certified factories.

A step up the evolutionary ladder from 'franchised coffee bars', Brio has been designed to be a _warm & friendly 'Oasis'-a place where you can relax, revive and reflect. Its classic yet sophisticatedambience, decorated in warm earth tones, uses natural materials such as Old Burma Teak furniture

I '

and counters, raw silk lamps and cappuccino painted walls, punctuated by friendly, helpful service.,Brio offers a mix of desserts, cookies, brownies, muffins, croissants and savoury puffs baked

fresh and served hot from the oven and freshly made sandwiches. It also offers a range of coffeebeverages that are perfectly suited for the Indian palette. In the year 2006-07, the Company hadincreased the count of the Brio outlets to 16. I

Desi Cafe stands for everything that is global in its outlook, yet truly desi at heart. The menu is,expectedly, as full of perennial favourites as it is with yumtny twists. While Chhola Batura, MumbaiMasala Sandwich, Pav Bhaji and Paapdi Chaat keep you comfortable in familiar territory, innovationslike Kala Khatta Slush and Curry Puff tease your palate with adventure. The best part of the fare isthat it has something for every Indian. Be it the breakfast section, the snacks, or the mini-meals-the choices are diverse enough to take you on a cross-country tour. And with the unbelievable

1Company Annual Report, 2006-07,

success of'take Desi (

In Julthereby bioffers themusic, staand is fasi

JOINT"

• Shopbean

• TIinerccse~r1

ltr:(JA3

• lJI

~ In \

san ope

I achieveProfit)

Sh<Citizenfunctic

BUYlfMerchto bebecorr

2comp:

3Comp:

Page 3: Shoppers Stop

directiol1,~+~,rom global .,Even Indi:a~2 -" -e made in.: -'

led to be a,;'·phisticatedk furniture "ful service:',.I<:. -"

.uffs baked ~--~_-e of coffee:, -npany had':i

"le menu is, v·c._.>",,__-~a, Mumbainnovations: the fare isni-meals-ibelievable

Case 6 Shopper's Stop-Building a Retail Brand 551

success of the brand at InOrbit Mall and the domestic airport at Mumbai, that's where we intend totake Desi Cafe.

In July 1, 2006, Shoppers's Stop became the master franchisee for Crossword owned outlets,thereby bringing about greater operational efficiencies and synergies in the business. Crosswordoffers the widest range of books for the young and old alike, along with magazines, CD-ROMs,music, stationery and toys. Crossword operates 45 stores in various cities and towns in the countryand is fast emerging as India's fastest growing chain of bookstores. 2

JOINT VENTURES

• Shopper's Stop has entered into a 50:50 joint venture with The Nuance Group AG, foroperation ofduty free retail outlets at international airports in India. The joint venture hasbeen awarded contracts to operate duty free stores at the green field airports at Bangaloreand Hyderabad, which shall commence operations in 2008.

• The Switzerland based The Nuance Group is the global market leader in the travel retailindustry, operating 340 shops across 56 airports and 16 countries around the globe andemploying 4500 staff. In addition to its duty- and tax-free operations, the Nuance portfoliocomprises specialist shops as well as food & beverage operations, distribution, in flightservices and shops in other travel retail channels.

• The second joint venture is with Timezone Entertainment Private Limited. Timezone is aleading fun family interactive entertainment centre that offers up to-date and the latestrange of attractive and popular interactive games. Timezone is a Joint Venture with LA!(Leisure & Allied Industries) of Australia. LA!, Australia have more. than 200 such centres inAustralia, New Zealand, Indonesia, Singapore, China, Philippines and India. As on March31, 2007, Timezone operated five gaming centres with a retail space of over 35,000 sq. ft.

• UK's leading home and improvement retail group, Home Retail Group Plc, has drawn aJoint Venture to develop its Argos retail format with Shoppers' Stop and Hypercity RetailIndia. Under the agreement, Argos will provide its brand, concept and multi-channelexpertise and IT support to the Joint Venture. The stores will be named HyperCity - Argosand will start in Mumbai later this year.

In the year 2007, Shopper's Stop Ltd. achieved a gross retail turnover of Rs. 8996 million andan operating profit of Rs. 787 million, which are higher by 33% and 39% respectively, than thoseachieved in the previous year. The consolidated turnover was recorded at Rs, 9283 million andProfit After Tax at Rs. 242 million.3

Shoppers' Stop also runs one of the largest retail loyally programmes in the country, with a FirstCitizen base of over one million members. In the next sections of the case, we examine how variousfunctions are organised within the organisation.

BUYING AND MERCHANDISING

Merchandise Planning is a centralised function. The corporate objectives determine the turnoverto be achieved. This determines the targets to be achieved by the various categories and thatbecomes a category benchmark.

2Company Annual Report, 2006-07.3Company Annual Report, 2006-07.

Page 4: Shoppers Stop

Retailing Management

While Category Management from the theoretical perspective, is not in practice in theorganisation, the company defines a category as an amalgamation of products or the comingtogether of certain products, which serve a certain basket. In real terms, the business is looked uponas a basket offering to the customers and the merchandise caters to those customers. The wholeprocess of Category Management is looked upon as a methodology of satisfying customers. TheTrading Manager, the merchandiser and the buyer work together to achieve the objectives of eachcategory.

In order to understand the process of buying and merchandising in the organisation, it isnecessary to understand the method in which categories are defined and handled. This isillustrated in Figure 1.

Budgeting is done at the sub department, chain level. Once the budgets are frozen, the off takesare determined in terms of value and quantity. This is the starting point of the AssortmentPlanning Process. Thus, if women's wear has a budget of Rs.l 00 crores to be achieved, thedepartmental break-ups would first be determined. Departments in Womens' wear are Indian wear,Western wear, Lingerie and Nightwear. The merchandise in each department is then classified intosub departments. For example, in women's western wear - tops would be a sub department. First thebrand mix of the total number of tops required is determined. Then the fabric mix and the colourmix are determined. This is the starting point of Range Planning.

The B&M department uses the Merchandise Management System functionality of a JDApackaged software solution to support the planning exercise. The system helps the merchandiserdetermine margins, costs and quantities. Tools on the same system for Option Management will beimplemented in June 2004.

Planning at SS is based on two seasons - Autumn-Winter and Spring-Summer,- typicallydone six months in advance. As the budgeted numbers are available, an analysis is done of the pastseasons sales. Other important factors taken into consideration are:

k< Sub-Class' :1

I Division Ir o·

Cateoqry 3IAiR.Department'· j

.,

FIG. I The Buying [,. Merchandising Process at Shoppers' Stop

• p

• VThe

assortm-

THE PF

SS has sHaute Clabel. E:

• S\1

·\• I• I

r

• IWh

margin:

EVALU

Each mfootage·(·(·(

Thrhelps flspace,monthsthe rest

IT-thrCons idInitialljthe roledevelojand the

Aftpresen(

Page 5: Shoppers Stop

:e in the~ comingced uponle wholeers. The:, of each

on, it isThis is

off takesrrtmenr'ed,the1n wear, . '",ied into s,

<irst the~colour

aJDAmdiserwill be

picaIIyle past

Case 6 Shopper's Stop-Building a Retail Brand 553

• Projections for the various brands.• WGSN4 forecasts for trends that can be adapted to suit Indian tastes, skins and sensibilities.

The direction for a particular category is then determined. The key to efficient B&M isassortment planning and then its implementation.

THE PRIVATE LABELSS has seven private labels in its basket of offering. Stop, Vittorio Fratini, Mario Zignoti, I Jeans,Haute Curry Kashish and Life. In women's wear, 40-45% of the contribution comes from the privatelabel. Each private label caters to a different target audience.

• Stop, the first private label from SS, is present across product categories and the propositionit offers to the customer is value for money.Vittorio Fratini and Mario Zignoti are Premium Formal and Casual wear Men's Brands.

• Haute Curry is a Women's Fusion Brand.• I Jeans is a Men's Jeans Brand.• Kashish is a premium ethnic wear brand for men and women. It offers kurta pyjamas in

menswear and formal salwaar kammez in womenswear.• Life is a fashion brand in men's and womenswear, targeted at the young customer.

While brands are seen as the traffic drivers in the store, it is the private labels that generate themargins. Sourcing at a better cost has always been a focus of the merchandise team for the labels.

EVALUATION OF PERFORMANCEEach merchandise category is evaluated in terms of targets and the returns that it has achieved onfootage, labour and inventory, i.e.

• GMROI - Gross Margin Return on Investment• GMROF - Gross Margin Return on Footage• GMROL - Gross Margin Return on Labour

The returns on the category are compared with the benchmarks set for that category and thishelps further decision-making. Depending on the evaluation, a decision is taken to either increasespace, increase service intensity or to increase merchandise. This exercise is done once in sixmonths, at the end of each season, so that the sales and promotions for the period are covered andthe results are not biased.

IT-the backbone of growthConsiderable effort and energy has gone into developing the IT systems in Shoppers' Stop.Initially, when the first store opened, a five-member team identified the information needs of allthe roles in the organisation across departments and hierarchical levels. A Fox Pro based system wasdeveloped to support these requirements. However, the information was largely people focussedand there was no consolidation.

After 1995, a number of new entities entered the retail marketplace. SS had also increased itspresence from one store to three stores and the management felt the need for implementing an

4WGSN :Worth Global Style Network.

Page 6: Shoppers Stop

554 Retailing Management

integrated enterprise-wide software solution. After studying the market at the end of 1997, JDA wasidentified as being the most appropriate integrated packaged software solution. After getting VSATconnectivity, the company went live onJDA in March 1999. In the following two years, 2002 & 2001,the company showed losses on its balance sheet and many considered the IT system to be the causeof failure.

The leadership tasked a 12-member team to review the way in which the JDA solution had beenimplemented and to identify changes required. System changes were implemented as part of anover organisational re-structuring programme. Today, IT helps integrate various functions likeWarehousing, Supply Chain Management, Buying & Merchandising, Finance and HR. Varioussoftwares like Oracle for Finance and Accounting, JDA and Arthur Planning for Buying andMerchandising and HRMS for HR are used today, as shown in Figure 2:

FlG. 2 IT - the Integrating Force

The organisation has also moved on from VSAT connectivity to a dedicated leased line, so thatthe service office provides 24 x 7 support. Achieving people efficiencies was sought, and this to agreat extent, has been achieved as, from a team of forty people handling 3 stores, today there are170 people handling 13 stores.

SS has close to 400 vendors supplying merchandise. Of these, 110 suppliers are integrated withthe system in operation. While warehouse logistics are outsourced, integration of the suppliers hashelped reduce cycle time. Going ahead, the IT team is now probing the option of providing mobilecashiering to the stores, gold card members and is looking at avenues in e-commerce.

INTEGRATING THE SUPPLY CHAIN

Given the largy vendor base that it has, initially, the company had a distribution centre attached toeach of the stores; now, with an online supply network system, the company has opted for regionaldistribution centres. Regional Distribution Centres exist at Mumbai, New Delhi and Bangalore,which service the stores in and around these places, for example, the distribution centre atBangalore services the Chennai store.

The nucleus of retail management is buying right and replenishing right so that the availabilityis optimum. The online supply network based on the ERP package handles merchandisemanagement, warehouse management, automated replenishment and sales management.

The merchandising management module helps decide on the right kind of products that haveto be bought for the store. It can be anything ranging from a particular brand, fit, style, materialand colour of trousers, for instance. The module identifies vendors, fixes the buying price andselling price and even raises purchase orders. It also points out what merchandise a particular storeis carrying at that point of time. On the other hand, the automated replenishment system indicates

when stockssystem autoreplenished

Similarchain. Thisdesign of rr

Beforedependentmost. of theparticular i

The orexcess stoclfind sometlvendors, w:

Apart flink with 1vendors asreceived aMerchandithe: :,nut O(

CREATiNI

Shoppers'customer.increase in

One olAward. Ththis was vea lllllque e

Page 7: Shoppers Stop

7,JDAwastingVSATJ2 & 2001,~ the cause

1 had beenpart of anctions likeR. Variousuying and

ne, so thatcl this to ay there are

~ated withopliers hasing mobile

utached torr regionalhngalore,centre at

availability-rchandiseIt.

; that have.~, materialprice andcular store1 indicates

.11

Case 6 Shopper's Stop-Building a Retail Brand 555

when stocks have to be replenished. For example, if out of 50 Arrow shirts, five have been sold, thesystem automatically orders for replenishment. This ensures that with minimal effort, the stock isreplenished.

Similarly, the warehouse management system manages the inventory throughout the supplychain. This module indicates from which part of the warehouse to pick up a particular colour ordesign of merchandise.

Before the online ERP package came into function, the distribution system was completelydependent on individuals who were in charge of receiving, tagging and storing the stocks, and sincemost of the stocks were stored in cartons, it was difficult to identify the stocks in the absence of theparticular individual who had received the stocks.

The online supply network has increased the availability as well as restricted the buying ofexcess stock. The objective is to see that the customer doesn't leave the store because he couldn'tfind something that he wanted. Apart from ensuring efficiency in the supply network between thevendors, warehouses and the stores, the system has increased customer satisfaction.

Apart from the current online supply network, the retail group has also implemented a B2Blink with 125 vendors through a Web-based technology. This gives online information to thevendors as to how a particular brand is selling, and the stocks situation. At present, merchandise isreceived at least once a day by the local stores and twice a week by the outstation stores.Merchandise is received at the stores only in the morning before 11 am, so as to ensure that it is onthe shelf before the first customer walks into the store.

CREATING THE BRAND EXPERIENCE

Shoppers' Stop has always aimed at providing a superior shopping experience to the retailcustomer. Keeping this in mind, it has created events and promotions which target either anincrease in the business at the store or provide a unique experience to the customer.

One of the first events to be organised by Shoppers' Stop was DOTY - The Designer of the YearAward. This was awarded to young and budding designers for Image, Design and Creativity. Whilethis was very popular with the students, it did not do much for the customer. Keeping this in mind,a unique event, 'The Festival of Britain in India' was organised.

Creating the experience for the customer - The festival of Britain in India.

Page 8: Shoppers Stop

556 Retailing Management

Photograph Courtesy: Shopper's Stop LimitedTaking the experience platform further, the festival of India, 'Parikrama' was created in the year1998. Over the years, Parikrama has been redefined as a festival, which celebrates and enjoysIndian culture. Last year, this festival was held for a period of seventeen days, beginning August 8th

to 24th, across its 13 stores around the country. Artists from different states ofIndia showcased theirunique talents like Miniature Painting, Bead Jewellery, Terracotta, Sholapith Work, Lacquer Toys toPalm Leaf Etchings, Pattachitra, Coir Toys, Dance, Music and much more. For this special occasion,the in-house design team had created an exclusive line of ethnic wear for women, under the privatelabel STOP and KASHISH. The collection had festive colours combined with regional flavours,crafted in a medley of rustic and rural techniques, fused with exclusive fabric and embellishmentsusing bead work, mirror work and traditional prints. The colours used were Indian reds, flameoranges, turmeric yellows, chutney greens, indigo blues, majestic purples and soothing off-whites.

A unique festival, which focused on both sales and the customer experience, was 'The SevenWonders Festival'. For this festival, each store reflected the characteristics, sights, sounds and feelof the seven wonders - The Eiffel Tower, the Leaning Tower of Pisa, the Pyramids of Egypt, theGreat Wall of China, the Great Barrier Reef, Niagara Falls and the Grand Canyon.

In addition to the decor of the store, Shoppers' Stop also brought in international performerslike the unicyclist, 'the Statue Man' from Italy-a man who refused to budge, a juggler from Francewho juggled with things like knives and devil sticks, dancers, painters and a troupe of colourful RedIndians who performed traditional Native American rituals among many other added attractions. Alarge number of attractive offers were also in store for the shopper.

While the events and promotions have brought the customer to the store, the courteous andhelpful staff has ensured that the customer stays loyal to the store.

Creating a unique brand experience being the central theme of all the advertising, promotionsand events, in the year 2006-07, the Company had an exciting Christmas festival, 'Fly to SantaLand', in the month of December. This two weeks long festival offered the lucky customers a uniqueopportunity to fly to the Santa Claus Village in Finland to meet the real Santa. The other majorevents that conducted were 'Gear up for School' for school going children, Salwar Kameez DupattaExchange in association with Concern India Foundation and 'Do Your Denim' festival for the youth.

The most awaited calendar festival, 'Parikrama' celebrated the exquisite embroideries of Indiathis year. During the Parikrama festival, customers also got an opportunity to interact with localartisans who were specially brought to the stores to promote and sell their crafts of embroideriesthey master in.

CUSTOMER SATISFACTION & LOYALTY

Shoppers' Stop strives to provide its customers with the best overall experience of shopping. Tomeasure the customer experience, the Company conducts customer satisfaction surveys to evaluatea range of parameters, including merchandise range and quality, store environment, staff,.transaction efficiency, loyalty programme, schemes and promotions to name a few and undertakesimprovements in various areas.

The Company also includes select competition stores in the surveys in order to measureexperience in the stores as compared to competition.

Overall'

Augu

(Scores out t

loyaltyThe ConCitizens IFirst Citi:tiers-Cl:tiers on t

FirstCitizens r

• Reme

• Ex6 Ex

pr<• In'e He

• ExFirst (

best of ofFirst. Thrphones, si

The (credit canpurchasesattractivestores. ForMarch, 20

IN KEEPI

The last f,retail mocformats mglobal ret:

Furthtfirming ulinvestmeninvestors t

Page 9: Shoppers Stop

the year:l enjoyslsust 8th

.ed their~Toys to.ccasion,~pnvateJavours,shmentss, flamef-whites..e Sevenand feel:ypt, the

formers1Francerful Red.tions. A

ous and

motions *'l

:0 SantaI umqueT majorDupattae youth.ofIndiaith localoideries

Jing. ToevaluateIt, staff,:lertakes

neasure

Case 6 Shopper's Stop-Building a Retail Brand 557

Overall Customer Satisfaction Index

(Scores out of 100) Source: Company Annual Report, 2006-07.

loyalty ProgrammeThe Company had pioneered India's first retail loyalty programme - "First Citizens". The FirstCitizens base grew from 632,000 to over a million in the year 2008. During the year 2006-07, theFirst Citizens contributed 61% of the Company's annual sales. The First Citizen programme has 3tiers-Classic Moments (entry level), Silver Edge and Golden Glow, Members fall into the varioustiers on the basis of their spends with the store .

First Citizens also earn differential reward basis on their current tier of membership. FirstCitizens receive :

• Reward points on all their spends. Reward points can be redeemed for a wide variety ofmerchandise at the Company.

• Exclusive schemes, benefits and promotions,• Extended and exclusive shopping hours-specially during the festive season. Special

previews before the sale periods.• Invitations to exclusive events-both in-store as well as those organised outside the stores,• Home delivery of altered merchandise.• Exclusive First Citizens lounge at select stores to relax after hectic shopping.First Citizens always stay updated with all details pertaining to their membership as well as the

best of offers and privileges available, through a unique service launched last year-First CitizensFirst. Through this service, First Citizens get all the information that they want on their mobilephones, simply by sending an SMS.

The Company, in association with Citibank, has offered its First Citizens an option to add on acredit card to their existing loyalty cards. This enables First Citizens to add on a credit line to theirpurchases. They also have the added advantage of being able to choose from amongst variousattractive financing options, cash back schemes, EMI schemes ete. for buying at the Company'sstores. For customers who are averse to credit, there is an option of activating a debit card. As on 31March, 2007, the number of members in the eo-branded card programme crossed 114,000.

IN KEEPING WITH THE CHANGING TIMES

The last few years have seen rapid transformation in many areas, setting scalable and profitableretail models across categories. Indian consumers are rapidly evolving and accepting modernformats overwhelmingly. Retail space is ne more a constraint for growth. India is on the radar ofglobal retailers and suppliers/brands worldwide are willing to partner with retailers here.

Further, large Indian corporate groups, as also foreign investors and private equity players arefirming up plans to identify investment opportunities in the Indian retail sector. The quantum ofinvestments is likely to sky-rocket as the inherent attractiveness of the segment lures more and moreinvestors to earn large profits.

Page 10: Shoppers Stop

Retailing Management

With the largest young population in the world-over 890 million people below 45 years ofage - India is indeed a resplendent market. India has more English speaking people thari in thewhole of Europe taken together. Its 300 million odd middle class, the 'Real' consumers, is catchingthe attention of the world. As the economy grows so does India's middle class. It is estimated that 70million Indians earn a salary of over INR 800,000 ($18,000) a year, a figure that is set to rise to 140million by 2011. The number of effective consumers is expected to swell to over 600 million by2010 - sufficient to establish India as one of the largest consumer markets of the world.

Favourable demographic and psychographic changes relating to India's consumer class,international exposure, availability of increasing quality retail space, wider availability of productsand brand communication are some of the factors that are catalysing organised retail in India. Overthe last few years, many international retailers have entered the Indian market on the strength ofrising affluence levels of the young Indian population along with the heightened awareness ofglobal brands and international shopping experiences and the increased availability of retail realestate space. Development of India as a sourcing hub shall further make India an attractive retailopportunity for the global retailers. Retailers like Wal-Mart, GAp, Tesco, jC Penney, H & M,Karstadt-Quelle ete. are stepping up their sourcing requirements from India and moving fromthird-party buying offices to establishing their own wholly owned/wholly managed sourcing andbuying offices, which shall further make India as an attractive retail opportunity for the globalplayers.

With the changing face of retail, the Indian consumer is in for a rapid transformation.Consumer spending continues to grow at double digit figures. According to India Retail Report2007, the total private consumption touched INR 20,000 billion (US $ 445 billion) at current pricesin the calendar year 2006, with organised sector accounting for INR 55,000 crore ($12.4 billion)worth of business increasing its share to 4.6 per cent of the total Indian Retail Value that stood atINR 12,000 billion ($270 billion). Moving forward, organised retailing is projected to grow at therate of about 37 per cent in 2007 and 42 per cent in 2008. Organised retail in India has the potentialto add over INR 2,000 billion ($45 billion) worth of business by the year 2010.

This consumer spending is ultimately pushing the economy into a growth-and-liberalisationmode. The Indian market is becoming bolder by the day, with the economy now expected to grow atover 8 per cent and average salaries being hiked by about 15 per cent, there will be a lot moreconsumption - and a lot more potential for organised retail.

In the year 1991, department stores were on the top of the perception map, the increase in thetypes of stores and choice available to the customer. The repositioning of the department store hadhappened in the perception map of the customer. This change was not attributed to anything doneby the customer but due to the maturing of the customer.

The customer had evolved to a different lifestyle and the Company realised that it could notafford to be where it was in terms of positioning. In some categories, the store had kept pace withthe changes in the customer and in some cases, it lagged behind. At this point in time, the Companymade a conscious decision to move upwards as Shoppers' Stop the brand. It was envisaged that thisentire exercise would be spread over a period of 15-18 months.

The first step taken towards this repositioning was to rework all the touch points which wouldhave an impact on the consumer. These were identified as the brand itself, the space, thecommunication and the overall experience. This is illustrated in Figure 3.

.FiG.3

Enlevel, ,~,the uni

Thplatfor

Thlike AI'<TomID'

Acits exisplan tlventuryears.depart

Shfrom 1formal

TI12 tiel

S~Store;Groutpreser

5 The F,

Page 11: Shoppers Stop

proidia.rengrrcnerediltiveF(j'

lil u~.-~.~< "<"'~"''''r'f

Ent nri'rp,:.i!

4 billion)t stoodow at thepotential,

ralisation:0 grow atlot more

ase in thestore hadling done

.ould notpace with:::ompanyl that this

ch wouldiace, the

.. ~

Case 6 Shopper's Stop-Building a Retail Brand 559

TheCommunication

TheEntire

TheRetailSpace

TheBrand

;FIG. 3 Enhancing the customer touch points

Enhancing the customer touch points also included among other things, changes at the groundlevel, which included a change in the look of the customer care associates, starting with a change inthe uniform.

The change in the communication was also in terms of changing the Company's positioningplatform from, Feel the Experience while you Shop, to Shopping and Beyond.

The look of the retail stores was also enhanced, which included the introduction of new formatslike Arcelia and new brands being added to the portfolio, like Lancome, FCUK, Mac, Clinique andTommy Hilfiger among others.

According to media reports, Shoppers' Stop Ltd. will be adding 2.7 million sqft, ofretail area toits existing spread of 1.3 million sqft, over the next three to four years, as part of a Rs 1,000-croreplan that will include investment in new acquisitions, its other formats and the airport retail jointventure. The Company is looking at an investment of more than Rs 250 crore over almost fouryears. Overall, the Company sees an increase from the 1.3 million sqft of the Shoppers' Stopdepartmental store, towards 4 million sqft across all formats.

Shoppers' Stop has earmarked Rs 50 crore for increasing its stake in HyperCity Retail (India),from 19% at present to 50% by December this year, and Rs 500 crore on expanding the HyperCityformat.

The retail major plans another 24 more stores in 24 cities within the next four years, looking at12 tier-II cities like Ludhiana, Aurangabad, Amritsar, Surat, Baroda, Vijaywada and Vizag.

Shoppers' Stop will invest Rs 150 crore to expand its formats like Mothercare, Crossword BookStore and HomeStop and it will invest Rs 25 crore in its airport retailing venture with the NuanceGroup AG. Shoppers' Stop is also looking at increasing the size of its new stores from 65,000 sqft atpresent, to 85,000 sqft, which will give it.space for another 50-80 brands.5

5 The Financial Express, March 13,2008.

Page 12: Shoppers Stop

L _

560 Retailing Management

Going forward, consider the following:1. In a scenario where the existing stores have been set up in the major metros and mini metros,

is a scalable model possible for a department store like Shoppers' Stop. If yes, what is thestrategy that can be adopted by Shoppers' Stop to enter these markets?

2. In a world where the department store model is on the decline, what can Shoppers' Stop doto sustain its leadership position in the Indian marketplace?

3. How can the retailer create an effective e-tail model, to enhance its existing business?

Exhibit 1

Profitabiliy

No. of StOrE

Income

Gross RELess: v«Gross RE

Other Or

Expenditu

Cost of \EmploysOperatin

EBIDTAInterestDeprect

Profit8EProfit AI

Balance!Share CReserveLoan FlCapiialFixed ANet Wo

Profit & ISales (.

Sales (IGross IOperatiOperatPBT MPAT M:Interes

BalanceDebtorCreditcStock'CurrenAssets

Debt E

Return tReturrReturr

Book'EPS (

I

I

Cash

Dividenc

~

Page 13: Shoppers Stop

Case 6 Shopper's Stop-Building a Retail Brand 561

Exhibit 1 Financial Highlights

ii metros, (Rs. in million)

aat is the Profitabiliy Slatement 2006-07 2005-06 2004-05. 2003-04

No. of Stores 22 20 16 14 12

, Stop do IncomeGross Retail Sales 8,850 6,660 5,001 3,953 2,949Less: Value Added Tax 387 311 114 110 25

:SS?Gross Retail Sales (Net of taxes) 8,463 6,349 4,887 3,854 2,924Other Operating & Miscellaneous Income 258 191 79 91 81

8,721 6,540 4,966 3,945 3,005

Expenditures

Cost of goods sold 5,688 4,322 3,421 2,712 2,077Employee costs 585 403 288 224 172Operating and administrative expenses 1,661 1,249 920 764 560

1; 7,934 5,974 4,630 3,700 2,809

EBIDTA 787 566 336 245 196Interest and finance charges 44 24 39 40 32Depreciation 256 139 90 75 58Profit Before Tax 487 402 207 130 106Profit After Tax 262 271 190 120 106

Balance Sheet ItemsShare Capital 348 344 274 274 265Reserve & Surplus 2,665 2,356 673 511 389Loan Funds 1,131 586 874 589 494Capital Employed 4,185 3,285 1,821 1,374 1,148Fixed Assets 1,450 1,225 1,096 770 660Net Working Capital 2,247 1,713 614 501 380

Profit & Loss RatiosSales (Chain level growth) 32.7% 33.2% 27.3% 34.0% 22.8%Sales (Like to Like growth) 21.0% 17.0% 9.1% 12.0% 9.1%Gross Profit Margin 31.4% 30.4% 29.3% 28.9% 28.7%

."Operating Exp,,:nses Ratio 25.4% 24.8% 24.2% 25.0% 24.8%Operating Margin (EB1DTA) 8.9% 8.4% 6.7% 6.2% 6.6%PBT Margin 5.5% 6.0% 4.1% 3.2% 3.5%PAT Margin 3.0% 4.1% 3.8% 3.0% 3.5%Interest Coverage 13.7 18.1 8.2 5.9 6.2

Balance Sheet Ratios

Debtors No. of Days 3 2 2 2 2Creditors No. of bays 55 54 65 63 57Stock Turnover Ratio 3.7 3.9 3.4 4.1 5.8Current Ratio 2.9 3.0 1.9 1.9 1.9As!>ets Turnover Ratio 2.4 2.6 3.1 3.1 2.4

Debt Equity Ratio 0.4 0.2 0.9 0.8 0.8

/ Returntoi~v~stors•• ,' _.... • -'.'<' ,,- . ~ •

Return on Nelworth 9.2% 14.9% 22.0% 15.4% 13.9%Return on Capital Employed 6.4% 11.3% 14.2% 12.4% 13.0%Book.Value Per Share (in RS.) 87.23 80.86 34.55 28.70 24.85EPS (taking equity share at Rs. 101- each) (In Rs.)

Basic 7.58 8.12 6.94 4.44 4.04Diluted 7.57 8.10 6.91 4.42 4.04

CashEPS 15.00 12.41 10.22 7.23 6.23Dividend Per Share 1.50 1.50 1.00

Source: Company Annual Report 2006-07, page 29.

- ---- .~- .. --

Page 14: Shoppers Stop

562 Retailing Management

Exhibit 2 A Graphical Presentation of Customer Entry and Conversion ratio

Customer Entry

25

19.920

18.3

E 1°10Cp..7-E C~c 15=2:-

12.2CQ)

Q)E 10.2C/):>U

5

02001-02 2002-03 2003-04 2004-05 2005-06 2006-07

Year (Source: Company MIS)

Conversion Ratio

[-u- Conversion Ratio I40

35

30~00 25~~I 200.~(J)

> 15c0o

10

5

020.01-02 2002-03 2003-04 2004-05 2005-06 2006-07

Year (Source: Company MIS)

Source: Company Annual Report 2006-07.

,-

,"The bebut we',

Sam waltonthe customsshop at var

In a ye,Wal-Mart w

Diluted ea!8.:L per cer

\ val- ~vIfor the Corecord forabout $30more imp:global ret:

\Val-~cases, it a

Thisbecome ,ICOMPA

The birtPermey,employnfurther {

In Svariety E

'This case1Compan

2Compar

3Compar