Shoppers Stop Ltd (SSL), a part of the K Raheja Group, is India?s leading large format department store company. It is also entering different retailing formats, such as Home, Food & Grocery. It was the first one to set up a nation-wide chain of large format department stores in India with a professional management. Shoppers stop services (India) Ltd., Crossword book stores, Spans Trading Ltd., and Shoppers Stop.com (India) ltd. are its subsidiaries.
Govind Shrikhande, CEO, Shoppers? Stop, joined in April 2001 as the Head of Buying & Merchandising and was promoted to the position of Chief Operating Officer (COO) from December 2004. He was promoted to the position of Chief Executive Officer (CEO) from 1st April 2006. Recently the Board has also appointed him as Executive Director for a period of 3 years with effect from 29 July 2006. He will be leading the Operations & Strategic Direction of the largest Department Store chain in India. Mr. Shirkhande is a Textile Graduate from VJTI, Mumbai and a MBA from Symbiosis, Pune. He has 22 years of experience in leading Textile and Apparel companies like Mafatlal, Arvind, Arrow and Bombay Dyeing. He was part of the team responsible for creating the Denim Revolution in India. He was a key member of the Arrow launch team.
Replying to Anil Mascarenhas of India Infoline, Mr. Shirkhande says the top 5 players would contribute 5 to 6% of the market in the coming five years.
With Reliance set to emerge as a mega player, how do you plan to handle the same?
Reliance is always known to go with a big bang approach. But the retail market is too disorganized to see a very large impact. As in any other part of the world ? consumers love different formats & different players. Hence, every player will have enough elbow room to grow. We have a strong Brand built on experience & trust. We believe we have a great chance to retain our leadership status in the Department Store category.
What do the latest figures tell you about organized retail in India? What is the share and size and going ahead what is it likely to be?
Total Retail is around US$300bn with 3% of organized retail at US$9bn. The organized industry continues to grow at 30% & is headed towards 8?10 % share by 2010.
Which are some of the segments where you see a huge potential? With around 600 malls expected in India by 2010, what future do you see for the likes of Shoppers? Stop?
Supermarkets, Hypermarkets & Dept. Stores in that order have a high potential. Shoppers? Stop being a strong brand will continue to show high potential & growth.
How many significant players are there in the market today? In another 5 to 8 years, what kind of consolidation do you expect in the industry?
There are 8 players contributing 1% of the market. In five years time, as consolidation happens, top 5 players would contribute 5 to 6% of the market.
You call yourself the pioneer in nation-wide chain of large format stores. What are some of the challenges you face at present. How do you plan to tackle competition?
There are two Ps that are current challenges ? People & Property. As the demand for these resources outstrip the supply ? scarcity & price / salary pressure is being faced by all players. Different approaches are being adopted by different players. Some are proactive ? while some are reactive. The path for us clearly is to make our Brand so strong everyone would want to join us or every mall owner would offer us the anchor position as first choice.
What kind of customer stickiness have you experienced?
In a world full of disloyalty ? Loyalty cards is the way to build bonds with consumers. Our Loyalty program both plain vanilla & co-branded credit card are scaling up rapidly with a base of 6.7 lakh customers & contribution to sale of 62%. We have a solid performing program. We can track the spend of this consumer & offer him customized options.
How many stores do you have? What are your ramp up plans?
We have now signed up to 49 stores for Shoppers Stop Department Store, which is 3.6mn sq ft. This is almost 1.1mn more than the 2.5mn that we had spoken about last year. For the specialty retailing, which includes F & B, Crossword, Mothercare and M.A.C, we have signed close to about 800,000 sq ft.
In FY07, we are expecting four more Shoppers? to come, two in the next quarter. As far as M.A.C is concerned, it is a selective distribution. As of now, we have the clearance to go from 1 to 3 in the coming 12 months. For Mothercare, we had signed the agreement to open 40 stores in the next five years? time. Current trend looks like we should be able to complete the rollout in three years? time
Between Brio and Desi Caf?, we see approximately about 100 doors within the formats of Hypercity, Shoppers? Stop and independent formats. As regards, Crosswords, we believe that this format can be rolled anywhere between 60 to 70 stores in the next two years? time.
How many cities do you plan to have a presence?
We are looking at being present in about 23-24 cities by FY10, which would be in addition to the cities that we are currently present in. The new cities would include the likes of Amritsar, Jalandhar, Chandigarh, Ludhiana, Lucknow, Kanpur, Surat, Baroda, Indore, Bhopal, Nagpur, Mysore, Vizag and Vijayawada.
What is the share of private labels? Going ahead do you expect it to rise further?
In H1 FY07, the private label sales share was 22%. We are a house of Brands. Hence, Brands will continue to dominate sales in our stores.
How long does it take for a store to break even?
All stores make operational profit before the end of the first year
Provide us a brief insight on your category-wise and division-wise break-up?
Apparel continues to be at 61% share & Non Apparel @ 39%. Men?s has the highest share followed by Ladies & kids.
Logistics is a key issue which you have outsourced. Which are the other areas you plan to outsource?
Logistics runs on our system & ERP Network. Only the physical of D&L activities are outsourced. There are no plans for outsourcing any other activity.
Tell us more about your brand building exercise. What is the budget set aside for the same?
Brands are built through Advertising & experience. It is important for a brand to have a bonding with customers? & be part of their lifestyle. Our current campaign connects the International Quality of our merchandise to the aspirational consumers ? offering range & experience. It reinforces the message to them that it is a ?Store for them?. I cannot provide any number for the same.
Infrastructure remains a key issue. The approach to most malls requires vast improvement. What kind of initiatives does the industry plan for the same?
Infrastructure is not only about roads but also about taxes like Octroi, Entry Tax, Regulatory issues like Entry Permit and Road Permit. It is also about outdated practices & laws. But these issues are common across India ? across all industries. I believe that more attention from the Government is required to resolve such issues.
What is your view on net shopping? Do you see it having an impact on the malls? People may like to go and see the product in a mall and perhaps check for best prices on the net.
The Net penetration in India is pretty low. Shopping is a pastime and an entertainment for most of us. As of date, Net is used mainly for Airline, Hotel & bill payments ? rather than for buying lifestyle goods. I believe that Net Shopping should contribute between 2 ? 3% of total retail market in the next 10 years time.
What would be your unique selling point (USP)?
We will be a House of Brands for fashionable families. We will appeal to their heart & soul through merchandise, design, experience & service. We believe that family shopping will continue to dominate for the next few years.
Are you still seeing any seasonality in the business? Which are the best months?
There are two clear Big Seasons, Summer holidays, which is, April ? May and secondly October to December, which covers all major festivals like Dassera, Diwali, Christmas & New Year along with marriage muhurats.
Your views on FDI. The advantages and disadvantages of the same?
FDI is welcome with an export commitment of 20 times the local turnover. This will boast our exports, improve infrastructure, offer superior products to consumer & push GDP growth beyond 10%.
What will happen to the scores of retail stores as mall culture picks up?
India is a country of Retailers & will continue to be so ? Malls or no Malls. The catchments will be fed by small retailers as Malls will not be able to access all points.
Between stand-alone outfits and malls what are the plans ahead?
Majority of our stores are now coming up as part of Malls.
Brief us on partnerships and MoUs. You have tied up with UK-based Nuance Group. Tell us more about it and what kind of revenues do you expect here?
Nuance is a Switzerland-based Airport Retail specialist. As travelers spend a large time shuttling between airports ? shopping at airports is becoming more & more attractive. It also helps a retailer to serve the consumer?s at one more buying point.
Tell us more about your Food and Beverages business and also your franchisee rights for Mothercare
Food is becoming a part of Department store?s offering. As consumers spend more time shopping ? they also require refreshments & break to rejuvenate. Hence F&B has good potential.
Mothercare is a brand that stands for Love, Care & Trust for 0 ? 12 kids, expecting mothers and new mothers. Our results have been satisfactory. We are on our way to open the 40 committed Stores at a faster rate.
What has been the experience with Hypercity? Do you plan to buy 51% in Hypercity retail?
The retail market for food & grocery contributes more than 50% of consumer spend. Hence Hypermarkets with food & grocery have great potential. The first 5 months experience has been very good. The Board will take a decision on this investment at the appropriate time.
Are most of your properties on lease? How long are the leases? Any demand for increase in rentals?
Majority of our properties are on lease. The lease periods range up to 24 years.
The current boom in the property market has created some pressure on the rentals.
What kind of margin expansion are you witnessing?
Our margin expansion for first half was 150 basis points. The future outlook is positive.
Give us a geographical contribution of your revenues.
Our model is pan India with large share in future set to come from North & West, followed by South & East. At present, West has the highest share.
Comment on the overall financials of the company. What is the outlook going ahead? What would be the fresh triggers for growth?
Our first half results are out with topline growth of 34% and bottomline growth of 88%. The outlook continues to be buoyant. The fresh triggers would come from the launch of new stores.
In your earlier stint, you had an interesting time promoting Denim. Share with us some insights. What is your view and outlook now on denim?
Denim continues to be a Universal equalizer. It is the preferred clothing of the youth & the old, poor & the rich. From James Dean to John Travolta to Shah Rukh to John Abraham ? it has lasted all decades. At present, you are seeing more washed Denims ? full of attitude from streetwear brands like Abercombie to Designer brands like Boss. Outlook on denim remains strong.
Your message to shareholders?
Ready & Steady wins the race.