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CAS E 6

SHOPPER'S STOP-BUILDING

A RETAIL BRAND

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'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.

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COMPANY HISTORY

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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.

Retailing Management

550

success of' take Desi (

FORMATS IN OPERATION

In Jul thereby bi offers the music, sta and is fasi

Shoppers' Stop has launched Home Stop, a first-of-its-kind premium home concept store offering a wide range of products and some of the most reputed national and international brands. It is a one-stop-shop for all home needs ranging from home decor to furniture & recliners, bath accessories to bedroom furnishings, mattresses to draperies, carpets, kitchen accessories and appliances to modular kitchens & health equipment all under one roof. The store is positioned as a complete home solution store which offers designs and style, quality and convenience. A typical Home Stop store is spread over 30,000 square feet. Home Stop houses some of the most reputed national 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 bedding from Paradies, Germany, bed linen and furnishing from Stop, Ivy, Fern, Portico, Maspar, Bombay Dyeing and home appliances from Phillips and Morphy Richards, bathroom linen from Welspun.

JOINT" • Sh op be an

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

• TI in er cc se

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

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

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The Mothercare India lines are in keeping with the absolute latest trend directions internationally. With this goal in mind, over 70% of products sold in India are sourced from global vendors in over 13 countries. All products conform to rigid European quality standards. Even India made products are subject to Mothercare's international quality parameters and are made in Mothercare 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 sophisticated ambience, 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 fresh and beverages increased

offers a mix of desserts, cookies, brownies, muffins, croissants and savoury puffs baked served hot from the oven and freshly made sandwiches. It also offers a range of coffee that are perfectly suited for the Indian palette. In the year 2006-07, the Company had 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, Mumbai Masala Sandwich, Pav Bhaji and Paapdi Chaat keep you comfortable in familiar territory, innovations like Kala Khatta Slush and Curry Puff tease your palate with adventure. The best part of the fare is that it has something for every Indian. Be it the breakfast section, the snacks, or the mini-mealsthe choices are diverse enough to take you on a cross-country tour. And with the unbelievable

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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. Crossword offers 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 country and 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, for operation ofduty free retail outlets at international airports in India. The joint venture has been awarded contracts to operate duty free stores at the green field airports at Bangalore and Hyderabad, which shall commence operations in 2008. • The Switzerland based The Nuance Group is the global market leader in the travel retail industry, operating 340 shops across 56 airports and 16 countries around the globe and employing 4500 staff. In addition to its duty- and tax-free operations, the Nuance portfolio comprises specialist shops as well as food & beverage operations, distribution, in flight services and shops in other travel retail channels. • The second joint venture is with Timezone Entertainment Private Limited. Timezone is a leading fun family interactive entertainment centre that offers up to-date and the latest range 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 in Australia, New Zealand, Indonesia, Singapore, China, Philippines and India. As on March 31, 2007, Timezone operated five gaming centres with a retail space of over 35,000 sq. ft. directiol1,~+~, rom global ., Even Indi:a~2 -" e made in.: -'

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• UK's leading Joint Venture India. Under expertise and and will start

home and improvement retail group, Home Retail Group Plc, has drawn a to develop its Argos retail format with Shoppers' Stop and Hypercity Retail the agreement, Argos will provide its brand, concept and multi-channel IT support to the Joint Venture. The stores will be named HyperCity - Argos in Mumbai later this year.

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

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

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BUYING AND MERCHANDISING Merchandise Planning is a centralised function. The corporate objectives determine the turnover to be achieved. This determines the targets to be achieved by the various categories and that becomes a category benchmark. 2Company Annual Report, 2006-07. 3Company Annual Report, 2006-07.

•

Retailing

Management

While Category Management from the theoretical perspective, is not in practice in the organisation, the company defines a category as an amalgamation of products or the coming together of certain products, which serve a certain basket. In real terms, the business is looked upon as a basket offering to the customers and the merchandise caters to those customers. The whole process of Category Management is looked upon as a methodology of satisfying customers. The Trading Manager, the merchandiser and the buyer work together to achieve the objectives of each category. In order to understand the process of buying and merchandising in the organisation, it is necessary to understand the method in which categories are defined and handled. This is illustrated in Figure 1. Budgeting is done at the sub department, chain level. Once the budgets are frozen, the off takes are determined in terms of value and quantity. This is the starting point of the Assortment Planning Process. Thus, if women's wear has a budget of Rs.l 00 crores to be achieved, the departmental 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 into sub departments. For example, in women's western wear - tops would be a sub department. First the brand mix of the total number of tops required is determined. Then the fabric mix and the colour mix are determined. This is the starting point of Range Planning. The B&M department uses the Merchandise Management System functionality of a JDA packaged software solution to support the planning exercise. The system helps the merchandiser determine margins, costs and quantities. Tools on the same system for Option Management will be implemented in June 2004. Planning at SS is based on two seasons - Autumn-Winter and Spring-Summer,typically done six months in advance. As the budgeted numbers are available, an analysis is done of the past seasons sales. Other important factors taken into consideration are:

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a Retail Brand

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THE PRIVATE LABEL SS 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 private label. Each private label caters to a different target audience. • Stop, the first private label from SS, is present it offers to the customer is value for money.

across product

Vittorio Fratini and Mario Zignoti are Premium • Haute Curry is a Women's

categories

Formal and Casual wear Men's Brands.

Fusion Brand.

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

EVALUATION OF PERFORMANCE Each merchandise category is evaluated footage, labour and inventory, i.e.

in terms of targets and the returns

• GMROI - Gross Margin Return

on Investment

• GMROF - Gross Margin Return

on Footage

• GMROL - Gross Margin Return

on Labour

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

IT-the backbone of growth Considerable 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 all the roles in the organisation across departments and hierarchical levels. A Fox Pro based system was developed to support these requirements. However, the information was largely people focussed and there was no consolidation. After 1995, a number of new entities entered the retail marketplace. SS had also increased presence from one store to three stores and the management felt the need for implementing

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Retailing

554

Management

integrated enterprise-wide software solution. After studying the market at the end of 1997, JDA was identified as being the most appropriate integrated packaged software solution. After getting VSAT connectivity, 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 cause of failure. The leadership tasked a 12-member team to review the way in which the JDA solution had been implemented and to identify changes required. System changes were implemented as part of an over organisational re-structuring programme. Today, IT helps integrate various functions like Warehousing, Supply Chain Management, Buying & Merchandising, Finance and HR. Various softwares like Oracle for Finance and Accounting, JDA and Arthur Planning for Buying and Merchandising and HRMS for HR are used today, as shown in Figure 2:

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The organisation has also moved on from VSAT connectivity to a dedicated leased line, so that the service office provides 24 x 7 support. Achieving people efficiencies was sought, and this to a great extent, has been achieved as, from a team of forty people handling 3 stores, today there are 170 people handling 13 stores. SS has close to 400 vendors supplying merchandise. Of these, 110 suppliers are integrated with the system in operation. While warehouse logistics are outsourced, integration of the suppliers has helped reduce cycle time. Going ahead, the IT team is now probing the option of providing mobile cashiering 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 to each of the stores; now, with an online supply network system, the company has opted for regional distribution 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 at Bangalore services the Chennai store. The nucleus of retail management is buying right and replenishing right so that the availability is optimum. The online supply network based on the ERP package handles merchandise management, warehouse management, automated replenishment and sales management. The merchandising management module helps decide on the right kind of products that have to be bought for the store. It can be anything ranging from a particular brand, fit, style, material and colour of trousers, for instance. The module identifies vendors, fixes the buying price and selling price and even raises purchase orders. It also points out what merchandise a particular store is carrying at that point of time. On the other hand, the automated replenishment system indicates

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a Retail Brand

555

when stocks have to be replenished. For example, if out of 50 Arrow shirts, five have been sold, the system automatically orders for replenishment. This ensures that with minimal effort, the stock is replenished. Similarly, the warehouse management system manages the inventory throughout the supply chain. This module indicates from which part of the warehouse to pick up a particular colour or design of merchandise.

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Before the online ERP package came into function, the distribution system was completely dependent on individuals who were in charge of receiving, tagging and storing the stocks, and since most of the stocks were stored in cartons, it was difficult to identify the stocks in the absence of the particular individual who had received the stocks. The online supply network has increased the availability as well as restricted the buying of excess stock. The objective is to see that the customer doesn't leave the store because he couldn't find something that he wanted. Apart from ensuring efficiency in the supply network between the vendors, warehouses and the stores, the system has increased customer satisfaction. Apart from the current online supply network, the retail group has also implemented a B2B link with 125 vendors through a Web-based technology. This gives online information to the vendors as to how a particular brand is selling, and the stocks situation. At present, merchandise is received 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 on the shelf before the first customer walks into the store.

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CREATING THE BRAND EXPERIENCE

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Shoppers' Stop has always aimed at providing a superior shopping experience to the retail customer. Keeping this in mind, it has created events and promotions which target either an increase 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 Year Award. This was awarded to young and budding designers for Image, Design and Creativity. While this 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.

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

556

Retailing

Management

Photograph Courtesy: Shopper's Stop Limited Taking the experience platform further, the festival of India, 'Parikrama' was created in the year 1998. Over the years, Parikrama has been redefined as a festival, which celebrates and enjoys Indian 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 their unique talents like Miniature Painting, Bead Jewellery, Terracotta, Sholapith Work, Lacquer Toys to Palm 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 private label 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 embellishments using bead work, mirror work and traditional prints. The colours used were Indian reds, flame oranges, 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 Seven Wonders Festival'. For this festival, each store reflected the characteristics, sights, sounds and feel of the seven wonders - The Eiffel Tower, the Leaning Tower of Pisa, the Pyramids of Egypt, the Great 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 performers like the unicyclist, 'the Statue Man' from Italy-a man who refused to budge, a juggler from France who juggled with things like knives and devil sticks, dancers, painters and a troupe of colourful Red Indians who performed traditional Native American rituals among many other added attractions. A large 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 and helpful staff has ensured that the customer stays loyal to the store. Creating a unique brand experience being the central theme of all the advertising, promotions and events, in the year 2006-07, the Company had an exciting Christmas festival, 'Fly to Santa Land', in the month of December. This two weeks long festival offered the lucky customers a unique opportunity to fly to the Santa Claus Village in Finland to meet the real Santa. The other major events that conducted were 'Gear up for School' for school going children, Salwar Kameez Dupatta Exchange 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 India this year. During the Parikrama festival, customers also got an opportunity to interact with local artisans who were specially brought to the stores to promote and sell their crafts of embroideries they master in. CUSTOMER SATISFACTION & LOYALTY Shoppers' Stop strives to provide its customers with the best overall experience of shopping. To measure the customer experience, the Company conducts customer satisfaction surveys to evaluate a range of parameters, including merchandise range and quality, store environment, staff, .transaction efficiency, loyalty programme, schemes and promotions to name a few and undertakes improvements in various areas. The Company also includes select competition stores in the surveys in order to measure experience in the stores as compared to competition.

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Case 6 Shopper's Stop-Building

a Retail Brand

557

Overall Customer Satisfaction Index the year :l enjoys lsust 8th .ed their ~Toys to .ccasion, ~pnvate Javours, shments s, flame f-whites.

(Scores out of 100)

Source: Company Annual

Report, 2006-07.

loyalty Programme

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

and feel :ypt, the

First Citizens also earn differential Citizens receive :

• Reward points on all their spends. merchandise at the Company.

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for a wide variety of

during

the festive season.

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outside the stores,

• Home delivery of altered merchandise. • Exclusive First Citizens lounge at select stores to relax after hectic shopping. *'l

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 Citizens First. Through this service, First Citizens get all the information that they want on their mobile phones, simply by sending an SMS. The Company, in association with Citibank, has offered its First Citizens an option to add on a credit card to their existing loyalty cards. This enables First Citizens to add on a credit line to their purchases. They also have the added advantage of being able to choose from amongst various attractive financing options, cash back schemes, EMI schemes ete. for buying at the Company's stores. For customers who are averse to credit, there is an option of activating a debit card. As on 31 March, 2007, the number of members in the eo-branded card programme crossed 114,000.

IN KEEPING WITH THE CHANGING Jing. To evaluate It, staff, :lertakes

tier of membership.

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reward basis on their current

TIMES

The last few years have seen rapid transformation in many areas, setting scalable and profitable retail models across categories. Indian consumers are rapidly evolving and accepting modern formats overwhelmingly. Retail space is ne more a constraint for growth. India is on the radar of global 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 are firming up plans to identify investment opportunities in the Indian retail sector. The quantum of investments is likely to sky-rocket as the inherent attractiveness of the segment lures more and more investors to earn large profits.

Retailing Management

With the largest young population in the world-over 890 million people below 45 years of age - India is indeed a resplendent market. India has more English speaking people thari in the whole of Europe taken together. Its 300 million odd middle class, the 'Real' consumers, is catching the attention of the world. As the economy grows so does India's middle class. It is estimated that 70 million Indians earn a salary of over INR 800,000 ($18,000) a year, a figure that is set to rise to 140 million by 2011. The number of effective consumers is expected to swell to over 600 million by 2010 - 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 products and brand communication are some of the factors that are catalysing organised retail in India. Over the last few years, many international retailers have entered the Indian market on the strength of rising affluence levels of the young Indian population along with the heightened awareness of global brands and international shopping experiences and the increased availability of retail real estate space. Development of India as a sourcing hub shall further make India an attractive retail opportunity for the global retailers. Retailers like Wal-Mart, GAp, Tesco, j C Penney, H & M, Karstadt-Quelle ete. are stepping up their sourcing requirements from India and moving from third-party buying offices to establishing their own wholly owned/wholly managed sourcing and buying offices, which shall further make India as an attractive retail opportunity for the global players. 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 Report 2007, the total private consumption touched INR 20,000 billion (US $ 445 billion) at current prices in 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 at INR 12,000 billion ($270 billion). Moving forward, organised retailing is projected to grow at the rate of about 37 per cent in 2007 and 42 per cent in 2008. Organised retail in India has the potential to 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-liberalisation mode. The Indian market is becoming bolder by the day, with the economy now expected to grow at over 8 per cent and average salaries being hiked by about 15 per cent, there will be a lot more consumption - 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 the types of stores and choice available to the customer. The repositioning of the department store had happened in the perception map of the customer. This change was not attributed to anything done by 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 not afford to be where it was in terms of positioning. In some categories, the store had kept pace with the changes in the customer and in some cases, it lagged behind. At this point in time, the Company made a conscious decision to move upwards as Shoppers' Stop the brand. It was envisaged that this entire 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 would have an impact on the consumer. These were identified as the brand itself, the space, the communication and the overall experience. This is illustrated in Figure 3.

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Stop-Building

a Retail Brand

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The Entire

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Enhancing the customer touch points

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

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

positioning

The look of the retail stores was also enhanced, which included the introduction of new formats like Arcelia and new brands being added to the portfolio, like Lancome, FCUK, Mac, Clinique and Tommy Hilfiger among others. According to media reports, Shoppers' Stop Ltd. will be adding 2.7 million sqft, ofretail area to its existing spread of 1.3 million sqft, over the next three to four years, as part of a Rs 1,000-crore plan that will include investment in new acquisitions, its other formats and the airport retail joint venture. The Company is looking at an investment of more than Rs 250 crore over almost four years. Overall, the Company sees an increase from the 1.3 million sqft of the Shoppers' Stop departmental 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 HyperCity format. The retail major plans another 24 more stores in 24 cities within the next four years, looking at 12 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 Book Store and HomeStop and it will invest Rs 25 crore in its airport retailing venture with the Nuance Group AG. Shoppers' Stop is also looking at increasing the size of its new stores from 65,000 sqft at present, to 85,000 sqft, which will give it.space for another 50-80 brands.5

5

The Financial Express, March 13,2008.

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 the strategy 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 do to 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 RE Less:

v«

Gross RE Other Or

Expenditu Cost of \ Employs Operatin

EBIDTA Interest Deprect Profit8E Profit AI Balance!

Share C Reserve Loan Fl Capiial Fixed A Net Wo

Profit & I Sales (. Sales (I Gross I Operati

Operat PBT M

PAT M: Interes Balance Debtor Creditc Stock' Curren Assets Debt E Return

t

Returr Returr Book' EPS ( I I Cash Dividenc

L

_ ~

Case 6 Shopper's Exhibit 1

Stop-Building

a Retail Brand

561

Financial Highlights (Rs. in million)

ii metros, Profitabiliy Slatement

aat is the , Stop do

2005-06

2004-05.

2003-04

22

20

16

14

12

8,850 387

6,660 311

5,001 114

3,953 110

2,949 25

8,463 258

6,349 191

4,887 79

3,854 91

2,924 81

8,721

6,540

4,966

3,945

3,005

5,688 585 1,661

4,322 403 1,249

3,421 288 920

2,712 224 764

2,077 172 560

7,934

5,974

4,630

3,700

2,809

787 44 256 487 262

566 24 139 402 271

336 39 90 207 190

245 40 75 130 120

196 32 58 106 106

348 2,665 1,131 4,185 1,450

344 2,356 586 3,285 1,225 1,713

274 673 874 1,821 1,096 614

274 511 589 1,374 770 501

265 389 494 1,148 660 380

33.2% 17.0% 30.4%

27.3% 9.1% 29.3% 24.2% 6.7% 4.1% 3.8% 8.2

34.0% 12.0% 28.9% 25.0% 6.2% 3.2% 3.0% 5.9

22.8% 9.1% 28.7% 24.8% 6.6% 3.5% 3.5% 6.2

2 63 4.1 1.9 3.1 0.8

2 57 5.8 1.9 2.4

13.9% 13.0% 24.85

2006-07

No. of Stores Income Gross

Retail Sales

Less: Value Added Tax

:SS?

Gross Retail Sales (Net of taxes) Other Operating

& Miscellaneous

Income

Expenditures Cost of goods sold Employee

costs

Operating

and administrative

expenses

1; EBIDTA Interest

and finance

charges

Depreciation Profit Before Tax Profit After Tax Balance

Sheet

Share

Capital

Reserve

Items

& Surplus

Loan Funds Capital

Employed

Fixed Assets Net Working Profit

2,247

Capital

& Loss Ratios

Sales (Chain

level growth)

Sales (Like to Like growth) Gross

Profit Margin

."Operating

Exp,,:nses

Operating

Margin

Ratio

(EB1DTA)

PBT Margin PAT Margin Interest Balance

Coverage Sheet

Debtors

No. of bays

Stock Turnover Current

Ratio

Ratio

As!>ets Turnover

Ratio

Debt Equity Ratio / Returntoi~v~stors ••

,'

_....

• -'.'<'

,,-

.

~

24.8% 8.4% 6.0% 4.1% 18.1

3 55 3.7 2.9 2.4 0.4

2 54 3.9 3.0 2.6 0.2

2 65 3.4

9.2% 6.4%

22.0% 14.2% 34.55

15.4% 12.4%

87.23

14.9% 11.3% 80.86

7.58 7.57 15.00

8.12 8.10 12.41

4.44 4.42

1.50

1.50

6.94 6.91 10.22 1.00

1.9 3.1 0.9

0.8

•

Return

on Nelworth

Return

on Capital

Book.Value

8.9% 5.5% 3.0% 13.7

Ratios

No. of Days

Creditors

32.7% 21.0% 31.4% 25.4%

Employed

Per Share

(in RS.)

28.70

EPS (taking equity share at Rs. 101- each) (In Rs.) Basic Diluted CashEPS Dividend

Per

Share

4.04 4.04 6.23

7.23

Source: Company Annual Report 2006-07, - ----

.~- ..

--

page 29.

,-

Retailing Management

562 Exhibit 2

A Graphical Presentation of Customer Entry and Conversion ratio Customer Entry

25

,

19.9 20 18.3

1°10

Cp..7-

E E c

= 2:-

C~

15

"The be but we',

12.2

C Q)

Q) E .2

10

C/)

:> U

Sam walton the customs shop at var

5

0 2001-02

2002-03

2003-04

2004-05

2005-06

2006-07

In a ye, Wal-Mart w Diluted ea! 8.:L per cer

40

\ val- ~vI for the Co record for about $30 more imp: global ret:

35

cases, it a

30

This become

Year

Conversion

(Source: Company MIS)

Ratio

[-u- Conversion

Ratio

I

\Val-~

~

,I

0

0

25

COMPA

~ ~I

0

20

The birt Permey, employn further {

.~ (J)

> c

15

0

o 10

In variety

5

S

0 20.01-02

2002-03

2003-04

2004-05 Year

2005-06

2006-07 (Source: Company MIS)

'This case 1Compan 2Compar

Source: Company Annual Report 2006-07.

3Compar

E