![](\"..\/images\/spacer.gif\"){kind=spacer}
Businessworld, \n February 14, 2011<\/i><\/p>\n Businessworld, \n February 14, 2011<\/i><\/p>\n
Vishal \n Krishna
\n <\/i> <\/p>\n
Shoppers Stop (SSL) has topped the list of the Most Respected \n Companies in the retail category for the third year in a row. \n The company, which started as a small retail outfit in 1991, now \n has 34 stores across 13 cities in the country. It has been rated \n No. 1 by its peers in all categories except one. While the rating \n on quality of its management, innovativeness, products and services, \n ethics, people management and global competitiveness are higher \n than all its competitors, it is second to Pantaloon Retail in \n financial performance.<\/p>\n
“Shoppers Stop has been built brick by brick by passionate \n and committed people who have always gone one step forward in \n serving our customers,” says B.S. Nagesh, who spearheaded \n the company for 17 years and now continues to mentor the top management \n as the vice-chairman. The customer focus is reflected in its financial \n results. Though it suffered a loss of Rs 81 crore in 2008-09 due \n to low buyer sentiment thanks to the global recession, it turned \n around in 2010, ending the year with a profit of Rs 50 crore. \n “Our focus on systems, processes and best practices has helped \n us achieve the best results,” says Govind Shrikhande, managing \n director of Shoppers Stop. He says that differential positioning, \n good merchandise range, service and ambience have helped the company \n remain connected with customers. Adds Nagesh: “For me the \n test of what I have built over the years is customer satisfaction \n and the continuing performance in the current year.” <\/p>\n
In the third quarter of 2010-11, SSL generated a turnover of \n Rs 515.9 crore and a net profit of Rs 27.9 crore, a 24 per cent \n and 45 per cent jump, respectively, over the third quarter figures \n of 2009-10. And in the nine months of the fiscal, revenues have \n risen 24 per cent to Rs 1,401.5 crore and net profits, 63 per \n cent to Rs 55.2 crore.<\/p>\n
Shoppers Stop’s success can be partly credited to some \n key strategic decisions taken by the company, including its focus \n on sharing sales data with merchants and suppliers. Once this \n data was made available, merchants realised that since buying \n patterns were different across locations, they had to stock particular \n items at particular stores and locations, thereby increasing customer \n satisfaction and sales. Earlier, in the absence of robust data, \n buyer behaviour was unpredictable. But now, the number of members \n in its loyalty programme, First Citizen, has increased to over \n 1.8 million (and contributes 73 per cent to sales). With such \n data, SSL is able to understand what will sell where and what \n won’t. This has led to lower inventory and higher margins.<\/p>\n
SSL works on two models. Under the buyout model, which contributes \n 60 per cent of revenues, apparel is bought from brand owners at \n factory price and the inventory is solely managed by SSL. Second \n model is the consignment model where the vendors themselves manage \n the inventory. This model is fast picking up.<\/p>\n
“Retail as an industry has been recovering and this is \n partly related to reduced rentals and better inventory management,” \n says Devangshu Dutta, CEO of Third Eyesight, a retail consulting \n firm.<\/b> <\/p>\n
SSL has renegotiated rentals on all its properties and now the \n company follows a revenue sharing model with the builders. <\/p>\n
Its EBITDA (earnings before interest, taxes, depreciation and \n amortisation) increased by 28 per cent to Rs 42.71 crore in the \n third quarter of 2010-11. “A fall in property prices was \n the key, and retail sentiment has also picked up,” says Shrikhande.<\/p>\n
The company has several other points to its credit. In mid-2010, \n it acquired a 51 per cent stake in HyperCity, a food retail format. \n Currently, it has seven stores of this format and each is around \n 75,000 sq. ft. SSL plans to increase the number of HyperCity stores \n to 26 in the next four years. The current investment in this format \n is Rs 61 crore.<\/p>\n
SSL also has different retail subsidiaries catering to various \n needs. There’s HomeStop, a home décor format with \n four stores in three cities, and Arcelia, another retail format \n with one store in Pune. The company has also moved into specialty \n retailing. Mothercare, a maternity, infant care store was started \n as an exclusive franchise agreement for departmental stores with \n Mothercare UK. Currently there are 28 stores of Mothercare (including \n eight standalone stores) across 11 cities. Then there’s Crossword, \n SSL’s bookstore, which has 33 outlets across the country. \n The company also set up MAC, a high-end cosmetics store, a couple \n of years ago in a retail agreement with Estee Lauder. At present \n there are 15 MAC stores in Mumbai, Bangalore, Delhi, Amritsar, \n Chennai and Hyderabad. Under cosmetics, SSL has also another brand \n called Clinique, which has seven stores at present.<\/p>\n
SSL is also betting big on airport retailing. It has one store \n at Hyderabad’s domestic airport and two at Bangalore’s \n domestic airport. Besides, two duty free stores are run by the \n JV company Nuance Group at the Bangalore international airport. \n However, airport retailing is yet to break even.<\/p>\n
Not all decisions made my SSL in the past have paid off. The \n company has made its share of mistakes. It introduced catalogue \n retailing through Argos and entered into a joint venture with \n the UK-based retailer. However, this did not succeed and SSL wrote \n off losses of Rs 35 crore. Then four of its small-format food \n retail stores, ExpressCity, shut down within months in 2007-08.<\/p>\n
Currently, the challenge for SSL is to keep its rivals — \n Lifestyle and Pantaloon — at bay. These companies have a \n higher share of private labels, especially Pantaloon, which boasts \n a 75 per cent private label collection. Then there is Lifestyle, \n which follows a similar model as SSL but has been rapidly expanding \n and increasing its private label collection to more than 25 per \n cent. SSL, too, expects private label sales of more than 25 per \n cent this year. Shoppers Stop has positioned itself as a premium \n retailer and so is in direct competition with Lifestyle, which \n is a close second in the BW list.<\/p>\n
SSL will need to draw on its 20 years of experience and continue \n to innovate to stay ahead.<\/p>\n
<\/p>\n
No 2: Lifestyle International MD Kabir Lumba’s Lifestyle \n has a strong merchandising team and a great product range. <\/b><\/i><\/p>\n
No 3: Pantaloon Retail Kishore Biyani, MD, will focus on \n the aspiring Indian rather than the Indian who has higher income \n <\/b><\/i><\/p>\n