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Cover Story
 

Retail goes on a charm offensive
Some Nifty Retail Strategies, Putting in Place a Superior Customer Relationship Programme and Introducing World Class Retail Technology and Practices, all have helped The Department Store Chain to be on top of The Retail Game.
Issue Date - 26/05/2011
 
The financial year 2010-11 was a good year for the K Raheja Group promoted Shoppers Stop. Two years after the financial downturn, the company recorded a positive double-digit growth for the first time. And there’s more! Even as the industry has been growing 15% annually (according to Retailers Association of India), Shoppers Stop clocked a promising growth of 20% last fiscal.

So what are the factors driving the financial growth of the company? Recalibrating its business supported by a good strategic plan helped Shoppers Stop steal the show from its rivals (read Pantaloon, which grew at 17%). “Our fine tuning of the business model was accomplished by undertaking rent correction, cost control and inventory rationalisation. We repositioned the brand as a bridge to the luxury space and the consistency of our standards in terms of the quality of merchandise & service along with the appeal of our customer loyalty programme helped a lot in the financial growth of the company,” says Govind Shrikhande, Customer Care Associate & Managing Director, Shoppers Stop Limited.

In fact, the chain’s customer loyalty programme, christened The First Citizen, has proved to be a huge success, so much so that there were 2.8-lakh First Citizen offers last year. It helped Shoppers Stop garner 60% of revenue generation from loyalty programmes alone. Loyalty programmes – that offer special discounts and easy rewards to regular customers – are structured marketing efforts to encourage customers to frequent a company’s outlets and spend more by offering them attractive rewards and discounts. In the fast-growing and competitive retail market of India, brand positioning depends a lot on customer loyalty. The trend for customer loyalty programmes has caught on fast and retailers such as Future Group, Landmark Group, Reliance Retail, Indus League and others are now making their loyalty programmes even more attractive by taking them to the mobile phone platform and even adopting a gender-based approach. Reliance Retail, ever since its launch five years ago, started its loyalty programme for the first time last year. Pantaloon has its ‘Green Card’ programme which enables customers to fill in their basic details. Currently, there are about 1.8 million customers under its loyalty programme.

Customer loyalty being the result of a well-managed customer retention programme, and as 50% of Shoppers’ Stop’s sales are drawn from Customer Relationship Management (CRM) initiatives, the chain has taken CRM to an even higher level. Going beyond its loyalty programmes, the company has now introduced customer experience management. This way, Shoppers Stop has converted the concept of retail into an experience, an indulgence. To gain insight into the international practice of customer service and new retail concepts, Shoppers Stop became the member of Inter Continental Group of Departmental Stores (IGDS), becoming the only Indian member among the 29 other celebrated retailers of the world. Says Shrikhande: “Our focus on best practices & systems have also added to our revenue and financial growth.”

 
However, when it comes to retail penetration, Shoppers Stop has been following a selective strategy. Until 2001, the company had just seven stores, whereas Westside from Tatas, which also followed a selective retail strategy within the first 10 years of its operation, had 14 stores. But Shrikhande points to a more aggressive retail penetration strategy in recent years. “In the last 10 years, we opened another 31 stores. In the next three years we plan to open another 31 stores. This is phenomenal growth vis-à-vis what we have achieved over the last 20 years. Maintaining our focus on delivering happiness to customers while growing at a fast pace will be the key challenge,” he avers. The chain’s cautious approach to expansion has had an up-side and paid off well during the bad times. When retailers such as Pantaloon and Woodland have had to close down 10 stores during the slowdown to combat rising rental cost, Shoppers Stop didn’t have to shutter any of its stores.

Today, even as it is pulling out all stops to position itself as a global retailer by bringing the world’s best retail technology and practices to its customers, the chain is looking to add more stores and has lined up investments worth Rs 450 crore over the next four years. The company has eight Hypercity stores and 36 Shoppers Stop stores across the country at present. But right now the biggest challenge for the group is to foray into tier I cities where Pantaloon, Lifestyle and other players have already entered much earlier. Pantaloon, with its comparatively easy-on-the-pocket portfolio of private labels mints 50% of its turnover from tier I and tier II cities. But unlike Pantaloon and Westside, both of whom have been thriving on private labels, Shoppers Stop has been banking on its power brands to grow, which are expensive than the private labels. The group has more than 400 international brand in its portfolio and that’s what makes Shrikhande confident about taking on the competition. However, its bridge-to-luxury positioning might not work in tier I cities. So positioning Shoppers Stop in tier I cities remains a challenge. Concurs Shrikhande: “Understanding different kinds of customers in smaller cities is a big challenge. Ramping up the supply chain, developing quality teams in the smallest of stores, maintaining the values of the company, developing multi channel capabilities, delivering shareholder returns, etc. would be the other challenges.” And with Westside planning to open 30 stores by this fiscal year in tier II cities and Pantaloon, too, sounding the battle cry, the competition in the retail space will only get tougher in the coming years. That will prove to be the real test for Shoppers Stop.

Angshuman Paul           

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