Under the leadership of its managing director Venu Nair, India’s first department store chain Shoppers Stop is reinventing itself once again with a focus on beauty and private labels along with a host of other initiatives. The question is, will it succeed in recreating its old magic?
New Delhi: In June last year, Shoppers Stop outbid some of corporate India’s heavyweights including Reliance Retail, Tata Group’s Tata Cliq and Nykaa to snap up a 1,300 sq. ft. retail space at the Bengaluru airport. The Mumbai-based department store operator has been eyeing that particular space in the Terminal-2 of the airport to open a flagship store of its SS Beauty. Now, Shoppers Stop is planning to roll out that store in mid-September, ahead of the crucial Diwali-led shopping season.
“It would be something absolutely stunning and different from what we have done so far,” said Venu Nair, Managing Director of Shoppers Stop. “The whole look and feel of the beauty store would be absolutely different with very high ceilings, lighting, LEDs right at the entrance, fragrance finder, virtual mirrors and a lot of engagement tools within the store. And, of course, the best of the international brands will be present,” Nair added. Shoppers Stop has a couple of similar beauty flagship stores in the pipeline.
Growth Drivers
Aggressive bidding for the Bengaluru airport’s location illustrates Shoppers Stop’s new strategy to focus on the burgeoning beauty space as a future growth engine. The Mumbai-based company has also zeroed in on its clutch of private brands as the second pillar of future revenue generation.
Over the years, the country’s oldest department store operator renewed its emphasis on its private brand by trimming the number of such labels by more than half to 11 own brands from 25. Currently, 21% of total apparel sales in Shoppers Stop come from the company’s private brands.
Private Labels Push
The company – which opened its doors way back in 1991 and played an important part in ushering in modern retailing in India – has private brands including Kashish occasional wear, Indian fusion brand Haute Curry, menswear Fratini and casual label Life among others.
“Stop is the single-largest brand across our entire chain, and it is a 200 crore-plus brand. So, we have some of these brands that are quite large,” said Nair in a video interview earlier this month from his office at Malad in Mumbai.
“We certainly hope so,” Nair said when asked if some of the brands have the potential to be 500 crore businesses in the coming years. Over the years, Shoppers Stop not only curtailed the number of its private brands but also occupied larger shelf spaces, comparable to any other national and international brands that the department store chain sells.
“The 11 brands got appropriate space and in line with other brands. We don’t say just because it is a private brand it will get bigger space (in our stores). It gets the same space as the other brands,” Nair said. “For the customers, it doesn’t matter whether it is a private brand or a national brand. They are coming to shop for brands. So, each brand has to define a lifestyle for the customers to shop for,” he added.
Display Matters
In the new stores, Shoppers Stop said it has also made its shopping experience seamless by having similar store design for each of the brands—whether they are national, international or private brands. The earlier practice was that each outside brand would showcase its products through different store design as per their own fixtures and choices.
“If you see our old stores every brand would put their own fixtures and colours so it would end up in a bit of mismatch,” Nair explained.
Shoppers Stop hosts shop-in-shop of many brands including Jack & Jones, Adidas, Calvin Klein, FabIndia, Biba, Levi’s, Tommy Hilfiger among dozens of other brands.
Nair took the stewardship of Shoppers Stop in late 2020, at a time when India and the world was battered by an unprecedented pandemic. Like legions of other retailers, Shoppers Stop’s revenue took a hit during the Covid years as customers stayed away from physical stores for fears of catching the virus. Nair is a retail veteran with experience of retailing experience of about three decades and had served as heads of Westside and Marks & Spencer in India prior to his latest role at Shoppers Stop.
Shoppers Stop operates 270 brick-and-mortar stores nationwide including 98 of its eponymous departmental stores and about two dozen stores in various airports, according to the company’s latest annual report.
Big on Beauty
Shoppers Stop is already among the top sellers of beauty products through brick-and-mortar stores with more than 140 beauty stores of MAC, Estée Lauder, Bobbi Brown, Clinique, Jo Malone, Too Faced and SS Beauty among others. Beauty is one particular segment Shoppers Stop is keen to build on. The company plans to open 15-20 beauty doors of SS Beauty and other mono brands each year for the next few years.
“Beauty and personal care market is 2.2 lakh crore and that is a sizable market in India. Out of this, premium beauty is around 18,000 crore annual market,” Nair said. “Per capita consumption of beauty is very small in India. If you compare our per capita consumption compared to South Korea or the UK, we are almost 1/10th of that; and if you compare us to China or Japan we are almost 1/15th or 1/20th. So, the headroom for growth is enormous,” Nair elaborated.
Retail industry watchers said Shoppers Stop had tried to reinvent itself many times in the past as well but with limited success. Harminder Sahni, co-founder of retail consultancy Wazir Advisors, said it has to be seen how committed the company is in its current approach, especially in beauty.
“In the current market a lot of other competitions are doing a lot of things with a full heart and passion,” he said. “Shoppers Stop has to keep pace with them and shun the company’s traditional pace of initiatives. It is a very aggressive space.”
A top executive of a foreign fashion brand said both Shoppers Stop and rival Lifestyle International at present are opting for divergent routes for future growth. While Lifestyle is focusing on sharper-priced point products and trying to become a little more affordable, Shoppers Stop, on the other hand, is targeting the premium segment.
“So, there is now a strong differentiation between the two which is good for both,” he said asking not to be named. “Also, both have benefited from Central going down,” he said referring to the shutdown of Future Group’s department store chain Central which was among the largest players in the pre-pandemic period.
New initiatives
In the latest quarter ending June 2023, Shoppers Stop reported a drop in its net profit by 36.5% to 14.49 crore compared to 22.83 crore in profit in the same quarter ending June 2022. Meanwhile, sales rose 4.76% to Rs 993.61 crore in the April-June months compared to 948.44 crore for the same quarter in 2022.
Shoppers Stop said the drop in profit is due to a rise in the company’s costs by about 10% in the April-June quarter owing to investments into SS Beauty stores, SS Beauty webstore and its entry into the footwear private brand category as well as value fashion retailing format through Intune. Shoppers Stop launched Intune in Hyderabad in June and lately, the company has opened two more stores.
Shoppers Stop said it will take EBITDA (earnings before interest, taxes, depreciation) gestation period of about three to four quarters and the company expects the new initiatives to ‘payback’ in the next 12-18 months.
Multichannel Approach
Over the years, Shoppers Stop has also transformed itself into a multichannel retailer which means all the merchandise in every category the company sells in its stores is also visible real-time on the company’s website and on its mobile phone app. Synchronised marketing and themes that are run in the stores are also extended to online shoppers. Furthermore, the company has introduced pricing parity in all its offline and online channels. In the backend, the teams including buying and merchandising are integrated as part of the multichannel strategy. “Only the front-end teams are separate, the rest are integrated with the business,” Nair said.
The Competitive Landscape
Department store chains have been under a lot of stress in markets including the US and the UK in recent years. Retailers like Neiman Marcus, JCPenney, Century 21, Lord & Taylor, Barneys New York, Gordmans, Debenhams, Arcadia Group have filed for bankruptcy in recent years amid dwindling sales and ballooning debts post-Covid and competition from online and other nimbler brick-and-mortar chains.
Nair said unlike in the West, modern retailing is just starting to make inroads into India’s vast unorganised market and, hence, there is a big room to grow.
“Modern retail has existed in those markets for 100 years. For example, M&S is about 139 years old now. Comparatively, we are the oldest department store chain in India and we are only 32 years old. So, the evolution is very different,” Nair said. “Over a period of time, in the West, there has been saturation in terms of the number of stores a place can take. Hence, there was an oversupply and that has caused a large number of rationalisations.”
He said modern retail is still in its “infancy” in India where branded stores and online channels only account for about a third of the country’s estimated $900 billion annual retail market.
“So, a lot of growth in retail is coming from the unorganized moving to organized. As it happens, the runway for department stores like us is very long. That is why we are going to newer markets,” he said.
While the runway might be longer for India’s department store business, it is expected to become more competitive in the years to come.
Reliance Retail and France’s Galeries Lafayette are expected to enter the market in the coming years and existing players including Dubai-based Lifestyle International ramping up. Then a host of e-commerce players including Amazon, Flipkart, Myntra, Ajio among others are also chipping away at the market-share with their deep discounting strategies.
Shoppers Stop said competition is healthy and helps grow the overall market. Side by side, Shoppers Stop is working on the “store of the future” for the company. “Even as we speak, we are already looking at what would be the store of the future. What will be the next evolution of the store,” Nair said. “It would be quite different but it is still in an early stage. We are still on a drawing board. It would be at least six months before we start work on it. Working with the architects on the look and feel of the store.”
The chief executive of the global brand quoted above doesn’t seem to be impressed. He said his brand is seeing some short-term growth from department stores as such stores saw a late rebound in their businesses post-Covid. Therefore, department stores are currently on a short-term growth trajectory. He said doing business with department stores is increasingly becoming an expensive proposition for companies compared to brands opening their own mono-stores.
“I don’t look at them (department stores chains) highly as part of my future strategy,” he said. Given the current competitive landscape of department stores in India will Nair be able to make Shoppers Stop a force to reckon with?
The article is previously published in Images Retail August issue 2023
