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Capston Project On Shopper'S Stop (Retail) : Prof. Kamal Tandon
Capston Project On Shopper'S Stop (Retail) : Prof. Kamal Tandon
Capston Project On Shopper'S Stop (Retail) : Prof. Kamal Tandon
TM
Submitted by: Praveen Shukla Roll No: 01 II Semester EP GPBM 2007-09 (Andheri) Project Guide:
ACKNOWLEDGEMENT
Several people have been extremely helpful in making this project successful. I would like to express my sincere gratitude to Professor Kamal Tandon at S.I.E.S. College of Management Studies.
Any endeavor is not possible without the love and support of family, friends and God. So I would take this opportunity to thank them all.
Last but not the least I would like to thank Mr. David Dsouza (Store InCharge, Shoppers Stop, Malad West) for taking his time out in discussing the problems and providing accurate data.
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TABLE OF CONTENT SYNOPSIS INDIAN RETAIL SECTOR AN OVERVIEW KEY DRIVERS OF THE ORGANISED RETAIL INDUSTRY THE VIRTUOUS CYCLE CHALLENGES IN INDIAN RETAIL KEY CATEGORIES DRIVING RETAIL GROWTH RETAIL FORMATS ORGANIZED RETAILING: NEED FOR A PROACTIVE OUTLOOK SHOPPERS STOP SWOT ANALYSIS COMPETITIVE STRENGTHS GROWTH STRATEGY OTHER ARRANGEMENTS MANAGEMENT STRUCTURE OPERATIONS ADVERTISING AND PROMOTION MANAGEMENT INFORMATION SYSTEM (MIS) ESOPs CONCLUSION BIBLIOGRAPHY
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SYNOPSIS
India retail industry gives an employment of around 8% and contributing to over 10% of the country's GDP. Retail industry in India is expected to rise 25% yearly being driven by strong income growth, changing lifestyles, and favorable demographic patterns. Shopping in India has witnessed a revolution with the change in the consumer buying behavior and the whole format of shopping also altering. Industry of retail in India which has become
modern can be seen from the fact that there are multi- stored malls, huge shopping centers, and sprawling complexes which offer food, shopping, and entertainment all under the same roof. Today, retailing is about so much more than mere merchandising. Its about casting customers in a story, reflecting their desires and aspirations, and forging long-lasting relationships. As the Indian consumer has evolved they expect more and more at each and every time when they steps into a store. Retail today has changed from selling a product or a service to selling a hope, an aspiration and above all an experience that a consumer would like to repeat. Modern retailing is all about directly having "first hand experience" with customers, giving them such a satiable experience that they would like to enjoy again and again. Providing great experience to customers can easily be said than done. Shoppers Stop (SS) is the leading department store company in India. It has built robust management systems to capitalize on the growth potential in the organized retail space, particularly the department store segment. However, the stock has priced in the bulk of its upside potential leaving little room for positive surprise, in our view. SS enjoys a unique advantage of having a strong presence in the niche department store segment, which is likely to face limited competition from both foreign and domestic players. In our view, income elasticity in this business segment is high, and as India per capita incomes grows, SS should capitalize on its growth potential. The company has a strong, loyal customer base, relatively high earnings visibility and low business risk. Efficient business systems, better/standard companywide business practices and a balanced portfolio lowers SSs business risk. SS plans to enter new segments such as home improvement and hypermarkets. These can give up further upside to the stock if successful.
Given the 30% growth predicted in organized retail and SSLs retail expansion plans, we expect the company to record revenue CAGR of 31.6% on a consolidated basis over the next 3 years.
The modern malls cater to shopping, entertainment and food, all under one roof. It was estimated that India will have over close to 50 million square feet of quality retail space by the end of 2007. The growth in mall space has been over ten fold in our years: from about 2 million square feet in 2002 to 28 million square feet in 2006. The Indian Retail market is estimated to be worth around Rs. 14,100 billion. The organized retail market has increased its share from 3 % in 2004 to around 4 % in 2006 and is valued at Rs. 511 billion (source: India Retail Report 2008, Technopak Advisors Private Limited).
The low median age of the population means a higher current consumption spend vs. savings as a younger population has both, the ability and willingness to spend. The younger population is also quicker
at experimenting. The Indian consumer in among the youngest in the world as compared to the ageing population of USA, China, Japan, UK etc. Higher consumption is a direct booster for the retailing industry.
Technology
Technological changes are being adapted for use in retail. Retailers are using call centers and cell phones to keep their customers informed of new developments, schemes and offers.Technology is being used to improve the customer experience, customer information, security, logistics and supply chain management resulting in finding favor with the consumers and increasing operational efficiency thus enhancing profitability.
Fluidity
The retail segment is expected to become more fluid now, with an increasing number of super-sized stores ranging in stocks from grocery to healthcare products. It is expected that the traditional formats will collapse into each other (source: India Retail Report 2008, Technopak Advisors Private Limited).
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customers in terms of lower price, better quality, greater selection, improved service and in-store ambience.
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Technology
Technology is important to cut costs, improve efficiency, providing value to customers and increasing the customer experience. IT solutions help in synchronizing activities across various verticals such as procurement of inventory. Security from both external and internal threats is also important when the scale of the operations increases.
Logistics
The efficiency of logistics and supply chain management systems are curtailed due to infrastructure constraints. The wider range of products make supply chain management even more complex. Efficient logistics services help organized retailers streamline their operational dynamics and thus more profitability.
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Retailers have to continuously upgrade systems and keep expanding their presence, both to provide better services to customers and maintain their position in the market. The retail industry has benefited from the partial relaxation of restrictions on FDI in the real estate sector. However, in the retail sector, FDI is allowed only in the cash and carry formats and to the extent of 51 per cent in single brand retail operations.
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Footwear
The footwear market stood at Rs. 122 billion in 2006, up from Rs. 111 billion in 2005. The category is poised to grow at 11% . The contribution of organized retail stood at 36 % in 2006 and is estimated to reach 38 % by this year end.
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Personal Care
The personal care category accounts for 5% of the total retail market with a size of around Rs. 700 billion. This category is seeing a growth rate of around 14% . The organized retail accounts for around 10% currently.
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The furniture and furnishing market is relatively small in India with a large portion coming from the unorganized trade. The size of this category in 2006 was Rs. 17 billion of which Rs. 2 billion is from organized trade. The category is poised to grow at 15 %.
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*Other formats include speciality stores in Apparel, Footwear, Watches, Furniture & Furnishing, Toys, Convenience formats etc.
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The total volume of retail trade in India is around $330 bn which is expected to increase to $500bn by 2011. Only 3 to 4% of total retail business is currently in the organized sector. The rest is in the hands of innumerable small and unorganized sector players. The giants of Indian business such as reliance, future group, RPG group, bharti, etc... , have come forward to invest huge amounts into the retail business. The support from the government seems rather lukewarm and ambivalent. This may be a concern situation if large business houses enter into retailing, they might replace small retail shops and lead to unemployment. This view, however, has its strong detractors. Some findings revel that the employment to floor-area ratio in organized retail is almost the same as that in unorganized retail. But the quality of environment in which people are employed, and the salary that they get, are of much higher order than in unorganized retail. However, the major efficiency gain from these modern value chains comes from their large-scale direct buying from the source, both local and global. It is noticed all over the world that big and small retailers work side by side and have progressed well. it is also to be borne in mind that in order to have 10-11% of retail marketing in the organized sector, huge investments are required to create the necessary infrastructure, which in turn will generate additional employment not only for those who may be replaced by the organized retail sector, but also for many other unemployed people. Organized retail has tremendous growth potential in the fast expanding Indian economy. Not only will it benefit millions consumers but also farmers, small manufactures and artisans. The sector will also offer enormous direct and indirect opportunities while attaching huge investments in building the supply chain infrastructure, adding to the economic growth of India, especially in rural areas. It will also be able to supply consumers with quality products and service at reasonable price. A well planned and well organized retail business will ensure that the customers will benefit not only by way of quality products but also in prices due to the bulk buying capacity of big retailers.
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In case FDI is permitted in the multi brand retail business, we can get access to international experience in this field. This would bring modern technology in transportation and logistics, which would have beneficial multiplier effects on various sectors of the economy. For example, we need technology in the harvesting, storage, handling and packing of fruits and vegetables. Today, more than 40% of our horticulture produce is spoiled due to poor handling, storage and transportation. Rather than clearing the entry of big international retail players like Wal-mart, Carrefour, Tesco and Sainsbury, we might consider the possible benefits of their entry into India. In case these players are allowed to enter retail business, they will not only bring in capital and advance technology, but also help boost our exports.
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hoteliers in the country. They are pioneers in setting up a nation-wide chain of large format department stores in India with professional management. They believe that the initiatives taken by them have played a key role in developing organized retailing in India. Their focus on bringing in the international best practices into the retail operations, and providing the customer with a unique shopping experience has helped them become an industry leader. They are a professionally managed and systems driven organization. They believe in strong focus on customers, supported by systems and processes and a committed work force are the key factors that have contributed to their success and will help them scale up as they embark on their strategic growth plan. They believe that delighting customers is the key to being a successful retailer, and hence have built the business model around their customer. Their focus is centered on developing Shoppers Stop and its various associate brands as leading retail brands and capitalising on the emotional connect that they have been able to create with the customers. Every employee in the organization is called a Customer Care Associate (CCA), including the MD, Executive Director and CEO who are designated as Customer Care Associate and Managing Director and Customer Care Associate, Executive Director and CEO respectively to reflect their belief in customer care and service. They offer their customers a shopping experience, comprising a vast range of lifestyle merchandise, various services and aspirational products made available to them in a globally benchmarked shopping environment and complemented by superior customer service. Their Service Mission Statement is Its Magical, Its Comfortable, Its My Store. They benchmark with global retailers, and strive to enhance their service offering in line with the emerging global trends. They began by operating a chain of department stores under the name Shoppers Stop in India. Currently they have twenty four (24) such stores across the country and three (3) stores under the name HomeStop. Over the years, they have also begun operating a number of speciality stores, namely Crossword,
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Mothercare, Brio, Desi Caf, Arcelia, Stop & Go and MAC. They are also experimenting with other formats of retailing through their various ventures.
Shoppers Stop
Shoppers Stop is the flagship business of departmental stores. They retail a range of branded apparel, footwear, perfumes, cosmetics, jewellery, leather products, accessories, home products, electronics, books, music and toys in their stores. They also retail their own private label apparel, footwear, fashion jewellery, leather products, accessories and home products. These are complemented by cafe, food, entertainment, personal care and various beauty related services. Promotions and events are an integral part of their service offering to their customer, which helps them to create a unique shopping experience. They retail products of domestic and international brands such as Louis Philippe, Pepe, Arrow, BIBA, Gini & Jony, Carbon, Corelle, Magppie, Nike, Reebok, LEGO, and Mattel among others, through their stores. They retail merchandise under their own labels, such as STOP, Kashish, LIFE and Vettorio Fratini, Elliza Donatein, Haute Curry, I Jeanswear, Insense, Mario Zegnoti, Acropolis and Indi-Visual. Their designer section show cases some of Indias prominent fashion designers (Ritu Kumar, Satya Paul and LABEL), retailing affordable designer wear. They are also licensees for Austin Reed (London), an international brand, whos mens and womens outerwear are retailed in India exclusively through their chain. Their loyalty program, called First Citizen, had 781,951 and 971,537members as on March 31, 2007 and December 31, 2007 respectively. It is one of the largest loyalty programs in the country. First Citizens accounted for over 62% and 61% of their Retail Sales for the year ended March 31, 2007 and nine months ended December 31, 2007. They offer them First Citizens rewards points on their purchases, special offers and discounts, and invitations to exclusive events and promotions. They are the only member of the Intercontinental Group of Departmental Stores, (IGDS) from India. IGDS, headquartered in Switzerland, is an international association of department stores enterprises who, in order to increase their economic efficiency and productivity, have 22
agreed to closely cooperate on mutual know how accumulation, networking and joint services in respect of all issues relating to the department store industry. Membership of the IGDS is exclusive and includes renowned department stores such as Marks & Spencer (UK), Selfridges (UK), Karstadt (Germany), Woolworths (South Africa), Central (Thailand), Far Eastern (China), Matahari (Indonesia), Parkson (Malaysia), C.K. Tang (Singapore), Marshall Fields (USA) and Manor (Switzerland).
Crossword
Crossword is a speciality store in the leisure bookstore category. The store focuses on methodical classification, clear signages, and dedicated enquiry/order desks. There are cafes, reading tables and stores within the store to enhance the customer experience. The product mix consists of books, magazines, CDROMs, music, stationery and toys. Forty eight (48) Crossword stores are currently being operated, out of which twenty six (26) stores (including 10 shops in shops) are run by the Company and twenty two (22) are Run by external franchisees
HomeStop
HomeStop is a format which retails hard and soft furnishing and home accessories. Their offerings through HomeStop ranges from hard furnishing such as home furniture, modular kitchens, health equipment and recliners, and soft furnishing such as mattresses, draperies, carpets and home accessories such as decorative accessories, kitchen accessories and appliances,. They are currently three (3) HomeStop, one each in Mumbai, Bangalore and New Delhi.
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Rajouri.
Hypercity
They have a 19% stake in Hyper city Retail (India) Limited, which operates the store named HyperCity. The store, having an area of approximately 124,500 square feet offers food and grocery, general merchandise and apparel. Currently, there is one HyperCity store in operation. Hypercity Retail (India) Limited has also opened three (3) stores called ExpressCity in Jaipur and one (1) store in Thane, to experiment with smaller versions of the format. ExpressCity is a retail format which is similar to a convenience store format primarily retailing food, grocery and household needs Shoppers Stop business has grown from one store in Mumbai in 1991 occupying an area of approximately 0.05 million square feet to approximately 1.50 million square feet across twenty seven (27) (including HomeStop) stores located in the cities of Mumbai, Delhi, Kolkata, Chennai, Bangalore, Hyderabad, Pune, Jaipur, Lucknow, Gurgaon, Ghaziabad and Noida. Their growth strategy is based on increasing the reach and penetration across the country by opening new stores and through multiple retailing channels and formats, and furthering Shoppers Stop as an experiential retail brand through unique national and international products. They also look at enhancing their merchandise width by adding new product categories and services, and strengthen their offerings by adding new brands and private labels to offer a better depth in each category. They also endeavour to enhance their base of loyal customers through the First Citizen Programme. They believe that as they grow in size and scale and expand the reach further, their current economies of scale would be further enhanced. They also continue to focus on at enhancing their operational efficiencies and human capital, which is critical
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in any service driven industry such as retail. They are also investing in other formats by way of joint ventures, licenses and franchisee arrangements. The following are the initiatives under such arrangements:
M.A.C.
They have opened M.A.C. stores under a Supply and License Agreement with the cosmetics major Estee Lauder. Currently it is operating four (4) MAC store in Mumbai, Bangalore and Delhi.
Arcelia
Arcelia is a new retail concept aiming at the bridge to luxury segment, with a strong emphasis on experience and indulgence and is primarily caters to discerning women shoppers. It primarily retails cosmetics, fragrances, fine jewellery, footwear, handbags etc. They currently have two (2) stores operational in Delhi and Pune.
Mothercare
Under an exclusive franchisee arrangement by virtue of a Development Agreement with Mothercare UK Limited, they have opened Mothercare stores, which market a variety of products for expecting mothers, babies, toddlers and children, the focus being on style, function and safety. It currently operates eighteen (18) Mothercare stores; out of which ten (10) are shop in shop and eight (8) are standalone stores.
Nuance Group
They have forayed into airport retailing through our joint venture with The Nuance Group AG, Switzerland. They will handle the retail operations in the domestic terminals while the joint venture company will handle the operations at the duty free zones in international terminals. The joint venture company, called Nuance Group (India) Private Limited, has already bagged contracts to operate outlets at the international airports at Bangalore and Hyderabad.
Timezone
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Timezone marks their foray into entertainment retail. They have acquired a 45% stake in Timezone Entertainment Private Limited which is in the business of providing family entertainment centres. It currently operates six (6) outlets in Mumbai, Ahmedabad, Kolkata and Hyderabad.
HyperCity-Argos
They have ventured into new formats of retailing, namely catalogue stores, call and collect stores, internet retail website and telephone orders through their subsidiary, Gateway Multichannel Retail (India) Limited under the name of HyperCity-Argos. Currently operating five (5) stores at Thane.
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Their Vision
To be a global retailer in India and maintain its No. 1 position in the Indian Market in the Department Store Category. They are clearly focusing on the Indian market, which they believe offers tremendous opportunities to department stores. At the same time, they benchmark themselves with leading retailers in the segment worldwide. It is the constant endeavor to bring in global best practices into the business and consistently upgrade themselves to offer to the customers an international shopping experience.
Their Background
One of their Promoters, Ivory Properties & Hotels Private Limited (IPHL), commenced its retail operations in the year 1991 under the brand name Shoppers Stop with its first store at Andheri, Mumbai. It started off with ready to wear mens wear and thereafter added womens wear in 1992, childrens section and cosmetics, perfumes and accessories in 1993. The company was incorporated on June 16, 1997. Soon after incorporation, IPHL executed a conducting agreement with them dated November 3, 1997 giving them the right to participate in running the departmental stores. This agreement was terminated and a fresh Conducting Agreement was executed with IPHL dated March 31, 2000. The brands, trademarks and goodwill of Shoppers Stop division of IPHL were also assigned through a separate agreement. In 2005 they made an initial public offering of 6,946,033 equity shares of Rs. 10/- each at a premium of Rs. 228/- per share to fund the opening of 11 new stores and the renovation and expansion of certain existing stores. They were awarded Most Admired Shopping Destination of the Year by the Images Fashion Forum, Retail Destination of the Year at the India Retail Forum and the Advertising Campaign of the Year at the CMAI Apex Awards, in the year 2005.
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In the journey of reaching 27 stores, They have received various awards and honours, some of which are, Most favoured retail destination of the year (2004), Retail Destination of the Year, at the India Retail Forum (2005) and the Advertising Campaign of the Year, at the CMAI Apex Awards, (2006), Gold Shield Award for excellence in financial reporting in their annual report for FY 2005-2006 as The Best in Manufacturing and Trading Enterprises category in January 2007 by ICAI. In FY 2006, they reported a net profit of Rs 402 million (before re-statement). Their gross retail sales were Rs 6660 million in FY 2006. Their operating profits stood at Rs 568 million in FY 2006 and our shrinkage was 0.40 per cent in FY 2006. Their gross retail sales increased to Rs 8850 million in FY 2007, and operating profits (earnings before interest, depreciation, tax, exceptional and non-recurring items) to Rs 787 million in FY 2007 and their net profit stood at Rs 262 million (before re-statement).
SWOT ANALYSIS
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They believe the following key strengths have helped them emerge as a prominent domestic retailer:
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framework of financial and legal decision making authority at all levels in their Company, right up to the CCA & MD and the CCA, Executive Director & CEO. They believe this will help them as they embark on the growth strategy and enhance their reach with the customers and help provide them a consistent brand experience across their stores. As they grow in size, systems and processes will be the key driver and differentiator to organised operations and enhanced profitability.
Distribution Center management is outsourced to service providers such as Toll (India) Logistics Private Limited. They believe their existing Distribution Centres, which have been designed to scale up, will be able to meet their growth requirements as they expand the number of stores. They have undertaken various initiatives in further improving the efficiencies of their supply chain, which they believe is critical for any retailer. These aim at meeting the conflicting requirements of reducing their inventory whilst ensuring availability of products at all stores as per customer needs, as well as reducing their operational costs.
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Increasing the penetration in existing cities and expanding their reach across the country
Increasing their penetration in existing cities with a larger number of stores, increasingly of larger size, will enable them to penetrate into new catchment areas within these cities and optimize their infrastructure. Enhancing their reach to cover additional cities amongst the top 50 cities of the country, will enable them to reach out to a larger population and become a preferred shopping destination for them. This will help them provide a platform to domestic and international brands wanting to reach out to domestic consumers with the same profile as their customers.
Furthering Shoppers Stop as an experiential retail brand through differential service and unique national and international promotions
They are continuously inducting and training CCAs to deliver a differential service, which they measure and improve through their customer satisfaction studies done through CSMM. They continue to focus on unique events and promotions to reinforce the Shoppers Stop experience and their brand image amongst their customers to become a destination of choice for them.
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Introducing new brands and developing private labels to offer a better depth in each category
They continuously focus on enhancing the depth and width of their merchandise. The private label and private brands initiative is part of such focus and offers a differentiating factor as compared to competition at the same time helping them to enhance margins. They have a tie up with Austin Reed (UK) wherein they are their licensee for India for mens outerwear such as tailored clothing to include suit, jackets, trousers, shirts, ties and mens smart casual wear to include trousers , jackets, shirts, knitwear and all items of women clothing. They continue to evaluate such opportunities for tie ups with national and international brands, which can be introduced in India through their stores. They may, in the future, also offer these brands to the customer through independent chain of stores that they may promote, should the market opportunity justify the setting up of the same. They have tied up with MotherCare UK Limited under an exclusive franchise to retail their product in India. MotherCare is a retailer of Kids wear and maternity wear and accessories.
Increasing their First Citizen base to enhance their base of loyal customers
The number of First Citizens increased from approximately 632,086 on March 31, 2007 to 781,951 on March 31, 2008. First Citizens accounted for 62% of their sales in the year ending March 31, 2008. As on 36
December 31, 2008, the number of First Citizens stood at 971,537and their contribution to the sales in the period between April 1, 2008 and December 31, 2008 was 61%. A higher base of First Citizens exposed to the Shoppers Stop experience, would help them to build customer loyalty. They believe, their new business intelligence software (called Business Objects) will help them understand the customer at an individual level, which may help in making more profitable sales to them, as well as meeting their needs in a focused manner. They believe with the addition of new stores and initiatives at their existing stores, they will increase the base of First Citizens. A higher base of loyal customers would attract various brands to join hands with them and use their stores to reach out to these customers.
Utilizing economies of scale as they grow in size and expand their reach
They believe that their existing corporate infrastructure and software systems have been designed for a higher scale of operations than their current size, and can help them with their growth plans without the need to significantly increase costs. They have in place their core distribution and logistics infrastructure, which can handle larger business volumes at marginal addition to costs. Higher business volumes will also improve their negotiating powers and help them get further economies of scale in their buying with opportunities of incremental margins.
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concepts such as GMROF, GMROL and GMROI to improve their productivity on space, labour and inventory. They benchmark their stores within the chain on performance parameters on historical as well as comparable basis to seek areas for improvement to reduce their operating costs and enhance their productivity levels. Their Baby Kangaroo Programme was recognized as top innovative HR practices by Delhi Management Association with Erehwon Innovation Consulting in 2006.
Their option to acquire a controlling shareholding in Hypercity Retail (India) Limited (Hypercity), setup to venture into mixed retailing
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One of the promoter companies, Inorbit Malls (India) Private Limited has incorporated Hypercity Retail (India) Limited. The objects of the said company inter alia include the running and managing of hypermarkets, supermarkets, etc. The company runs a store under the name HyperCity, in Malad, Mumbai, which is the business of food and mixed retailing, i.e. to provide all kinds of products to consumers at competitive prices through a hypermarket format. The company has also started three (3) stores called ExpressCity in Jaipur and one (1) store at Thane. In the event they view that the investment in Hypercity would be beneficial to them, they may acquire such shares. They believe that this option would be beneficial to them as it would allow them to participate in new retail formats as and when they consider such a venture profitable. As and when they acquire shares in Hypercity Retail (India) Limited, the same would be subject to regular market risk as any other equity investment. They have acquired 19 per cent equity stake in Hypercity Retail (India) Limited on March 17, 2007
Their joint venture with The Nuance Group AG for retail outlets in airports
In January 2007, we entered into a joint venture on 50:50 basis with The Nuance Group AG, Switzerland for managing and operating retail outlets in duty free zones at airports in India. The joint venture company has won bids to operate outlets in the Bangalore and Hyderabad international airports.
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MANAGEMENT STRUCTURE
The Chandu Raheja group holding structure is the promoter of Shoppers Stop with only the retail arm of the group listed.
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THEIR OPERATIONS
They currently operate 154 stores (including HomeStop) with 26 stores just in Mumbai, an aggregate area of approximately 4.50 million square feet. The real estate in which they
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operate their stores is taken on long term lease and conducting arrangements. They do not own any of the stores. The chart below illustrates the scheme of their operations.
Specialties
Retail, Hypermarkets, Department, Stores, Bookstore, Airport, retailing
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Departments:
Men Men's Apparel Men's Accessoris Women Women's Apparel Women's Accessories Kids Toys Mothercare Girls Boys
Home & Travel Home Travel Fragrances &Beauty Fragrances Skincare Makeup Gift Ideas Bargains & Discounts Crossword For Him For Her Gift Voucher
They review their store opening plans from time to time, and may open additional stores as per their competitive strategy for different markets in India. They have entered into contractual arrangement for 17 additional stores sites, aggregating an area of 1,842,572 square feet with the stores likely to be opened by FY 2010-11. They intend funding these and any additional stores that they may sign up from proceeds of this issue. They also periodically review their space requirements in existing stores and if required, may negotiate for additional space to meet their growth requirements.
Distribution Centers:
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They have four Distribution Centers (DCs) servicing their departmental stores and speciality stores across the country.
The service office housing the corporate functions is located in Mumbai. Store Planning and Set up
Planning and starting a store takes approximately between 6-24 months, depending on the stage at which the construction is when they sign on the property.
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24 years. They also optimize their investment in the store by getting the property developer to provide us with utilities such as air conditioning, escalators, lifts and electrical etc.
Store planning
They have a centralized Store Planning and Projects Team comprising of Engineers and Architects. This team focuses on setting up of new stores as well as upgradation of existing stores to: Create a store ambience that helps present the desired image to the market Facilitate customer convenience, circulation and store space productivity by Internal arrangement of selling/non-selling areas. They have currently engaged international architects and retail designers to design their stores. Portland Design Associates (UK) form the panel of architects that work with them for concept design and are supported by a panel of domestic architectural firms. This allows them to capture international trends and developments, and continuously bring in latest designs on retail store fixtures, lighting, building materials, signages and related elements. Hence, each of their stores may have a different look and feel, with improvements targeted at providing the customer with an enhanced international shopping experience. The store planning process begins approximately 2-3 months before planned handing over of the store shell to them by the property developer / their landlord. Since every store may have a different geometry and floor configuration, and also have a different space allocation for different departments and services, they draw up an independent plan for each store.
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Completing a store after receipt of the store shell typically takes between 3-4 months for fit out, wherein usually no occupancy charge is paid. The project supervision is done by professional project management companies appointed for each project. They have extensively defined operating procedures for all the activities governing the entire process as part of their SOPs.
Store Operations
Their stores are where they deliver to their customers the Shoppers Stop experience. Hence the store operations are one of the most critical functions. Their processes are designed to ensure that each aspect of the stores functioning adds up to delight the customer and reinforce the Shoppers Stop brand. Each of their stores is headed by a Store Manager, reporting to the Area Controller who looks after a group of stores. The Store Manager is responsible for the day to day operations of the store and is assisted by a team comprising of retail as well as back office personnel. The retail team is responsible for sales and consists of the CCAs responsible for serving the customer. The back office team comprises of support functions such as administration, security and housekeeping and store level representatives of corporate functions such as human resource, marketing, visual merchandising and accounts. The corporate functions executives report to both, the Unit Head as well as the functional head at the Services / Corporate office to ensure perfect synchronization.
Store Processes
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They have defined processes for all their functions for day-to-day operations, and to ensure consistency in customer experience across their chain of stores. Functions such as security and housekeeping which are outsourced are also covered under the process manuals, with strict control to ensure that they are rigorously followed. This enables them to meet their Service Vision Statement Its Magical, Its Comfortable, Its My Store. Their CCAs follow their operational guidelines and help customers to shop in a non-intrusive manner.
Customer assistance
The CCAs are regularly trained on product knowledge as well as selling and inter personal skills to ensure that their customers are well serviced and have an unforgettable experience within the store. They use in-store directories, size charts, signages and ticketing to make it easier for the customers to shop and find their way about, in line with their philosophy of non-intrusive service in line with international standards. Cashiering, alterations and exchanges are critical service areas that they focus on to ensure that the time taken with respect to each of these aspects helps them to meet customer expectations. Cashiers are trained and tested regularly on their speed to ensure quick checkout for the customer at the same time ensuring that customers in the queue are well attended. Similarly, they provide alteration services on purchase free of cost. They also permit their customers to exchange the merchandise purchased at the stores, which they are not satisfied with. They value customer feedback and view customers complaints as an opportunity to learn and build better ties with their customers. They have a well-defined complaint management process and strive to respond to all complaints within 72 hours of the complaint being received.
Visual Merchandising
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They use Visual Merchandising (VM) skills to present their merchandise at its best, in order to appeal to the customer. This is a critical in store activity with Visual Merchandising Team deciding on the theme as well as the manner in which the merchandise is proposed to be displayed across the stores nationwide. Scope of VM includes setting up of window displays as well as in-store areas to display merchandise. They draw up annual VM calendar at the beginning of the financial year based on the planned merchandise seasons and launches. This calendar is then used to draw up a complete VM plan along with designs, vendors and other details. Doing this centrally allows us to ensure a common visual merchandising theme across the chain of stores.
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The title of all the goods shall be at all times with them till they are sold to a third party. The service providers shall be responsible for maintaining all waybills, updating records in the register and also submitting them back to the Sales Tax Department.
Insurance
The insurance for the warehouse premises, will be taken by the owner of the premises. UTL or Shopper Stop Company will insure the stock during storage and transits as well as our equipment, if any placed at the warehouses.
Penalties
If attention of UTL is brought to the fact that there is a shortage in stock /goods lying in the premises of the service provider, UTL has the right to recover an amount equal to the cost price value of the goods from the service provider within 15 days after giving a notice in writing in respect thereto to the service provider. If any loss or damages is suffered by UTL or Shopper Stop on the happening of any of the events specified written notice shall be sent to the service provider shall make good all the loss suffered by UTL and Shopper Stop.
Statutory Compliance
All statutory compliance with regard to labour laws, rent (as applicable) and other charges including tax for running and operation of the premises shall be borne by the C&FA
Termination
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In the event of any breach of any of the terms and conditions of this Agreement and the service provider fails to remedy such breach within thiry (30) days of receipt of written notice from UTL, UTL has the option of terminating the Agreement;
UTL shall be entitled to terminate this agreement by giving to the C&FA, three (3) months notice in writing. This C&FA can wish to terminate this agreement by providing six (6) months notice to UTL.
While the infrastructure facilities for company DCs are set up by the service provider, these DCs work exclusively for the company and employ their software systems. Stocks are delivered to stores on a daily basis or once in two days (as per their needs) in the morning, to the Receiving Bay Incharge who verifies the stock and keeps it on the floor, which is then displayed on the shelves, before customers enter. They do not have any stocking point at the stores. This ensures that the desired service levels are effectively delivered, costs are variable, allows capturing economies of scale that the service provider is able to bring in. The service providers are accountable for all shrinkages in the distribution system.
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The B&M function works on the basis of two seasons (Spring-Summer and Autumn-Winter). Each season is broken down into 26 weeks, with planning and monitoring done at the weekly level. Based on market research, past performance analysis and forecasts for fashions and trends in the ensuing season as available from various industry bodies and research agencies, the B&M team plans and sources the product range for all our stores.
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Range Planning
Range planning is where their teams decide what to buy, how many options (types of merchandise) to buy and how much to buy of each option, and when to put it on sale. This is derived from the financial plans formulated for each season, for each division and department. B&M team with the help of the software can fine tune the range for each store.
Generally, each brand makes a brand offering for the season. The merchandiser, based on trends and past data, selects the range and places the order. For private label, we prepare the design brief for each season based on the trends and fashion forecasts. The design brief is converted into samples by our vendors, based on which we place the orders.
In Season Management
Monitors actual performance of their merchandise against the plan on a weekly basis during the season, and accordingly decide on the short term strategy to be adopted. These include special promotions, in excess of what had been initially budgeted. This may also require revising plans, and also purchase orders with vendors, wherever possible.
Private labels
They have a strong focus on in-store brands, which are also called private labels. These help the company to complement the product range that they receive from national and international brands and allows them offer to their customer an enhanced range across price points. Their private labels are STOP, Kashish, LIFE, Vettorio Fratini, Elliza Donatein, Haute Curry, I Jeanswear, Insense, Mario Zegnoti, Acropolis and Indi- Visual. Since the company does not advertise their private labels, costs are lower enabling the company higher margins as well as permitting to offer the customers quality products at lower price points. Private labels accounted for 21% of our sales in FY 06-07. It is their endeavour to enhance the share of private label portfolio in the total sales, but as a policy they will not take the share to more than 25%, as this would dilute our brand offering to the customers.
Gift Vouchers
They also sell gift vouchers, which are purchased by customers for gifting purposes. These gift vouchers can be used in any of our stores for purchase of merchandise. Individuals and corporate purchase gift vouchers for their gifting purposes.
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Concessionaires
These are arrangements under which they provide concessionaires with a demarcated space within store to sell its products. The concessionaire is responsible for its inventory and also employs its own staff at its counters. They monitor the product range as well as the sales staff to ensure consistency with the Shoppers Stop offering. The company gets their margin in the form of trade discounts under such arrangements, with a fixed minimum amount. They have such arrangements with Gili India Limited, Rockym Optimor Private Limited and Sterling Meta-plast Private Limited among others.
Conducting arrangements
Under this arrangement, the company permits others to conduct their business in their stores in demarcated areas, and in return pay them a conducting fee. The conductor has its own billing and cash collection system, and independently manages its operations. The conducting fee that the company receives from such arrangements is generally fixed as a 55
percentage of the revenues generated by the conductor subject to a fixed minimum amount.
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Promotions
Shoppers Stop use promotions as an important part of our marketing tool to reinforce the brand positioning Feel the experience, while you shop. The promotions are targeted at enhancing the fun in shopping and providing the customer with a unique shopping experience and not just on offering discounts and bargains. Their belief is to give more for same and not same for less. The companies plan their annual promotions calendar and carry out these promotions simultaneously across all our stores. Some of our promotions and events include:
Parikrama: Festival celebrating Indian tradition and culture, which not only
serves to bring the consumers closer to culture, but also provides a platform to promote upcoming artisans from remote and rural areas giving them an opportunity to showcase their art and craft at Shoppers Stop.
Rims And Dials : A festival which solely focuses on watches and sunglasses Do Your Denim : This event is geared towards bringing out the creativity of
customers to design their own denim jeans
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Besides these, they organized several other festivals such as: Disney Carnival, in 1993, with official Disney characters from Disney Inc (Mickey, Minnie, Donald and Goofy) participating. The Tycoon Tie Festival in 1994, in which the largest tie in the world was displayed and featured in the Guinness Book of World Records. Festival of Britain, in 1996 in collaboration with the Government of Great Britain. The Buy and Fly to Seven Wonders of the World, in 2001 which provided customers an opportunity to win a trip to the Seven Wonders. They also hold sales at the end of each season (twice a year to mark the end of each season) wherein they offer a range of discounts on our merchandise. These not only help them clear their inventory, but also bring in larger number of customers into the stores.
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First Update from Shoppers Stop First Update is a complimentary bi-monthly magazine sent to Golden Glow First Citizens. The articles are written keeping in view the lifestyle preference of the customer covering various topics such as health, shopping, product specific information, , fashion trends, new arrivals in store, store updates, contests/offers, entertainment and travel.
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The SOPs provide guidelines for most of our business activities and define the steps to be undertaken as well as responses for a variety of situations that may arise. They believe this offers us significant advantages and enables them: 1. Provide customers with a consistent service delivery across organization, which helps them, strengthen their brand and bondage with the customer 2. Respond to situations and developments in a predictable manner 3. Capture learnings and best practices from across the organization and enhance efficiencies in the operations 4. Reduce operational risks by permitting them to identify issues and areas of concerns and deviations from set processes 5. Reduce dependence on individuals, including those in critical functions 6. Induct new employees faster Ranking the stores is based on their compliance with the SOPs. They believe the trust on systems and processes will help them manage their growth better, and will be the key driver and differentiator to organised operations and enhanced profitability.
Shoppers Stop
investments to generate valuable insight for them and helps them in improving the operations, as well as in enhancing the speed of response to what the customers want. They are thus able to monitor their performance on a day-to-day basis, across stores, departments and product categories and compare the same with other stores as well as across periods. This helps them take corrective action on time , and optimize stock. They are in the process supplementing Business Intelligence capabilities through the deployment of Netezza, a next generation data warehousing appliance. They believe that this is the first time that any company is using this technology in India. They have also invested in Oracle Data Integrator (formerly Sunopsis) to map the source systems to the Business Intelligence platform. They are currently using Business Objects to analyse data related to the buying trends of loyalty customers. They use this insight to customize our offerings to our loyalty base, which in turn, enhances their shopping experience leading to increased repeat visits.
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The Process Index covers factors within the control of Company whilst the Overall Index also covers additional factors that may be outside the control of the Company but may have an impact on customer satisfaction. CSI scores are made available at the unit level for each of the above parameters as well as for the chain. This allows them to track performance on customer expectation at overall, segment and unit levels, determine critical improvement areas at all levels and also identify opportunities that can leverage upon. CSI score acts as an indicator of employee performance with several of managers having the CSI score as a Key Result Area (KRA) in their performance appraisal.
The Work Factor Index covers parameters that directly impact the employee whilst the Overall Index covers additional factors such as company loyalty and image, which also influence employee satisfaction, but are outside the purview of the immediate manager.
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They are one of the first Indian retailers to use external research agencies to track Employee Satisfaction scores. They also participated with Walker International in one of its worldwide researches that links customer satisfaction with employee satisfaction.
Technology
They are technology oriented organization and use information systems extensively across their operations, to enable them to optimally benefit from systems and processes. Their focus on technology dates back to the time when they started business, even whilst were a single store company. Since then, they have remained abreast of the developments in IT usage in the retail sector globally and have progressively introduced new software solutions across various functions. Beginning with a computerized cash memo in their first store in 1991, to use of FoxPro for operations & accounting and eventually, implementation of a complete ERP from JDA, they have gradually extended the use of technology in the various areas of operations. Most of the critical functions such as Supply Chain, Operations, Finance & Accounts, Customer Loyalty Program & Human Resources are linked through a computer network. This has enabled to reduce their time to market and respond to the changing customer requirements. This has also helped to reduce the costs of operations through both, reduction in wastages and missed opportunities as well as a consequent reduction of the overall costs of operations.
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IT Backbone
Entire organization is networked and connected with the 27 stores and 4 Distribution Centers (warehouses) linked up to the Services Office through high speed leased line. They have almost 600 point of sales machines and over 1000 desktops or laptops connected to over 75 servers spread across our different locations, through leased lines and Integrated Services Digital Network (ISDN). They have data and network security systems managed by HCL COMNET. They also have deployed some external third party packaged software solutions (from some of the leading global vendors) while some of the software systems have been developed in house. They continue to invest in IT systems to upgrade the same to be able to better serve their requirements and enhance operational efficiencies.
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Human Resource
Human resource policies are targeted at creating an engaged and motivated work force. They have a fairly young team with the average age of the organization being 26 years as on January 31, 2008. Managing a young team engaged in a service intensive business with largely repetitive work is one of the challenges that they face. With competition from other service companies including retailers and ITES/BPO companies, retaining CCAs is another challenge that they face, and therefore they view retention of key personnel as a priority task. Efforts in building a conducive work atmosphere has helped in having lower attrition rates than the rest of the industry. Attrition level for the front end Customer Care Associates was 81 per cent in FY 20067 and has decreased to 60 per cent in FY 2008. They provide a conducive work atmosphere and opportunities for their employees to learn and grow.
from personnel within the organization through a process of scientific selection based on assessment centers as on March 31, 2007 and December 31, 2007, respectively. This is mainly due to the reason that makes them strongly believe in providing the associates with career paths within our Company through cross functional exposure and role enhancement as part of the developmental process.
Training
Their corporate objective is to provide every associate with an average of 5 man days of training per annum through internal and external resources. All senior management members are required to contribute 30 hours per annum towards training. In order to support a learning culture, they provide at our discretion, reimbursement for fees for relevant professional courses that eligible associates enroll in. There are tied up with City and Guilds, UK, to provide a distance learning and certification program for Customer Care Associates who have been identified as having potential to grow into supervisory roles. International exposure is provided to associates with potential. On an average, annually about 50 associates get an opportunity to visit retail establishments in different parts of the world through the International Group of Department Stores (IGDS). Internationally acclaimed professors are brought into India to train our associates on strategic issues of retail management. Another thing being to also investing in an E-learning platform to enable associates take courses from their individual work stations at their own convenience.
Compensation Policy
Compensation policy reflects continuing efforts to build a world class performance driven culture. They benchmark them selves on compensation externally through consultants biannually, and aspire to be on the upper quartile of percentile. target segment, comprising of FMCG companies and other retail companies and are currently at the 75
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Variable pay is an important component of total compensation, with all associates covered under Profit Linked Reward Scheme (PLRS), linking individual performance and Company profitability. Part-time and full-time employees are eligible for PLRS. Almost 60% of Customer Care Associates earned PLRS in the year ended March 31, 2007. They also have Employee Stock Option Plans (ESOPs). Eighty five (85) employees held stock options under our ESOPs as on date of this Draft Letter of Offer. They also contain monetary reward scheme called Jo Jeeta Wohi Sikander which recognizes excellence in work under various categories i.e. Best CCA, Supervisor, Store, etc. Winners in each category are recognized through awards and ceremonies and are given individual prizes such as Trophies and Gift Vouchers.
Communication to Employees
Shoppers Stop also have a bi monthly in-house magazine called Re-Tale, which helps in our endeavour to enhance transparency and communication across levels. Associates are encouraged to write in to the editor with their concerns and the CCA and MD are required to respond with a solution through this magazine. Conducts focus groups wherein they have participation from cross functional and cross level associates where they can voice their thoughts, issues or opinions to the facilitator.
Competition
They retail a range of branded apparel, footwear, perfumes, cosmetics, jewellery, leather products, accessories, home products, electronics, books, music and toys. Along with this they have their own private label apparel, footwear, fashion jewellery, leather products, accessories and home products. This is complemented by caf, food, entertainment, personal care and various beauty related services. Promotions and events are an integral part of our service offering to our customer, which helps us create a unique shopping experience. Tough competition from other retailers of similar products and services. These include stand alone stores in the organized and unorganized sector, as well as other chains of stores including department stores. The competitive landscape in the retail industry has 67
altered drastically in the last couple of years. Several large players have announced mega plans to enter this sector and existing players are also ramping up their capacities to meet the fresh, untapped demand and competition. They balance that by focusing on offering customers a unique shopping experience with a combination of promotions and events. It is because of this and the service and ambience that they offer; they believe has been able to create a differentiation in the mind of the customer vis--vis our competitors where similar products and brands are available.
Social Responsibilities
Responsible corporate citizen and make a conscious effort to contribute to society at large. They support NGOs such as Child Rights and You (CRY) and Concern India Foundation. In association with CRY, launched eco-friendly bags and donate part of the proceeds from their sale to CRY. They also periodically conduct exchanges as part of the promotions and donate the old garments collected to Concern India Foundation.
Capacity Utilization
Existing in the business of retailing of goods and services where capacity and capacity utilization cannot be quantified
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determine the terms and conditions of the options vested/granted. Presently it has the following ESOP schemes in place namely ESOP III, ESOP IV, ESOP V-1, ESOP V-2, ESOP V -3, ESOP V- 4, ESOP V- 5 and ESOP V-6 (ESOP 2005). ESOP- III was approved by their members on March 31, 2004 and was revised on July 30, 2004. Options under ESOP-III have been granted to eligible employees and Directors on April 19, 2004 and are already vested and are due for exercise for period of 3 years from its respective vesting. ESOP IV was approved by the members on July 30, 2004 and revised on January 22, 2005 by the Board. Options under ESOP-IV have been granted to eligible employees and Directors on January 22, 2005 and its two tranches has already been vested and are due for exercise for a period of 3 years from its respective vesting. The last and third tranche is due for vesting on May 1, 2008. ESOP 2005 was approved by the members on December 07, 2005 their Extra Ordinary General Meeting. Options under ESOP 2005 have been granted to eligible employees and Directors on December 28, 2005, July 29, 2006, October 28, 2006, August 23, 2007 and January 28, 2008.
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CONCLUSION
For a start, these retailers need to invest much more in capturing more specific market. Intelligence as well as almost real-time customer purchase behavior information. The retailers also need to make substantial investment in understanding/acquiring some advanced expertise in developing more accurate and scientific demand forecasting models. Re-engineering of product sourcing philosophies-aligned more towards collaborative planning and replenishment should then be next on their agenda. The message, therefore for the existing small and medium independent retailers is to closely examine what changes are taking place in their immediate vicinity, and analyze Whether their current market offers a potential redevelopment of the area into a more modern multi-option destination. If it does, and most commercial areas in India do have this potential, it would be very useful to form a consortium of other such small retailers in that vicinity and take a pro-active approach to pool in resources and improve the overall infrastructure. The next effort should be to encourage retailers to make some investments in improving the interiors of their respective establishments to make shopping an enjoyable experience for the customer. As the retail marketplace changes shape and competition increases, the potential for improving retail productivity and cutting costs is likely to decrease. Therefore, it will become important for retailers to secure a distinctive position in the marketplace based on value, relationships or experience. Finally, it is important to note that these strategies are not strictly independent of each other; value is function of not just price, quality and service but can also be enhanced by Personalization and offering a memorable experience. In fact, building relationships with customers can by itself increase the quality of overall customer experience and thus the perceived value. But most importantly for winning in this intensely competitive marketplace, it is critical to understand the target customer's definition of value and make
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an offer, which not only delights the customers but also is also difficult for competitors to replicate.
Bibliography:
http://www.indiaretailbiz.com http://www.indianrealtynews.com TSMG report on retail http://www.retailangle.com www.shoppersstop.com wikipedia.org/wiki/Shoppers'_Stop www.fibre2fashion.com/news/company-news/shoppers-stop/ India Retail Report 2008, Technopak Advisors Private Limited CSMM, A division of IMRB international.
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