Study 1: Growth Implementation Strategies at

Shoppers Stop Limited

Background mark of modern retailing standards in
The growth of Shoppers Stop in the the
Shoppers Stop Limited is a
chain of retail firms currentlymulti-brand outlet
department store format based inoperating as a
Vice Chairman Mr B. S. Nagesh is words
vision, To be a global retailer in India
in India
county.
diven by itg
Mumbai.
origin of Shoppers Stop Limited is traced to The tain No.1 position in the Indian and main.
market
day when the K. Raheja Group of the department store category".
Shoppers in the
Mumbai laid the foundation for opening Companies, emerged as the largest chain of Stop has
apparel store in a 3000square feet area in athe
Ambar, Oscar, Minor cinema theatre
men's
old
department stores in the country.
The focus here is on the large-format
strategies
building in Andheri owned by the group
27
complex
on
October 1991. As the theatres were closed, the
byby Shoppers
Shoppers Stop
Stop to achieve growth.
growth can take place by many means in
adopt
Busineesds
group had the ready real-estate space retail organization. The factors that
retail. The very next year, the category available for
of women's
ready-to- wear apparel was added and in 1993 the
the achievement of business growth are influence
divided by researchers into two categoriesbroadly
children's category and organic and inorganic growth. Growth of asuch
accessories too were retail company is generally measured in terms of
included. The store was expanded subsequently
to occupy 55,000 square feet in Andheri. The its geographic expansion and increased revenues
sprawling store spread out in aself-service brows profits and assets. In order to achieve growth. a
ing format soon offered aunique company can innovate and create new product
rience to customers. Shoppers Stop shopping expe lines to retail by expanding its format base or by
modern retail in India and is the highest pioneered creating new formats or can merge and acquire
bench another company. The growth of a company
 with the help of its efficient management is called Store Format Strategy
organic growth and a company that chooses to
grow with the help of mergers and acquisitions is
called inorganic growth. This is als0 called intemal it was iitially a tenly t, Eat atvparel store whern
and externalgrowth. it opened itt 199l, it gre , ene a depart
Organic growth is growth from within. It is nent stote in 199in 4tiultu band 1ornat. fhe
planned and slowly increases in the size and reseah ourvey tias i i i atej thhat the size of the
resources of the firm. A firm can grow intemally typital hpper: 1) s1re i ati average o
by recapitalizing its profits into the business every 66,600 quare feet
vear. This leads to the growth of production and Product Mix
sales turnover of the business. Internal growth
may take place either through increase in the sales heovet all tittorut oiz at stioppers Siopurrerity
of existing products or by adding new products. acodioa to the reearth is 64 er cent appare
and 32 per teit iofi apparel. fhe major epat
Internal growth is slow and involves comparatively nent, indude Apparel: rnen', woie, Kio a
little change in the existing organization structure.
It can be planned and managed easily as it is slow. Non Apparel: Fragranices and eauty, horme and
Iravcl and aift idjea,. The cateyory miz in spectic
The ways used by the management for internal
growth include: sales contribution in Shoppers Stop currerntiy is
men's apparel 35 per ent, wornen's apparel
" Format strategy 19 per cent, Kids 14 per cent and non-apparel
" Financial strategy and 32 per cent. The study points out that Shoppers
Store operations strategy Stop's product differentiation cornes from its pri
vate label strategy (private label is a product or
Inorganic growth, it can also be termed as external variety of products offered by aretailer under the
growth. Inorganic growth involves a merger of firm's own name in competition with branded
two or more business firms. Afirm may acquire goods. Private label products, like non-branded
another firm or firms may combine together to goods are normally cheaper than brandeditems)
improve their competitive strength. External The firm's private labels contribute to 20 per cent
growth has been attempted by firms through the of the total merchandise sales. Globally, private
two strategies (a) mergers and acquisitions and labels contribute 17 per cent of retail sales with a
(b) joint ventures. An attempt will be made in this growth of 5 per cent per annum. "International
case study to find whether the firm Shoppers Stop retailers like WNalmart of USA and Tesco of UK have
Limited has followed any such external growtn 40 per cent and 5S per cent own label brands rep
strategy as inorganic growth is fast and allows resentation in their stores. respectively."
immediate utilization of acquired assets.

Merchandise mix Category mix

32% 32° 1996

Men's appare
OApparel
ONon-apparel Woman's appare

KId s appare

Non-apparel
68%
14 19%

KPMG Study 2008

lot or R'ail: Time to change lanes,
As part of its
1Sion Through Alliances strategic approach based on its partner
egy efforts to implement
its growth mix,
uct range/quality and its process strengths. prod-
Shoppers
and category Stop has
mix with extended strat The Location Strategy
its departments
firm has branded considerable focus. The Shoppers Stop is established as a
and rolled outa its home section as Home Stop
spin-off of an
Stop in Bangalore in independent Home
format with its stores being located in
as independent stores and in malls high
destinstatreetions
Stop entered into a 2005. Similarly Shoppers play the role of anchor stores. The they where
with leading beautynon-exclusive retail agreement large size, independent high-street ofobjective
the
Estee Lauder, and cosmetics brands and
Make-up Art Cosmetics (M.A.C.),like format according to the study is to mall
Cinique and Bobbi footfalls into the
Brown in India as a strategy to sion into business. stores to bring
make successful captive
partner with them, since 2005. In October 2005,
Conver-
Shoppers Stop entered into an exclusive
agreement with the UK-based Mothercare franchisee
Plc to Financial Strate8Y
Open Mothercare stores across India. The firm
strengthened its format by the Funding StrategY
category base, which provides expansion of such The financing philosophy at Shoppers
economies the
of large-scale operations.firm
To
with the
cater to attempts to limit the financial leverage to avoid Stop
the groWing customer base in the
in India, Shoppers Stop airport segment compounding the firm's already high operating
leverage in the business. A major
ture agreement with The entered into a joint ven
overheads (occupancy cost, energy portion of the
Nuance Group AG of ment cost, etc.) are fixed in naturecost, employ
Switzerland, the world's
2007. The joint venture leading airport retailer, in
and pose a
major risk to the company in the event of low sales.
Group company, called Nuance
(India) Private Limited is currently operat- So the firm avoided debt as a
ing outlets at the
International strategy. As a policy it has beenprominent
restricting
financing
Shoppers Stop forayed intO theairports in India. Equity ratio to less than 1. Bringing in equityitsfinance
Debt:
sector by acquiring 45 per cent stakeEntertainment
in
from new shareholders to finance
expansion was
Entertainment Private Limited which is inTimezone
the busi-
the right step taken to give stability
Stop's growth plans. The first was by way to Shoppers
of setting up and ing Private Equity players to participate in theof invit
ness

Entertainment Centres (FECS). operating Family

In 2000 Shoppers growth. The private placement to a clutch firms
Stop bought 5 per cent stake in Crossword, the of PE
book store chain and hiked its stake players like Morgan Stanley, OCBC, ICICIVenture
holding to Fund, IL&FS Investment Fund in Feb 2000 brought
100 per cent in 2005 and thereafter a concession in
the much needed $ 60 crores ($ 600
aire book format extension was made in million) to
Ston stores to sell books and its related Shoppers fund the first major bout of expansion of the com
categories pany by opening new stores as well as by building
of merchandise through the Crossword brand in the required
addition to the independent Crossword stores. infrastructure and resources (like tie
The aroup also opened a hypermarket Tormat implementation of new ERP systems, setting o
distribution centres to
Hypercity as a separate business entity in 2006. Sion, etC.). This moneysupport the business expa
diion HomeStop, the first of its kind of pre- face also helped the compaly
the crisis created by dwindlina sales in a reces
mium home concept store from snoppers Stop sionary market in 2000-01
Ltd. is housed as a shop-in-shop concept within
Shoppers Stop, which provides high quality home firmThewasnext the milestone
decision in
to funding
go publictheforgrowth oftthe
generating
dcts in national and international brands, public equity funds. The first
Initial Public Offering
with wide and deep product assortments under was made by the firn in May 2005. The company
one roof. raised$its
The firm's format strategy is significantly finance
165 crores ($ 1.65 billion) from the IPOto
next stage of expansion. Bytakingthe
com
impacted by its focUs on Customer service, Company publicthe firm was also able to enjoy the
Customers and a clear
munication with its loyal advantages of being a public limited company.
 In order to fund further expansion, the com- exposed and decides the steps to be taken to
pany wanted to approach the shareholders once address them. The risk committee's membership
includes all the senior nmanagement members of
again through a Rights Issue in 2008 but was
unable to do so because of the unfavourable con the company. Risk mitigationtakes different forms
ditions in the Stock market. However, Shoppers in the firm. Conservative insurance covers all insur
Stop continues to contain the Debt: Equity ratio able assets of the company. The Manual of
under 1 as at the end of FY 2016. Debt: Equity Authority (MOA) and Standard Operating
ratio is an important ratio that determines the Procedures (SOP) ensure discipline al every lunc
leveraging of the company's capital structure. tional level to adhere to the directions decided for
The other ratio considered while planning debt the organization. A best-of-breed internal auditor
isthe EBITDA :Debt ratio. It indicates the capaciy cesses
ensuresandadequacy and implementation ol pro
systems to avoid situation of risks.
of the company to repay the debt from its inter-
nal accruals in the regular course. Additionally, Additionally, an internal loss prevention team
according to company sources, the cash flow functions to checkon the transactional level incon
drawn conservatively over the term of the Debt sistencies. Retainingquality statutory auditors and
gives a good indication of repayment capacity of advisors in the fields of law and property matters,
the company. The third ratio in priority is the inter ensures reduction in documentary and compli
est coverage ratio, which indicates the number of ance lapses which may expose the company to
times the operatingcash flows cover the interest serious longterm risk.
outgo. The Debt : Equity ratio restricts growth
plans fuelled by aggressive funding by debt, and Store Operations Strategy
necessitates sourcing of the Equity funds beyond Store Operating Processes
the internal accruals. A growth of 25 per cent
plays a very significant
on the existing base is comfortably managed by Store operations strategyoverall
Stop's
he company with funds generated from internal role in ShoppersThe growth implemen
dccruals and alittle debt. tation strategy. firm is acclaimed to be a well
runcompany with strongsystems and procedures
Strategies to Add Shareholder Value in place. The senior management believes that it's
The strategy of the firm is to expand the business thrust on systems and processes will help to better
profitably with a long term perspective. This strat manage growth. The company has created a
eqy has helped the firm to focus on its flagship Manual of Authorities (MOA), which governs deci
department store business as other added busi sion-making authority. It has also created a
nesses which might be profitable in the short term Standard Operating Procedures (SOPs) manual to
but may not hold long term value. For example, qovern most activities from site selection, store
when the firm recently realized that it's Food and planning, store operations to buying and mer
Beverage business did not have long term value, it chandising, distribution, and logistics. Standard
handed overthe business to Café Coffee Day from operating procedures and systems reduce the risk
whom it can expect long term value. Similarly, the from losses due to potential lapses. Such standard
in wound up its catalogue retailing business operating procedures when updated reqularly
when it found the top-line and bottom-line various
help thestores.
company share best practices acroSs its
According to the study, shrinkage
2chievements were way below the projections.
For capital expenditure, the firm invests only as percentage of gross retail sales currently stands
hon it foresees a teturn on the capital employed at 0.34 per cent which is lower than the interna
oovr20 per cent over a5 to 7 year perOd. This tional averaqe of 0.50 per cent. The foolfall con
elstes channelling of shareholders' funds to pro- version ratio stands at 30 per cent consequent to
Cqivirq matcrial returns. the implementation of the strong customer loy
ally strategy at Shoppers Stop. This conversion
7isl 4itigation Strategy ratio is found to be good as the footfall count in
To ss ris':s facing thr organizalion, Shoppers thefirm is done on a headcount basis arnd the con
h, formed a risk committee which mects version is measured bythe number of cash memo
Iiu ho riske to which thr company is
58 Retail Management
product previews, priority bill.
privileges such as
special benefits. The firnm offers
generated against the footfall. So when a family of ing and other cards in alliance with Citibank
four enters the store the footfall amounts to Toul credit
single co-branded earn up to s
but the family may buy merchandise on a bill which offers customers to at
transaction size per $ 100 spent Shoppers Rewardin
Stop
cash-mnemo. The average Points for every and benefits offered by
(aBso known as Ticket Size) is said to hover around addition to the discounts
$ 2876 currently. partnering restaurants, hotels and other establish.
bring new
ments. This is a strategy tomembers of customers
RetaiiTechnology at Shoppers Stop the loyalty
to Shoppers Stop. The Citizen co
Leveraging retailtechnology for achieving effi programme of Shoppers Stop, First
in
ciency in store operations: Shoppers Stop was cent of the total sales the organi-
the first retail chain in India to invest on an ERP tribute 72 per
zation so far.
package and the firm is again investing heavity on
software. The company implemented a software Customer Service Strategy
package called Arthur Planning, and adata ware Currently the firm is dealing with over 260 brands
Armnstrong.
ousing solution from DA ( D bought of garments and accessories. Shoppers Stop has
SCottsdale, Phoenix, USA), from which it
clearly become aone-stop shopfor alCUstomers.
the ERP package. Arthur Planningisusefulin meas-
The demographicprofile ofcustomers at Shoppers
uring the stock position at the store shelf level and Stop falls between the age group of l6years and
Tor auto replenishment of the shelves. Althouah majority of thembeing families and
Shoppers Stop selected JDA as its ERP in 1998 to 35 years, the
a nmonthiy household income
replace its legacy systems, the firm recognized the youngcoupies with an annual spend of $25000.
need for new technology solutions that would above $ 30000 and non-resident Indians visit the
enable it to efficiently and profitably grow its retail Alarge number of the international envi
model, as well as ensure the company's success shop for cultural clothes in
ronment they are used to which means people
particularly that of its newly expanded business. from
To ensure consistency and uniformity of fixtures abroad are also interested in shopping at
across its stores in a given business unit, Shoppers Shoppers Stop. Their target customers include
Stop licensed jDA'S space planning and replenish- upper middle class and upper class. Customer
ment applications. The use of jDA portiolio solu- service at Shoppers Stop is ol top significance and
tions has enabled Shoppers Stop to: amajor area of focus. Each store has acustomer
Optimize floor space and visualize the lavout Service desk besides dedicated telephone lines for
Customers to call. There is a no-questions-asked
before they are constructed.
Sihoppers Stop, which delights
Efficiently manage high inventory turns and xlange policy at
the customers. The specification of retail ser
volumes.
Vice-output levets, operational efficiencies embod
Improve inventory planning through sophisti ied in the retail technology and the learning and
cated forecasting.
Improve the management of metrics, including Apeielces contained in the retail culture. deter
service and inventory levels. mine the position the retailer secures in the
" Provide a high magnitude of analysis and market place.
The case study of Shoppers Stop points to very
reporting. vivid strategies of growth implemented in the val
Customer Loyalty Strategy iOus stages of growth of the firm as established in
Shoppers Stop launched its customer loyalty pro- the areas of store format, finance and store oper
aramme, 'First Citizen' in 1995 which is currently ations with their specific implications and resuits,
the largest loyalty programme in the category which will serve as alearning for many new retal
across India. The First Citizen Programme mem firms who intend to set shop in India and expand
bership entitles the loyal customer to exclusive in future.
59 pro of
strategy
Strategies strategies
growth
Retail
operating
" inorganic
4
Chapter
firm's
itsS the
pelled
growth?
the on Shoppers
Stop.
have notes

How Write

4. 5.
QUESTIONS
FOR
DISCUSSION
Shoppersfrom the
by growth?
itselfstrategy?
adopted
of differentiate
strategy of
merchandising
stages
strategies

format Stop various

funding
the Shoppersits its
briefly in in
theorganiz
ompetition
does are
xplain
top. How What