MUMBAI: Shoppers Stop will shut or relocate unprofitable outlets and redesign some, as the nation’s largest department store chain seeks to spur growth by attracting young consumers who may have moved to fast-fashion rivals or online.
“We have about 10% of our bottom stores that are not working,” managing director Govind Shrikhande said. “Two of them we shut last quarter. We have a plan to cut down size or relocate, or shut down, three more stores. Eight old stores will go under redesigning. So, cost cutting itself should lead to about a 50-60-basis-point gain.”
The K Raheja Corp-promoted retailer, which operates 81stores in 37 cities, is aiming to grow sales by 15% and profit by 50% in the financial year that starts next month.
The company that runs the eponymous department store chain, apart from Hypercity, Mac and Bobby Brown stores, has been posting sales growth of 7-13%, pale in comparison with rival Future Group’s Central or single-brand retailers such as Zara and H&M that have posted a more than 20% expansion.
Shutting down or rightsizing stores is a very common and essential practice in the retail business. Companies like the Future Group, Domino’s and Lifestyle have done so in the past.
The fashion retailer believes that despite having one of the strongest collections across all categories, the company has failed to resonate with young consumers because of lack of right communication.
“The connect of objective communication has been missing and has been lost out in the clutter of sale. We haven’t really had campaigns for categories. We haven’t created a brand campaign in the last 24 months,” the MD said. Hence, the company will also be investing heavily in brand campaigns and marketing.
It will launch a new brand campaign in April, along with campaigns specific to various categories. Another objective is to drive sales through private and exclusive brands by making them more relevant to the youth.
While the contribution of private brands like Stop, Life, Haute Curry, Vittorio Fratini, Eliza Donatein & Kashish is 11.5% of sales, exclusive brands contribute 4.1%. The exclusive brands it sells include Wrogn by Virat Kohli, Desigual the Spanish fast fashion brand and Imara by Shraddha Kapoor.
Rheson by Sonam & Rhea Kapoor will be launched towards the end of March.
“We will have to bring in younger brands which will bring in the differential for the younger customers, and also keep on cleaning the brands that don’t make any sense today,” Shrikhande said.
According to Abneesh Roy, senior vice president at Edelweiss Financial Services, Shoppers Stop needs to focus more on private label in order to deal with competition from both online and offline retailers.
“If you see Westside and most of the retailers that are doing well, they have a very vast portfolio of private labels that are exclusively available on those platforms,” he said. For the company, apparel remains the biggest contributor to sales with an around 64% share.
Watches and beauty products contribute more than 10% share each. Shoppers Stop exclusively retails beauty brands like Estee Lauder, MAC, Clinique and Bobby Brown in India.
“What we are seeing is that nonapparel categories continue to do well and makeup and watches I think will help create further differential,” said Shrikhande.
Jewellery sales, however, are shrinking and currently contribute only 2-3%.
Another challenge that Shoppers Stop and every other retailer is facing is the pressure from increasing discounts that ecommerce players are offering.