India?s oldest organised retailer Shoppers Stop is working on multiple strategies to overcome three consecutive quarters of falling volumes and margins, which the company believes is a direct impact of the economic slowdown. It plans to raise the share of private labels for better margins. The three main brands ? Stop, Haute Curry and Live ? bring in 15-16% of sales for the company. ?We will take that up to 20-22% and introduce more labels,? Govind Shrikhande, managing director of the K Raheja Corp company told FE.
In the fourth quarter of FY12, the company?s like-to-like growth ? a measure of the performance of stores operating for over a year ? stood at a healthy 10%. But this was driven by the 9% rise in average selling price (ASP) as the retailer hiked prices by 15-18%. ?Consumption happens when the overall sentiment is positive and we don?t see any boost in 12-18 months,? Shrikhande said. ?Hence, we had to tweak our strategies and create value for consumers.?
Store expansion, which raised top line in the last two quarters, also increased input costs. ?Operating overheads will take 18-24 months to get fully absorbed and, hence, will lead to subdued margins for Shoppers Stop,? an Aditya Birla Money report said in June.
For optimum use of supply chain and logistics, the company is planning a metro-centric expansion in two to three years. ?About 80% of our sales comes from metros and consumption is least affected in big cities as the share of working women is high,? Shrikhande said.
Besides its flagship Shoppers Stop, the group also operates Hypercity, Home Stop (home retailing) and specialty stores like Crossword, MAC and Mothercare. Hypercity has been the biggest drag. The large-format retailer, which started operations in 2006, has taken longer than average hypermarkets to turn cash-positive. While its huge stores have affected store-level functionality, its focus on food and grocery has squeezed operating margins.
?Hypercity?s premium positioning in the hypermarket segment and lack of competitive pricing have pulled back profitability by some years,? said a retail consultant. ?The share of perishables in the merchandise mix must come down.?
The company is taking steps to address this issue. ?Hypercity stores are being resized to about 50,000 sq ft. The share of high-margin categories like apparel will go up and food and grocery will come down,? Shrikhande said.
At Crossword, Shoppers Stop looks to make changes in store design and increase share of toys. ?Book buying has mostly shifted online,? Shrikhande said. It is also betting big on loyalty schemes and higher visibility in social media to drive sales.