There is a growing clamour among offline retailers over huge discounts offered by the online retailers to lure consumers. Govind Shrikhande, Managing Director and Customer Care Associate at Shoppers Stop Limited, spoke to correspondent Sunil Pol about the strategies that the company is adopting to beat the heat of online retail, while prominently investing in store expansions, at the JDA Industry Connect event in Mumbai.
Why do you think that the 'achchhe din' are only coming for e-tailers?
I haven't seen big investments coming into retail. If you look at FDI policy for physical retail, it has got a number of compulsions because of which, nobody can invest, whereas, for online, there is no restriction. People are bringing billions of dollars and burning them that's why 'achchhe din' are coming only for online retailers. Presently, government doesn't look like promoting offline retail, may be, the strategies of the government are not planned that way. We believe that if the government understands the requirements of the physical retailers and the number of jobs being created by these retailers can be multiplied with effects then they should support this industry much better.
What are your plans of investment for store expansion this fiscal?
This year, we are planning to open around 6 stores and around 14 stores in the next two years, so in three years we will be opening total 20 stores. Approximately, capex investment annualise will be of Rs 100 crore, out of which, Rs 50 crore will be invested into omni-channel, online and infrastructure development.
Out of these, 10 stores will be set up in existing metro and tier I cities and the remaining 10 stores we will set up in tier II cities like Kolhapur and Goa. Each of the stores will be spread across 40,000 sq ft of area.
Are there any plans specific to mCommerce?
Currently, our online business is less than a year old and we are targeting it to grow to 10 per cent in the coming three years, therefore, we will be launching our mobile app in Q3.
We will be going ahead with the smartphones coming into play with speeds increasing faster, along with the increasing of size of the screens. In total, 90 crore mobile users are there in our country and around one-third of them are going online and only one-ninth of them are shopping online.
We will be investing around 50 crore on our entire omni-channel journey. We are first investing in hybrid right now and over the nine-month period we will scale up to multi-channel and then to omni-channel. We are looking forward for good growth. With lot of changes happening in the market, we are learning from customers, learning from changes and disruptions and trying to drive a faster growth by embracing uncertainty and embracing online.
What is your take on the growth of modern retail being steadily beaten by online retail?
Modern retail is set to continue to grow with about 15 to 20 per cent rate YOY. Modern retail is not growing dramatically. Earlier, people used to think that modern retail will grow by 20 to 22 per cent but it doesn't look like that's happening. The growth is likely to be of 15 to 20 per cent and another five per cent seems to be taken up by online retail. And if modern and online are put together, India might get 25 per cent of growth of that sort.
Why more number of logistics and delivery companies are coming up with IPOs than the e-tailers?
Today or tomorrow the e-tailers will come with the IPOs for sure, the minute they will get their model of profitability right. Anybody who gets into IPO model, they have to be clear about announcing their results every quarter transparently. In e-Commerce, every company is talking of GMVs which is not the right number. Nobody is talking of the losses that they are making. And the minute you become public, you have to state every number transparently, so till the time they have profitability at the bottom line level, I don't think that they are really going to come up for an IPO.
And for delivery companies, the demand is there for their services - the price for which has to be paid by the online companies. But the question is, will those prices hold further. The total demand on online is less than one per cent and even though it is going to be 10 per cent, the companies have to grow 10x so there will be a huge amount of demand upscale which will provide huge room for profiting for delivery companies.
What are your consumer acquisition strategies when e-tail is encroaching into the sale of brick and mortar stores?
We believe our scaling up should be taken care in the long run because globally, most of the department stores have taken on the omni-channel journey by scaling up convenience offerings, that is curated product merchandising to customers and seamless shopping experience.
Basically there are two things driving online sale, one is huge advertising spend and second one is discounting. Globally, online is convenience format, but in India it is discounting format. I don't think there is any need to fight this kind of discounting war because at the end of the day, you have to look at the profitability for the long run. Online companies are funded by PE companies and they are not bothered of profitability. They just want to spend so much of money on discounting and advertising.
Please tell us about your upcoming vendor management platform?
We are coming up with next level vendor management platform. Today, everything that comes to me I have to get it into the store and then I can only dispatch online. Now there are models called dropship in which you need not get the supply of merchandise from your DC or your pickpack station it can be directly shipped from warehouse of the supplier to the customer. So this is the vendor platform for the dropship model.
How has been your experience so far with ERP?
Initially, two to three years were spent to understand the ERP system better and now we are very well settled. And when you are wanting to scale up from 4 stores to 72 stores like us, you cannot manage on excel sheet, you need to have a proper Enterprise Resource Planning (ERP) which can connect the supply, the store, the customer, the loyalty and everything. And JDA’s ERP has been very helpful for us to scale up our operations, get it to the next level and scale up across formats. Apart from Shoppers Stop, we have this software in Hyper City, Mother care formats and all other beauty care formats. I would say it's been a great journey with the use of this technology since the time we started using in 1998. The first two years were definitely tough as I have mentioned for any company which is not used to systems and to get into a system becomes difficult as it dictates over how to operate your system.
Any more new technology that you are keen to incorporate within your organisation?
Yes, one of them is intelligent fulfillment that we have adopted and second is Warehouse Management System (WMS). So, we are currently in the process of evaluating all these and currently executing the whole omni-channel strategy. Midway within the omni-channel strategy, we believe we will be working on both WMS and intelligent fulfillment.