Forerunner in organised retail

B.S. Nagesh, Managing Director, Shoppers Stop, speaks about growth of the company and also impacts of foreign players’ entry in Indian retail, in an interview to the Retailer

Retailer: What were the challenges that face you in the last 17 years?

B.S. Nagesh (BSN): I was managing around 130 stores of Carona footwear before joining Shoppers Stop. My vision was to run one store of about 40,000 to 50,000 sq.ft instead of large number of stores across the country. With this vision, I joined Rahejas. At that time, I didn’t have much clue on how to run a departmental store. I did not have much knowledge and relied on Rahejas’ knowledge in international retail.

We do not want to run a family business. Instead, we want to run a professionally run business having best technology, distribution and supply chain. There was nothing like store planning or organised layouts. Retail was an art then; the science of retail, which we see today, was completely lacking. Between 1991 and 2000, there was no property for retail businesses in India as organised retail was yet to take off. It was only in 1998 that Ansal Plaza in Delhi came up, followed by small shopping complex in Chennai.

One of the biggest challenges before us at that time was of recruiting people as no one wanted to foray into retail. Therefore, the first few months were the toughest. And, once our team was in place, running operations was not an issue. The problem lies in external perceptions. Now, around 17 years later, the situation is exactly the reverse. We started off as a purely menswear store and became a departmental store much later.

Retailer: How did you market Shoppers Stop initially and how did the campaign idea emerge?

BSN: Globally, retail is built mainly by merchandise and not by marketing. But, in India, marketing avenues such as press, outdoor and events are used extensively to build a retail brand. We personally went into various shops to get in-depth understanding of what consumers want and discovered one thing common of their experience of shopping. And, that is how our first campaign idea emerged: Shoppers Stop and this campaign continued. So, our whole journey has revolved around what our customers feel and insights they provide. You connect with the customer and, after some time, he grows bigger than you.

Since the business is evolving with liberalisation and globalisation of Dr Manmohan Singh policies of 1991, flexibility in brand started. Campaign through experience created entertainment in India. We started our campaign with ‘black and white’ logo and it attracted my attention too much.

Retailer: Do you see competition between organised store and kirana store going beyond the ‘price war’?

BSN: At present, existing malls are not enough to cover the 125 crore population of the country. These malls which are in a scattered pattern are not located in residential colonies and people have to cover long distances to reach one of them. Moreover, consumers too are not much interested in walking for more than 20 minutes. New towns, which are coming up in Delhi suburb and other cities, will have shopping malls within residential areas and provide doorstep facilities to consumers.

Kirana stores are targeting over 94 per cent of the total retail of the country while organised retail’s share is a meager six per cent. Though shopping mall stores are providing better ambiance to their consumers, kirana stores are no longer same as these were before. Today, they are more smart and intelligent. They are learning much faster and getting best experiences from the organised retail and have started providing good services like home delivery to their consumers. I can say that there is no threat to kirana stores. May be they are under a format and product threat, but not in terms of running the business.

As regards the price war, organised retail makes a person buy more for the same amount and offers tremendous scope for impulse shopping, which is not the case in a kirana store. Instead of buying from a mall store, if a consumer buys something at kirana stores where there is no room for impulse buying, he will save 5 - 10 per cent.

Retailer: Once global players like Wal-Mart and Carrefour find their footholds in India, how will the retail scenario be then?

BSN: Today, large Indian players dominate Indian retail market and cross-border will not cross their way.  Domestic large players have big ambitions and they have planned to take over the country’s retail market in a big way in the coming days. Challenges from foreign players are like what they are facing from domestic players. I believe that, in retail, the winner doesn’t take it all. And, this applies globally too. You cannot take one model and apply it elsewhere. Players who are weak internally will suffer as a result of this competition.

Retailer: Do you feel that retail outlets will earn substantial revenue from advertisers and pass on a portion of this profit to consumers?

BSN: Not really. Whatever the revenue is earned through advertisements, it goes to mall developers and not to retailers. Mall developers use these funds for maintenance of malls and providing other facilities. However, I am satisfied with the way the retail is being used for advertising. In the long run, retail outlets will earn substantial revenue from advertisements but the end-consumer generally gets his benefit from competitive pricing.

Retailer: Given prevailing high realty rates, do you think that real estate market has reached its peak and will crash?

BSN: Honestly speaking, till three years ago, there were very few malls across the country and hardly any space for retail was available in these malls. Today, retailers and brands started quitting the malls. This is because realty prices are too high in shopping malls and a big share of footfall is not converting into shopping. This has resulted in making survival of small stores or brands in shopping malls difficult.

He admitted that current mall space prices are much higher and there is an urgent need of price correction. I do not know what will happen tomorrow but, presently, there is no fear of any crash as there is still much room for more malls for the full booming of retail industry. 

Retailer: What is the response of retailers and consumers alike to new technology?

 BSN: It is a consumer business. Both retailers and consumers have well accepted the latest technology wherever it is required in the present scenario of Indian organised retail sector. I would like to say here that we are far ahead of the world in using the latest technology despite the fact that concept of shopping malls and organised retail business is just started in the country. Wherever it has been implemented, the new technology is well-accepted.

Retailer: What special measures would you recommend for improvising the quality of retail talents and overcoming retail attrition in India?

BSN: Retail industry in the country is nascent and there is much scope for its booming. In the next few years, large number of trained persons in organized retail sector will be required as it will be the biggest employment generating sector in the country. Central government and state governments as well including almost all the political parties are making efforts to generate new employment venues for youths. Governments should prepare meaningful education for ‘school dropped out’ youths at early stage and make arrangements with IGNOU and other such institutes for providing technical education to them through their distance education system.

Retailer: What will help in creating a win-win situation for consumers and retailers?

BSN: To create a win-win situation, we should make our supply chain and logistics stronger. Today, the country has poor infrastructure, which requires correction. However, if we want to achieve real goals, we should make our supply chain stronger.

Retailer: Do you feel that present inflation will hamper retail business?

BSN: Inflation, which is facing the country today, will not hamper retail industry in any way. But, retailers will have to face challenges for some time. Though inflation rate (11.89 per cent) at present is too high, it is a temporary phase and will soon vanish. Retail business will get stability. The retailer should not be panicked by it.

Retailer: To what developments are you looking forward?

BSN: Today, we have all retail formats across the country and are enjoying retailing experience that we have achieved so far. However, we are concentrating only on expansion projects of our existing retail formats so that we may reach to every consumer of the country.

Retailer: What would you like to add?

BSN: I would like to say that retail is a very simple and loyalty-led business. In USA and European countries, loyalty towards a store is more than 50 per cent while, in India, it stands between 10 and 20 per cent. Retailers should concentrate on this aspect and organise events to make their consumers loyal to their stores.