In a conversation with Swati Khandelwal, Rajiv Suri, Managing Director & Chief Executive Officer, Shoppers Stop, talks about the company's new store format, risk of diluting the brand value, brands that have been discontinued and where they will stand at the end of the year. 

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Edited excerpts:

Q: Shoppers Stop's strategy has shifted towards premiumization and is mainly focusing on the high-margin business. How it will help you in transforming your business?

A: Shopper Stop is embarking on a programme to fulfil our customers' need. Some time back, we did research, in which the customers informed that they would like to see new brands in India and have a better shopping experience here. Keeping the same in mind, we designed two concepts (i) with a company in London Dalziel and Pow and (ii) Schwitzke in Duesseldorf. We have created our next-generation stores to provide a shopping experience for our customers. Both, the new concept of stores are now open. In addition to this, we are working on bringing new brands to our stores keeping in mind the demand from our customers. The Indian customers are very aspirational customers, they are very global, well aware about what is happening around the world and with that, we are constantly trying to bring new brands to satisfy their desires in shopping. 

 

Q: Do you think that it, the strategy, brings a risk of diluting your own brand value? How do you intend to create a premium identity for your brands while you are maintaining your mid-segment customer base?

A: The entry price in the stores haven't changed at all. Our private brands where we are investing a lot are still very much there. So, what hasn't happened is that we haven't increased the prices of our store but we have added new brands at the top end while maintaining all the mainline national brands, which we have. The only brands which we have discontinued are the one on which the customer is not reacting to. In the total of 37 brands were discontinued in the autumn and winter 2019. We have discontinued them not because they were low in price but because there was no demand for them from the customers. So, we discontinued those brands but the entry price point is very much there and we have items starting in fashion and ethnic wear from Rs700 onwards. Thus, the entry price remains there but in addition to that we are providing the upper price, as per the demand of the customer and we have launched new brands with that in our mind. 

 

Q: How this strategy towards premium brands will impact your margin profile and can we expect margin expansion in the future, if yes, to which level? How many investments will be made to add these new stores?

A: As far as the margin is concerned then it will not have any impact on the margins because most of the time, we buy our merchandise from the local market. Thus, the margin will remain the same one but the big impact will be seen in the average transaction value if the consumer goes for the higher price merchandise, which will have an impact on our transaction value, which will go up. In regard to the new stores then we will be opening around 8-10 new stores in this financial year of which 3 new stores will be opened in December itself. Our company is completely debt-free and the investments will be self-funded investments. Thus, we are not going to borrow money to open these stores. 

 

Q: Same-store sales growth have been under stress. What are your plans on this?

A: There was an impact in the second quarter on same-store sales but post-Diwali, the business has been better and our like-to-like sales is in the high-single-digit. The festive season and the wedding season has been a good one till date. The end of season sale, whose first weekend has started now, has received positive reactions from the customers. Going forward, we will be able to maintain our estimates of mid-single-digit sales. 

 

Q: We have been hearing a lot about slowdown and customers are not very confident yet. Have you experienced the same, if yes, what was your experience during the festive season and how customers are responding to your end of season sale?

A: On the ground, pre-Diwali we have seen a slowdown in the customer demand and that is reflected in sales when we informed little-bit later during the year. However, post-Diwali, the wedding season has gained pace and ongoing things are positive and are at the high single-digit and are going in line with our expectation. 

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Q: What is the growth outlook for 2020 from the perspective of the top line, bottom line and margin?

A: We can't give guidance for the next year's figures and expectations at this point in time, but we do have plans to open the new stores, that we have opened this year. The 10 stores to be opened will have an annualised impact next year and in that sense, we feel quite positive about the year that is coming.