Is it a Full Stop for Shoppers Stop?- Part 1

An MD & CEO whose background in retail is with UK based Marks & Spencer, who has closely monitored Spanish retailer Zara to model Westside on the same lines has been inducted at Shoppers Stop. B. S. Nagesh, under whose able stewardship the first store was launched in 1991 has been unable to turn SS around post the exit of Govind Shrikhande. The news is making ripples in the market as this is a high-profile case of poaching from a rival retailer. With a felicitous CEO, is SS in a condition to regain its lost glory? I have my doubts.

On the heels of success of departmental stores like Akbarallys and Amarsons K Raheja Corp decided to foray into retail. Real Estate being the DNA of the company, their approach towards retail was not Fashion, it was letting out space to brands to showcase their collections in return of royalty on sales. This was the USP of SS and this is what led to the growth of 88 stores across 44 cities. Like I mentioned in my earlier post, that USP cannot be static. It is ever evolving and adapting to the changing needs of the market. This is akin to Ford trying to make a superior car engine when Apple is developing battery operated self driven electric vehicles. Similarly, with the advent of Malls, departmental stores started losing relevance. Most brands that are retailed at SS on an 8 ft wall also possess their EBOs at the same mall. An EBO showcases its collection in a presentable ‘story’ format which is not only pleasing to the consumer, but also stimulates up selling and cross selling to the customer. A departmental store like SS is an amalgamation of products of various brands stacked together to ensure maximum sales per square foot of the store. This goes against the very fundamental of a fashion brand. Accessories & lingerie can be retailed in this format but not fashion labels. Fashion sales are thus led by loyalty programmes and discounts. There was no way, departmental stores in that format were going to be able to withstand the competition from the malls which offered F&B as well as entertainment in several formats. But SS seemed to be in complete denial and continued with its realtor mindset. The next wave of retail was led with online marketplaces which resulted in the decline of mall culture. SS realised it was far behind the retail curve. Feeble efforts were made to have an ecom platform. They could however not compete with the Flipkarts and Myntras as these were offering discounts from the ‘funding’ they were receiving to up their valuation. Neither could it match the deep pockets of Amazon. It was not possible for SS to keep up with these online giants. They did launch programmes like ‘personal shopper’ but it was a case of too little too late.

Under constant pressure to achieve sales targets, SS keeps coming up with rampant ‘sales’ making it look like an outlet mall. Brand owners comply with the mandate to participate in ‘sales’. But they do so by pushing slow moving merchandise into SS just to maintain the visibility of the brand. SS has lost the essence of its positioning from trying to be a premium departmental store in 1991 to presenting itself like an outlet store to drive sales numbers.

That they failed to gauge the pace of change is also evident from the yielding of Crosswords to digital and audio books.

While other retailers are harvesting the power of hyper market, SS was compelled to get rid of HyperCity to Future Group. Another example of dissonance between their vision and implementation.

Its not surprising that the share price has dwindled from Rs.400 in 2012 to Rs.180 today. Reinvention at this stage seems improbable unless there is a drastic evolution of mindset at the topmost level. Its akin to Nokia waking up from slumber now and envisioning to topple Apple and Samsung to regain its top spot that it proudly held till 2011.

I wish Venu Nair all the very best and pray he is given a free hand by B. S. Nagesh to turn around the ailing retailer.

How should he go about identifying the problems? What solutions should he propose? How should he execute the restructuring? I welcome your ideas and proposed strategies on this forum. Shall be discussing these in the next part of this series on SS.