Chapter No. 7

Case Studies fo Indias Two most

established malls

Chapter 7

CASE STUDIES OF INDIA'S TWO MOST ESTABLISHED MALLS

7.1. PANTALOON RETAIL (lNDlA) LTD. (Blc BAZAAR) (Case Study

No.1)

Pantaloon Retail (lndia) Ltd.

Pantaloon Retail (lndia) Ltd. is India's leading retailer that operates multiple

retail formats in both value and lifestyle segments of the Indian consumer

market. Head quarter is in Mumbai, company operates over 12 million sq.ft. of

retail space and has more than 1000 stores including hotels, kiosks and other

outlets across 71 cities in India, employees over 30,000 people. The

company's leading formats include, Pantaloons, a chain of fashion outlets, Big

Bazaar a uniquely Indian hyper market chain, food bazar, a super market

chain, blends the look touch and feel of Indian bazaars with aspects of

modern retail like choice, convenience and quality and Central, a chain of

seamless destination malls.

Some of its other formats include Brand factory, blue sky, all top 10 and 'star

and sitara'. The company also operates online portal future bazaar.com. A

subsidiary company, Home Solutions Retail (lndia) Ltd. operates Home Town,

a large format home solutions store, collection, selling home furniture

products and ezone focused on catering to the consumer electronic segment

Pantaloon retail was recently awarded, the "lnternational Retailer of the year

2007. by the US based National Retail Federation (NRF) and the emerging

market retailer of the year 2007 at world retail congress held in Barcelena.

Pantaloon retail is a flagship company of future group, i.e. business group

catering to the entire Indian consumption spaces.

Future Group

Future Group, is led by its founder and group CEo Mr. Kishor Biyani, is one of

the India's leading business house with multiple business spanning across the

3a www.pantaloon.com/companyinf o. al.p

189

consumption space. Retail form the core business activity of future group.

other group subsidiaries are operative in consumer finance, capital,

insurance, leisure and entertainment, brand development, retail real estate

development, retail media and logistics.

The flagship enterprise (Pantaloon retail, operates over 12 million sq.ft. of

retail space in 71 cities and towns and 65 rural location across the country).

Pantaloon retail follows a multi-format retail strategy that captures almost the

entire consumption basket of Indian customer. Big Bazaar is a hyper market

format that combines the look, touch and feel of lndian Bazaar with choice

and convenience of modern retail. In 2008 Big Bazaar opened its 100th store,

making the fastest ever organic expansion of a hyper market. The first set of

Big Bazaar stores were opened in 2001 in Kolkata, Hyderabad and

Bangalore. The groups specialty retail formats include, books and music

chain, depot sports, ware retail, sports, electronic retailer e zone, home

improvements chain, home town and rural retail chain.

Future capital holdings, the group's financial arm provides investment

advisory to assets worth over $ 1 bn that are being invested in consumer

brands and companies, real estate, hotels and logistics. lt also operates a

consumer finance arm logistics with branches in 150 locations.

The group's presence in Leisure and Enteftainment segment is led through, a

Mumbai based listed company Galaxy Entertainment Ltd. Galaxy leading

leisure chains, sports bar and Bowling Co. and family entertainment centers,

F123, through its partner company, 'blue foods', the group operates around

100 restaurants and food courts through branches like Bombay Blues,

spaghetti kitchen, noodle bar, the spoon, copper chimney and Gelato.

Future group's Joint Venture partner includes US based stationary products

retailer, Staples and Middle East based 'Axion'communications.

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2.

3.

Future group believes in developing strong insight on Indian consumer and

building business based on Indian ldeas, as espoused in the Group's core

value viz. "lndianness". The group corporate credo is "Rewrite rules, retain

values".

Future Group Manifesto (Corporate Statement)

1. "Future" the word, which, signifies optimism, achievement, strength,

beauty, rewards and perfection. Future encourages us to explore areas

yet unexplored, write rules yet unwritten, create new opportunities and

new successes. Striving for a glorious future brings to the group it's

strength, and ability to learn, unlearn and relearn, our ability to evolve.

We, in future group will not wait for the future to unfold itself but create

future scenarios in the consumer space and facilitate consumption.

There by, we will effect socio-economic development for our

customers, employees, shareholders, associates and paftners.

Our customers will not just get what they need but also get them

where, how and when they need.

We will not just post satisfactory results, we will write success stories.

We will not just operate efficiently in the Indian economy, we will evolve

it.

We will not just spot trends, we will set trends by managing our

understanding of the Indian consumer to their needs of tomorrow.

It is this understanding that has helped us succeed and it is this that

will help us succeed in the future.

We shall keep learning and in this process do just one thing "Rewrite

rules, Retain Value."

4.

5.

6.

7.

8.

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7.2. Group Vision:-

Future group shall deliver everything, everywhere, every time for every Indian

consumer in the most profitable manner.

7.3 Group Mission:

1) We share the vision and belief that our customers and stake holders

shall be served only by creating and executing future scenario in the

consumption space leading to economic development.

2) We will be the trend setter in involving delivery formats, creating retail

reality, making consumption affordable for all customer segments for

classes and masses.

3) We shall provide lndian Brands with confidence and renewed

ambitions.

4) We shall be efficient, cost conscious and committed to quality in

whatever we do.

5) We shall ensure that our positive attitude, sincerity, humility and united

determination shall be our driving force.

7.4 Pantaloon Retail Strategy:

"We intend to maintain and enhance our position as a leading retail entity

through continued focus on the Indian Maket and inverting further in our

competitive strength to grow our business." The key elements of business

strategy include

1) Increase our offerings to meet higher portion of customer spend (by

new formats and new adding category

192

2) Increasing new brands and developing private labels to offer a better

depth in each category.

3) Utilizing Economies of Scale as we grow in size and expand our reach.

4) Enhancing our operational efficiencies through new system and

processes.

a) Gross margin return on floor space.

b) Gross margin return on labour.

c) Gross margin on Inventory to impure production.

5) Enhancing our human capital.

Pantaloon Success Factors:

1) Ability to understand the Indian consumer psyche.

2) Indepth experience in managing growth and massive expansion plan.

3) Excellent execution capacity of retail business.

4) Command a strong bargaining power with suppliers.

5) Sound financial performance force to make us successful.

Core Values:

1) Indianness - Confidence in ourselves.

2) Leadership - To be a leader both in thought and business.

3) Respect and humility - To respect every individual and be humble in

our conduct.

4) Introspection - Leading to purposeful thinking.

5) Openness - To be open and receptive to new ideas, knowledge and

information.

6) Valuing and Nurturing Relationships - To build strong long term

relationship.

7) Simplicity and Positivity - simplicity and positivity in our thought,

business and action.

8) Adoptability - To be flexible and adoptable, to meet challenges.

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9) Flow - To respect and understand the universal laws of nature.

7.5 Major Milestones

1) 1987 Company incorporated as Manz Wear Pvt. Ltd. launch ofPantaloon Trousers, India's first formaltrouser brand.

2) 1991 Launch of BARE, the Indian Jean brand.3) 1992 Initial Public Offer (lPO) was made in the month of May.4) 1994 Pantaloon Shoppe - Exclusive menswear store in

franchisee format launched across the lndia. The companystarts the distribution of branded garments through multibrand retail outlets across nation

5) 1995 John Miller - formal shirt brand luanched.6) 1997 Company enters modern retail with launch of the first 8000

sq.ft. store, Pantaloon Kolkata.7) 2001 Three Big Bazaar stores launched within a span of 22 days

in Kolkata, Bangalore, Hydrabad.8) 2OO2 Food Bazar, the Super Market chain is launched.9) 2OO4 Central the India's first seamless mall (lifestyle) is launched

in Bangalore.10) 2005 Group moves beyond retail, acquires stake in Galary

entertainment, lndia's league clothing and planet retail. Setup India's first real estate investment fund Kshitij to build achain of shopping malls.

1 1) 2006 Future capital holdings, the company's financial is fonned tomanage over 1.5 bn in real estate, private equity and retailinfrastructure funds. Plans forays into retailing of consumerfinance products.

Hometown, a home building and investment products retailchain is launched along with consumer durable format, Ezone and furniture chain. furniture bazaar.

Future group enters into joint venture agreement to launchinsurance products which ltalian Insurance Major,Generadli.

12) 2007 Future group crosses 1 bn$ turnover mark specialisedcompanies in retail media, logistics IPR and branddevelopment and retail led technology seryices becomeoperational.

13) 2008 Future capital holding, becomes second group company tomake successful in Indian capital markets.

194

Big Bazaar crosses 100 store mark, making one of thefastest ever expansion of hyper market format anywhere inthe world. Total operational space crosses 10 Million sq.ft.mark.

Future group acquires rural retail chain, Adhar is present in65 rural locations.

7.6 AffiliatedCompanies3s

1) Home Solutions Retail (lndia) Ltd. (HSRIL)

HSRIL offers complete retailing solutions for all products and services

related to home building and home impurements. The key product

categories are consumer durable and electronics, furniture, home

furnishing and decor etc.

HSRIL operates retail formats - 1) Collectior - T, 2) Furniture Bazaar 3)

Electronic Bazaar 4) Home Town 5) E-Zone

Future Brands Ltd. (FBL)

FBL (since 2006) is involved in business of creating, developing

managing, acquiring and dealing in consumer related brands.

Future Media (lndia) Ltd. (FMIL)

FMIL is aimed at creation of media properties in the ambiance of

consumption and offers relevant engagement through its media

propefiies like visual spaces, print, radio and television activation.

Future Logistics Solution Ltd. (FLSL)

Future Logistics Solution Ltd. has been incorporated as a separate

entity and is involved in the business of providing logistics,

transportation and warehousing services for all group companies.

Future Axion Telecom Ltd. (FATL)

tt Haldiya Faheem, Soorya Tejomootula -Restructuring

Pantaloon Retail ICFAI Center for management research2008 vol .2 pp.32 to 36.

2)

3)

4)

5)

195

6)

FATIL is a joint venture with Axion Telecom LLc uAE. The company

would be engaged in soming and wholesale distributions of mobile

handsets; accessories and in setting up seruice centres for mobile

handsets.

Pantaloon Food Products (lndia) Ltd. (PFPIL)

PFPIL was incorporated with object of sourcing and backward

integration of food business of the company. PFPIL has sourcing and

distribution at all key cities across country.

Fantsloon Central Fasnion$tatbn

Big Bazaar Fod'Bnzaar

7) Future Knowledge Services Ltd. (FKSL)

FKSL was incorporated in Jan. 2007 and is engaged in the business

process outsourcing and knowledge process outsourcing.

Future Capital Holding Ltd. (FCHL)

FCHL was formed to manage the financial seruices business of

Pantaloon Retail (lndia) Ltd. and the group entities.

Future General India Insurance Co. Ltd. (FGllCL)

FGIICL was incorporated in Oct. 2006 to undertake and carryon the

business of Generali Insurance.

The approval for carrying out business received from Insurance

Regulatory and Development Activity on 4/glO7.

Future Bazaar India Ltd. (FBIL)

8)

e)

10)

196

FBIL is set up as the E-retailing arm of the future group for providing

online shopping experience. Future Bazaar.com was launched 2l5lj7and has emerged as one of the most popular portal in India.

11) Staples Future Office Products Pvt. Ltd. (SFOPPL)

SFOPPL was incorporated on Jan. 2007 and is involved in the

business of dealing in all kinds of office supplies, office equipments and

products. lt is a Joint Venture between future group and staples Asia

Pantaloon Retail Business Areas

Investment Ltd. (A subsidiary of staple India USA). The company's first out let

opened in Bangalore in Dec. 2OO7.

7.7 BIG Bazaar

Big Bazaar, Hypermarkets, retailing format was launched in 2001 to retail low

cost general merchandising, food product, grocery, packed food items,

apparel, furniture, plastics, branded products, utensils to the customer in

2001. The major unique selling proposition (USP) of the Big Bazaar store

was low prices being offered to customers.

As a paft of its low pricing strategy, the stores focused less on branded items

and more on unbranded products, which were the same quality as banded

ones.

The caption used in the promotion of Big Bazaar clearly explained its

proposition "ls se sasta aur accha kahin nahin." (Nothing is cheaper and

better than this, anywhere else!)

In 2008, Big Bazaar crossed 100 store mark, making one of the fastest ever

expansion of hypermarket format anywhere in world. The operational space

crossed 100 million sq.ft. mark.

197

Table No.l9 Big Bazaar stores located at following locations.

State Gity No. of Biq Bazar

Uttar Pradesh

Agra 2Allahabad 1

Gaziabad 1

Kanpur 1

Lucknow 2Meerut 2Noida 1

Maharashtra Ahmednaqar 1

Auranqabad 1

Kalvan 1

Kolhapur 1

Mumbai 8+3Naqpur 2Nasik 3Navi Mumbai 1

Sanoali 2Thane 1

Taraour 1

Pune 6West Bengali Bardhaman 1

Darieelinq 1

Durgapur 1

Haldia 1

Kharagpur 1

Kolkata 7Siliquri 1

Salkia 1

Andra Pradesh Hyderbad 5Vijaywada 1

Vijay 1

Tamil Nadu Chennai 2Coimbatore 1

Madhya Pradesh Gwalior 1

Indore 1

Rajastan Alwar 1

Jaipur 2Karnataka Bangalore I

Beloaum 1

Hubli 1

Manqalore 1

Mysore 1

Udupi 1

Gujarat Ahmedabad 3Anand 1

198

State Citv No. of Biq BazarBharuch 1

Raikot 1

Surat 2Vadodara 1

Orissa Bhubaneswar 2Cuttak 1

Kerala Kerala 1

Thrissur 1

Trivandrum 2Jharkhand Dhanbad 1

Ranchi 1

Asam Guwahati 1

Tinsukia 1

Punjab Ambala 1

Ludhiana 1

49pur 1

Haryana Gurqaon 2Panipat 1

Chattisgarh Raipur 1

Delhi Delhi 4Wazirpur 1

Total 115

NB:- The number of malls is greater than 5 in Mumbai, Pune, Kalkota, Hyderabad and Bangalore. The

rest of the cities have on an average only one or two malls.

These findings prove the relationship of density of population and number of

malls.

199

Figure No.16 Presence of Big Bazaar Stores in India

200

Table No.20 Financial Operating Results (figures in Rs. Cr)

Year Sales and

Operating Income

Cost of

Goods sold

Total cost Profit

1999 105.24 73.32 97.21 2.35

2000 137.28 97.19 126.53 4.92

2001 180.58 117.98 166.27 6.40

2002 285.29 1 86.1 1 262.98 7.O3

2003 444.83 303.5 407.44 11.41

2004 658.31 438.01 602.50 19.78

2005 1052.80 700.31 961.94 38.55

2006 1868.97 1243.43 1722.34 64.16

2007 3236.74 2245.05 3021.14 1 19.99

2008 5048.91 3512.19 4588.39 125.97

1999 2000 2001 2002 2003 2004 2005 2006 2oo7 2008I LJJJ

Graph No. 27 Sales and Operating Income of Pantaloon Retail India Ltd

6000

5000

4000

3000

2000

1000

n

201

140 :

t20 --

100 :

_ 41,:

I

Graph No. 28 Profit of Pantaloon Retail India Ltd

NB:- 1) within a period of only about 10 years, pantaloon sales have increased to Rs.5048.9

Cr., from Rs,105.2 Cr. of the year 1999. The net rise being 48 times.

2) Total cost of goods sold have increased by 47 trmes, which is very close to the rise of sales

turnover during the same period

3) The gross profits increased by 47 times, which is more than satisfactory.4) There is a direct proportional relationship betweeln sales growth and profit growth.

5) Obviously therefore, the company will have to launch further expansion in order to maximise

the profit.

A big driver at Big Bazaar, is the product variety. This is achieved by selling

wide range of products and through the 'shop in shop" format. A typical Big

Bazaar comprises shops that stock medicine, crockery, glassware, health and

beauty products, ladies accessories, electronics, infant necessaries, watches,

clocks, computer accessories, food and beverage, stationary, readymade

garments, household appliances, home furnishing, luggage.

Big Bazar belives that it is a win-win situation as the customer is assured of

product availability, the shop owners can benefit of infrastructure and Big

Bazaar Management enjoys assured income, without needing to stock

202

inventory. Also the shop in shop offering is able to increase the customer

traffic in to the store.

The Big Bazaar has been positioned to the customer as a place where the

customer can shop for each and every thing for which it goes to market.

Management have also launched private label initiatives in Big Bazaar

understanding apparel industry and expanded the number of private labels.

such as (Johnmiller, Bare, Rig, (75-80%) ladies ethnic ware segment (50%)

Pantaloon sports 2O%). Overall Big Bazar has 28 to 30% contribution by the

sales of their own labels.

Mr. Kishor Biyani in interview with CNBC on 271112007 said "The Private label

is one of the big effort which we are going and look at 'Koryo' brand it, would

become one of the top 4 brands in electronics. Our "Pure & Fresh" brand of

butter, ghee and oil is doing remarkably well. In fashion we are driven mostly

by our private label. Our private label is changing to private brand."

Bina Mirchandani Head of category management pantaloon retail, while

speaking to business lines said. "Today our private label generates 75 to

80% of our revenue".

Big Bazar has launched a full range of accessories to supplement apparel

business including imitation jewellery, watches, mobile phones etc.

Pantaloon retail ventured into food retailing in April2OO2. lt began as a paft of

Big Bazaar and now operates as a standalone in addition to being a part of

Big Bazaar. Food Bazaar provides vide range from fresh fruits and vegetables

to FMCG Products and ready to cook product. lt stocks 8000 to 12000 stock

keeping units (SKU) per location.

Areas of food bazaar range from 8,000 sq.ft. to 10,000 sq.ft. Food Bazaar

core concept is to create a blend of a typical Indian market and international

super market atmosphere with objectives of giving the customer all

advantages of quality, range and price. Food bazaar also provides categories

such as

203

a)

b)

c)

d)

e)

live dairy- fresh milk, milk product

live chakki and masala - grinding facility

live bakery - fresh bread, bakery products

Fresh juice comer

live kitchen - vegitable, chopping and cooking, sandwiches, salad,

soups etc.

Pantaloon retail believe that their business model is unique because they

have successfully integrated backward into the inhouse manufacture of parts

of apparel products sold from their shelves. The management, through their

manufacturing capabilities, has the ability to control garments from initial

stage into the value chain to tide over unexpected demand and wipe up with

unpredictable world of fast changing fashion trends. The resulting seamless

integration and relative independence from intermediaries represents a

competitive advantage in terms of value, cost and conveniences6.

The trouser manufacturing plant is at Tarapur.

The plant is equipped with staie of art, fully automatic machines for fusing,

serging, bottom heming and welt pocket making operations. The factory has

capacity to manufacture 3000 Trousers a day. The plant was commissioned in

2001 and achieved a capacity utilisation 85%. lt has 300 machines and 340

operator. The basic raw materials for manufacturing process of apparel

include suitting fabric. Some of the fabric used in process are impofted from

countries like Turkey, Dubai etc. The fabric is also sourced from local traders

in India [Ahmedabad, Mumbai, Bhilwara].

The components that go into Apparel are purchased from vendors in lndia

and abroad (Accessorisation).

The purchase department develops vendors to specific company

requirements and also guide them by involving every stage of manufacturing

by providing expertise. The manufacturing division work closely with design

36 Pantaloon retail director report:- www.sebi.gov.inldp/equity share holder draft letter offer 2005 - 2006.

204

team and the research and development team to understand trends anddevelop new products.

7.8. Supply Chain Management

For Big Bazaar, the most important aspect is cost to market. Keeping this inmind the company has created supply chain and logistics model.

The supply chain involves vendor management, quality assurance and

transpoftation.

Vendor Management System

Vendors are identified all over the country and strategic relationships are

developed. A transparent vendor rating system rates each vendor. Regular

follow up and vendor rating system ensures that the vendor remains sync with

the company's goals and targets. Presently no. of 'A' category vendor are

above 80%.

The quality assurance function has been strengthened with implementation of

internal quality control measures. Quality hub has been established at zonal

level.

Warehouses

The company' has one main distribution center and twelve regional

distribution centers located at Delhi, Ghaziabad, Ahmadabad, Mumbai,

Bangalore, Hyderabad, Kolkata, Gurgaon, Pune, Nasik, Nagpur, Chennal

fn big Bazaar the merchandise is delivered straight from the vendors /manufactures to different regional distribution centers. These distribution

centers then transfer the products to the respective stores.

Transportation

The company outsourced intercity transport of goods to third parties. Intracity

movement from warehouse to store is handled by company's own transpoft.

205

In case of lifestyle retailing, the entire apparel stock is generally delivered to

main distribution warehouse. The main distribution warehouse then services

individual store. For lifestyle Format Company uses the seruices of logistics

solution providers in order to transport and supply each store.

Supply Chain Management Initiatives

One of the most crucial initiatives the company launched in 2005 - 06, was the

realignment of supply chain system from the format driven approach to a line

of business led one. This meant that company's supply chain was split into the

broad categories of fashion, food and general merchandise, leading to more

focused approach to business, improved service level, better customisation of

logistics and supply chain related needs. Company also initiated along with

drive of business strategic alliances with the companies for supply of goods,

transpoftation to warehousing etc.

The company also has appointed leading international and domestic players

in warehouses, infrastructures and technology front.

The company has also introduced the concept of reverse logistics that looks

at setting up a process to transfer finished goods from consumption point the

point of origin.

Master Distribution Center and Regional distribution centers and stores are

connected through SAP, there by facilitating standardisation, real time data,

as well as, optimum operational efficiencies.

Processes and Support Function

1) Category Management - Management have employed the concept of

category management which is day to day merchandising function as

against traditional brand management merchandise practices followed

by most retailers.

Category manager looks at sales and margins of each brand in a category.

The whole idea of category management is to create products across length

206

and breadth of category at different price; prints, fabrics, design, shape,

season, colour and size

a) Category Manager's Functions

To develop merchandising strategy for the categories taking into

account customer profile, classification resource vendor, fashion

trends, items and price.

b) Sourcing and Purchasing

The category manager controls quantity to be purchased as per the

sales forecast. The purchasing is done as per range plan made for the

season, vendors are placed on basis of sales and stock available.

The category manager reviews the actual sales verses planned sales

and source the material based on the feedback from storefront.

c) Logistics

The category manager ensures that goods are dispatched in right

quantities and at right time to reach stores with sufficient time in hand

to promptly cater to customer demand.

d) Promotions

The category manager plans promotions / brand or product building

schemes. He identifies slow moving and plan for disposal.

207

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7.9 Shoppers Stop37 (Case Study No. 2)

1) Gompany Profile

Shopper stop Ltd. was founded by K. Raheja corporation in 1g91, laying the

foundation of organised retail industry in India. lt stafted operations with the

first store in suburban Mumbai and is now a multi channel retailer with 26

large format department stores (Hyper markets) and online presence.

From its inception shoppers stop has progressed from being a single brand

shop to becoming a fashion and lifestyle store for the family. Today shoppers

stop is known for its superior quality products, services and above all, for

providing complete shopping experience. Company's continuous expansion

plans aim to help Shoppers Stop to meet the challenges of retail industry in an

even better manner than it does today.

Shoppers Stop invested in and acquired a crossword book store which now

operates more than 50 stores across the country. lt has also invested in

Hyper city a Hyper market which has been rated among top store worldwide

with exclusive brands, as well ?s, domestics and international brands.

shoppers stop continues its expansion across the country with the hyper

market, department stores and book stores. Shoppers stop also operates

catalogue specialty stores for expectant mothers and children's in

arrangement with mother care and cosmetic boutique, stores with MAC. A JV

with Nuance Group of Zurich operates Airport retail stores at Mumbai,

Bangalore, Hyderabad-in India.

Specialties - Retail - Hyper markets, departmental stores, book stores, airport,

retailing.

Shoppers stop may look at exposure in emerging retail generation like food

and value retailing. Shoppers stop has option to by upto 51% equity share

capital of rainbow retail ltd. at any time before Dec.31st,2008 as per lpO

documents filed with SEBI by the company. Rainbow has set up to carry on

" www.shopperstop.com

209

hyper market retailing and online trading, as well as, it deals in confectionary

and grocery.

Shoppers stop believes that the various initiatives taken by them have played

a key role in enhancing the standard of retail in country. Shoppers stop focus

is on bringing in the international best practices into the retail operations and

providing customer with a unique shopping experience.

Shoppers stop is professionally, system driven organisation. The retailer

believes on focusing strongly customer supported systems, processes and

committed staff. Shoppers Stop believe that delighting customer is the key to

being a successful retailer and hence have built business model around

customer needs. Shoppers Stop offers to customer a unique shopping

experience, comprising of vast range of lifestyle merchandise, various

seruices and aspirational products made available to the customers in a world

class shopping environment and complemented by superior customer seruice.

Shoppers stop strives to enhance their service offerings in line with emerging

trends globally. lt has wide range of branded and own label apparel, foot

ware, perfumes, cosmetics, jewellery, leather products and accessories,

home products, books, music and toys in stores.

Shoppers Stop Product Profile

It operates 'shop in shop'for some supporting of the product lines.

Shop in shop For pedumes, mobile, jewellery, kodak, watches,sunglasses, crystal (gift), bag section, pens(sharpener, cross, parker)1) Apparel - Presently 70% of sales is of apparel.Out of 240 brands of apparel stocked (value 400crore) only 5 brands are of private label (Stop andLife brands for mid segments of youth).2) Premium ethnic ladies wear Kashish Privatefabel contributes 18-2O% of value of sales.3) Sarees4) Dress material5) Kid section6) Sports section

Purchased and sold

210

This is complemented by cafe, food entertainment, personal care and various

beauty related services. The promotions and events are an integral part of

service offering to customer, which helps to create a unique shopping

experience.

It's loyalty program "called "FIRST clTlzEN OLUB" currently has over

4,10,673 members. First citizen accounted for about half of shoopers stop

safe in year ended 2004.

Shoppers stop otfer their 'first citizen reward' points on their purchases,

special offer and discount and invitation to exclusive events and promotions.

7.1O. Shoppers Stop Success factors (S.S.)

Shoppers Stop believes that the following factors have helped them' emerge

as a leading domestic retailer.

1) Experienced professionally managed team.

2) Strong focus on systems and procedure.

3) Extensive use of lT system.

4) Strong distribution and logistics network.

5) Vast range of lifestyle products and services.

6) Internationallybenchmarkedshoppingenvironment.

7) Strong understanding of real estate business.

8) Large base of loyal customer.

7.11 Shoppers Stop Growth Strategy

1) Increasing penetration in existing cities and expanding our reach

across the country.

2) Furthering shopper's stop as an experiential retail brand through

unique national and international promotion.

3) Enhancing our merchandise width by adding product categories.

4) lntroducing new brands and developing private labels to offer a better

depth in each category.

211

5) Increasing our first citizen base.

6) Utilising economies of scale as we grow in size and expand our reach.

7) Enhancing our operational efficiencies.

8) Enhancing human capital.

Shopper Stop'VlSlON' statement

"To be a global retailer in India and maintain its number one position in the

Indian market in stores retailing."

Shopper Stop'MISSION' statement

"Nothing but the best"

To strive and achieve nothing but the best in terms of processes, practices

and deliverables

Customer Philosophy

"feelthe experience, while you shop"

Service Philosophy

"lt's magical, lt's comfortable. lt's my store. "

Organisational Values

Shoppers Stop believes in the following organisational values that would

provide success in achieving vision and groMh mission.

1) We shall not take what is not ours.

2) The obligation to dissent (against a view point that is not acceptable).

3) We shall have environment conducive to openness

4) We shall believe in innovation.

5) We shall have environment conducive to development.

6) We shall have the willingness to apologies and forgive.

7) We shall respect our customer's rights.

8) The value of trust.

9) We shall be fair.

212

Mr. B. S. Nagesh Customer Care Associate and Managing Director Shoppers

Stop Ltd. said "our long term focus is to provide world class service to our

loyal customers on a sustained basis."

Mr. Govind Shrikhande Customer Care Associate and CEO of Shoppers Stop

Ltd., said "our customer loyalty program has been growing strongly and isnow contributing to 72"/" of our sales".

During year 2008-09 Shoppers Stop was awarded with following awards.

1) Most admired fashion retailer destination of year by "Al lmage Fashion

Forum 2009."

2) Retailer of the year - fashion and lifestyle - At Asia retail Congress

2009.

7.12 Shoppers Stop Store Locations3s

StateA.P.DelhiHaryanaKarnatakaMaharashtra

RajastanTamil NaduUP

West Bengal

Town / CityHydrabadNew DeihiGurgaonBangaloreMumbaiNavi MumbaiPuneJaipurChennaiGaziabadLucknowNoidaKolkata

No. of Stores1

31

271

221

1

1

1

326

NB :' 1) The number of stores of Shoppers Stop is relatively small viz 26 as against 1 15 stores

of big bazaar.

2) Shoppers Stop also focuses metros like Mumbai, Delhi and Calcutta etc. for expending the

number of stores conesponding to their large population.

38 www.shoppersstop.com/store location

213

Shopper's Stop Ltd. has a commanding presence across with 26 stores in 12

cities covering area more than 1.5 Mn sq.ft.

I $*ppcr'r Stss

I 0E locdfunr

a HF{Eih

{l SpcciJilfetn-r Cm. ,ldcrsrmro< FccJ ii h.pgm *:rra'

Figure 18 Shoppers Stop Store Locations in India

Table No. 21 Shopper Stop Financial Highlights (Rs. In Mn.)

2002-o3 03-04 04-05 05-06 06-07Number of Stores 12 14 16 20 22Gross retail sales 2924 3854 4887 6349 8463Cost of qoods sold 2077 2712 3421 4322 5688Operatinq expenses 732 988 1208 1652 2246Profit 106 120 190 271 262Assets Turnover ratio 2.4 3.1 3.1 2.6 2.4Returns on capitalemploved

13% 12.4% 14.20h 11.3o/o 6.4%

214

Findings :-

1) The sales turnover of 22 shops has increased to Rs. 846 cr. Being

about 3 times in comparison of the same of Rs.2g2 cr. of year 2002-

2003.

2) The profit of the year 2006-07 has increased bv 2.4 times to Rs.26 cr.from Rs.10 Cr. Of the year 2002-2003.

3) The sales growth and the profit growth are directly proportional.

4) In absolute and quantitative terms Big Bazaar (Pantaloon) has excelled

by having 230 shops and about Rs.5000 cr. Sales with profit of Rs.126

Cr. But in relative and quantitative terms the shoppers stop excels inthe managerial efficiency

5) Big Bazaar (Pantaloon) targets all classes, even the poor and lower

middle income groups as their targeted customer. Whereas shoppers

Stop focuses only on elite class of customer.

Number of Stores

2002-03 03-04 o6-o7

Graph No.29 Shopper's Stops Total Number of Stores Growth

215

c

=.=c;t,

300

250

200

150

100

50

0

Gross retail sales

Graph No.30 Shopper's Stops Gross Retail Sales Growth

2002-03 06-07

I

J

Graph No.31 Shopper's Stops Net Profit Growth

216

7.13 Historical Developments

1991

19921993

19941995

199820012002 - 2003

2004 - 2005

2006 -08

Shoppers Stop. Outlet with area 2800 sq.ft. and was readyto wear men's store.It added ladies wear.It was complete retail dept. store with kids section andaddition of accessories including jewellery, cosmetics andwatches.It launched 'STOP'- the first inhome brand of merchandise.It opened store in addition to Mumbai, Bangalore inHydrabad.It opened store in Jaipur.It entered in Pune and ChennaiIt opened in Mumbai at Chembur, Bandra, Kandivali andMulund and Gurgaon and Kolkata.Opened additional store in Kolkata, Bangalore, Pune andMumbai (Juhu), Delhi (Gaziabad)It entered Lucknow.It opened store in Noida, DelhiCompany had launched a new format "Home Stop" inBangalore. Home stop had every thing that a consumermight need for home furnishing and home decor items.There are three home stop till date.Shoppers Stop had launched new format "Arcelia" in twocities Pune and Delhi. Arcelia caters to the need of thoseconsumers seeking high end cosmetics, perfumes,accessories, jewellery, handbags etc.Investment in Joint Venture, license and franchiseagreement for addition of new formats.a) Cross word - a leisure book store.b) Brio - the cafe bristro and Deri Cafe (Food and

Beverages) 27 nos. in g cities.c) "Hyper City" store - a huge cavernow food, grocery,

general merchandise and apparel outlet. The hypercity one in operation with area 1,24,000 sq.ft.

d) "Mother Care" stores are operational selling productsfor expectant mothers, babies, toddlers and children.

e) Airport Retailing - Joint venture with Nuance groupSwitzerland and outlets are at Bangalore andHydrabad.

D M.A.C. (Cosmetics) - MAC store function under asupply and licence agreement with the cosmeticmajor Estee lauder (Cosmetics, fragrances, finejewellery etc.) 6 stores in Mumbai, Bangalore, Delhi,Chennai.

g) Clinique (Cosmetics) - shop in shop store in ShopperStop - Malad, Mumbai.

h) Time zone - family entertainment centers in Mumbai,Ahmedabad, Kolkata and Hydrabad.

2007 - 2008

RecentDevelopments

217

7.14 Supply Ghain Management at Shopper Stop (SCM)

Supply chain management is a key management function viewed as a means

of enabling profitable growth in line with the company strategic growth

planning. The supply chain management function at shoppers Stop

coordinates and integrates all activities and integrates all activities associated

with moving product, services into seamless process. Embrosing all the

partners in the chain, including various departments, vendors, transporters

and other service providers facilitates all the information system to monitor the

same activities.

Supply chain management at shoppers stop begins and ends with customer.

The focus is to introduce new tools and techniques and changing mindset to

manage the constraints and uncertainty.

The first step of planning is merchandise planning and sourcing the range

width and assortment planning process is used to develop meaningful sales

and space plans. The planning process starts six months in advance, of

actual beginning of the season to fill an agreed amount of footage with

product that matches customer demand. The challenge is to develop a

balanced range which provides the appropriate mix of colour, price, styling

and fabric so that the customer is given the best possible choice at all times.

Also the agenda is having a mix of own label products and branded products

in a such a way that aligns with the company strategic goal of increasing own

label participation to drive store loyalty through exclusivity and

complementary to overall brand strategy.

Once the range width and assortment planning is done the next challenge is

the merchandise. The buying department then decides the suppliers who

would supply the necessary merchandise as per plan considerations which

are given in selecting the preferred supplier such as history, quality, hit rates

in supplying goods in time, margin and vendors'cooperation, future capacity

expansion plan, financial capabilities to invest for growth and the lead time.

218

Shopper Stop has implemented the Atlanta, US based retail ERP system

through which the entire buying process and merchandise management is

now being undertaken. As per the range width and assortment plans,

purchase orders are issued to suppliers through the central merchandising

function. The actual delivery of the stock is then controlled on week to week

basis through delivery authorisation number, acts as tool to control the overall

inventory position. The delivery authorisation is issued to vendors on a weekly

basis based on the previous weeks actual sales and forward sales plan.

The vendor then dispatches the goods to distribution center based on the

purchase order and delivery authorisation. Every distribution center gets a

copy of the delivery authorisation issued for the week. At the distribution

center the support is provided by warehouse management system (WMS) of

JDA which manages the warehousing function most efficiently.

At shoppers Stop, the challenge emanates from the fact that it has nine

stores across India of size varying from 2500 sq.ft to 45000 sq.ft which are

expected to go up to 12 stores by next year and three distribution centers, one

each in New Delhi, Mumbai and Bangalor. Also it has 300 suppliers who

supply stock to three distribution centers which then redistributes

merchandise to the nine stores.

Variety, colour, size of merchandise play a very important role in delivery

which is a great shopping experience to the customer. Looking at this factor,

shopper stop implemented a replenishment system in 2000. Today the auto

replenishment schedule (ARS) acts as a live, real time link between the

distribution centers and shopper stop outlets.

The ARs automatically analyse the data and suggest that a particular stock, in

particular quality, size and colour to be sent to a specific shopper stop outlet.

The warehouse management system (WMS) on the other hand, is designed

to optimize the space in the warehouse. So when stock comes in from vendor,

219

the system allocates the slot in the warehouse for the merchandise to be put

in such way that space utilisation is optimum. The ARS minimises the reaction

time to raise a replenishment trigger and the warehouse management system

(WMS) minimises processing of the replenishment trigger at distribution

center. Realising the infrastructure is the key to the success of supply chain

management. Shoppers stop has made investments in warehousing

infrastructure and system. Visiting four intemational stores in order to

understand the best practices in supply chain management help Shoppers

Stop, revamp its entire distribution center operations. Today distribution

centers operate round the clock, supplying stocks to stores much before the

first customer walks in and eliminating any kind of interference to the

customer, while he / she browsing the products on display. Today shoppers

stop distribution center deliver service at a cost which is comparable to the

best of the world's distribution center's operations. The other major areas of

concern is inventory control. Shoppers Stop which is basically a lifestyle

retailer is hard pressed to keep pace with changing fashion. Hence focus is on

controlling inventory in such a way that obsolescence is decreased.

With implementation of the ARS and WMS, Shoppers Stop has reduced the

inventory to 10 weeks. An efficient supply chain has enabled the company to

optimise the stock levels thereby conserving working capital. lt has enabled

quick turnaround of inventory which minimises the obsolescence in stocks.

What makes the retailing business complex, is the dimensions the number of

stock keeping units - large vendor base, seasonality, tax law managing,

expansions and scalability of operations, inbound and out bound

transpoftations, stock accuracy and reverse logistics of defective stocks. All

decisions and actions taken any where the chain has impact on each and

every member of the chain. The greatest challenge is to get the act together

and seamlessly integrate the parts in such way, that the effectiveness of the

whole chain is more important than that an individual link of the chain.

Future projects at Shoppers Stop include Automatic Data Capture (ADC) at

the distribution centers. Every product has a different bar code since every

220

bar code is number based, there are chances of errors in operations resulting

in stock in accuracy. Shoppers Stop has already set up the ADC for cashier

and stock taking process. lt further plans to use it for the stock receiving

process and stock replenishment process at distribution centers.

The company is also in the process of testing out a consolidated intake

model, which in time, will add value to total supply chain management. For

this the company plans to take the services of third party logistics (3-PL)

which would run on daily basis and collect the stock as per the delivery

authorisation and deliver the same to the distribution centers. Another

endeavour is to integrate suppliers into Shoppers Stop Supply chain through

EDI and the internet. Shoppers Stop is investing in business to business (Web

enabled procurement solutions) to achieve this. The idea is to disseminate

and seek information faster at minimum cost and do online transactions

processing. The first phase of this project is already implemented and major

vendors are now connected to Shoppers Stop business to business web site.

Supply chain management is a key factor in improving overall efficiency and it

creates an opportunity for enhanced sale; and customer satisfaction.

Shoppers Stop has already initiated progressive steps in management of

supply chain in line with its mission of 'nothing best - the best'.

It would not be very long before other retailers also take up developments in

the area of supply chain management based on these benchmarks. The next

few years will witness various innovative tie ups and consolidations of various

elements of the supply chain.

221

Shoppers Stop Supply Ghain Management Initiatives

Shoppe/s Stop is a member of intercontinental group of department store

(IGDS) and have obtained knowhow and co-operation to increase economic

efficiency and productivity to efficient supply chain.

In 1999, Shoppers Stop implemented the Enterprise Resource Planning

(ERP) of JDA - merchandise management system (MMS), well ahead of time.

Before implementation the situation was

3 stores with a turnover of Rs. 127 crores.

- Turnaround time - 4 days

- Poor hit rate from partners

- Difficulty in tracking merchandise.

- No sharing of inventory data with Partners.

- High Distribution cost.

- High Inventory

- High Shrinkage

- Annual stock take stoppage of operations for 2 days.

- High variance between books and physical stock.

- lnefficient use of executive time.

System (JDA - MMS - WMS - PICS)

InfrastructureDelivery Mechanismlntake Consolidation

Logistics Partners

The Strategy to overcome and implement supply chain3e

B-2.8Source TaggingReceipts DirectStore delivery

3e www.shoppershop.com

222

A) System

Shoppes stop implemented JDA Retail Merchandise Management System

(MMS). MMS Provides an end to end solution for managing merchandise

throughout chain. Right from P.O.S. (Purchase Order) to sale - to

replenishment, to markdown and inventory management.

It is an integrated online system connected with backend, front end (stores)

and the distribution centers.

MMS - Activity Trigger

a) Auto Purchase Order

- Predetermined level of minimum stock for core styles at

distribution centers.

- Drop in level generates on auto purchase order to the vendor.

b) Auto Replenishment

- Predetermined level of minimum stock for each item at each

store.

- Drop in level generates auto replenishment command at stock

keeping unit levelto the concerned distribution center.

- Daily auto replenishment to all stores.

c) The WMS - Warehouse Management System

- Prior to WMS, inventory was monitored manually and transfer

required more than 96 hours.

- With WMS, entire process is controlled electronically.

- Thus transfers are executed in 24 hours.

d) WMS Process

- Distribution center mapped on to a rack and bin system.

- Calculates store capacity.

- Allocates designated area for each category .

223

- Pick list which identifies exact location of merchandise at stock

keeping units level.

- Maintain records of perpetual inventory online.

- Minimise shrinkage

- Reduce turnaround time to 24 hours.

e) PICS - Perpetual Inventory Contral System

- Distribution center scans one department per day.

- All depaftments scanned in a quarter.

- Predetermine schedule of all department

- Operation process not affected.

- Help in checking pilferage.

- Variances are known every day.

- Major tool for reducing shrinkage resulting in cost savings.

"Competitive Advantages through supply chain achieved." presented by

Shopper Stop

B) Logistics

Four dedicated distribution centers, covering 85000 sq.ft. supply merchandise

to 15 stores across the country.

Distribution Center Management is out sourced to and managed

independently by regional service provider.

Regional distribution centers are connected online to the central system.

224

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225

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Figure No. 19 Shopper's Stop Distribution and Logistics

lntake Consolidation

- Currently only for own brand paftners.

- Delivery authorisation indicating quantity to be received for the week.

- National transporter to follow up with the vendor for merchandise.

- Distribution center is informed by Electronic Data Transfer (EDl)

These initiatives achieved turnaround time to 24 hours and saving of Rs.1

lakh month.

C) Partners - Partners can proactively improve efficiency and business

results by

- Ensuring smooth flow of merchandise through the entire supply chain.

- lmproving the visibility and velocity of information through supply chain.

Operationo out $ourced

\'". L-'\:=:--l*-ffi;;

226

a) Business to Business

- Currently 150 partners connected online with shoppers stop and the

features include

- Order Processing

- Purchase order

- Receipt details

- Payment

- Ledger details

- Sales and Stock

- Style wise / location wise

Business to business Advantages

- Reduction in communication expenses.

- Faster information exchange with business associates.

- Frees up executive time for other value added activity

- lncrease in service level.

b) Source Tagging

- Bar coding capturing style and price are attached to the

merchandise at the Paftners Premises.

- Ensures smooth flow of merchandise through the supply chain

and reduce tumaround time.

c) Receipts

- Receives confirmation report prepared at the distribution center

upon receipt of goods.

- Report is sent to corporate office against which payment is

released.

d) Direct Store Delivery

- By passing the distribution center, goods are directly received at

227

Tumaround time is reduced to 12 hours.

Reduction in distribution cost.

Supply Chain Strategy Summary

System-JDA-MMS-WMS-lmproved efficient customerresponse.PICSShrinkage beats global std.

82BSeem less integrationSource togging Seamlessgoods flow Receipts100"/" reconciliation

LogisticsInfrastructure - Scalability up50 storesDelivery MechanismTurnaround time 24 hou rs.Intake Gonsolidation - logisticscost saving

Supply chain management lmplementation Benefits

1) A financial cumulative savings of Rs. 1.20 crore.

2) Reduction in Distribution and logistics expenses

No shrinkage at Distribution center.

3) Shrinkage of store level

4) lmproved service standard of logistics

Shipment allocated Vs shipment executed

Year Turnover D & L Exoenses 7o to turnoverBefore sum 2001-02 249.5 2.64 1.O6"/"After sum 2OO3-04 404.5 3.35 0.83%

Year T.O. (Grores) Shrinkaqe (Crore) o/o

2001-02 249.5 1.65 0.66%2003-04 404.5 1.62 O.4O"/"

Year Allocated Shipoed o/o

Aoril2001 2410 2187 9'1"/"Aoril2004 11537 1 1366 99%

228

5) Results of supply chain management initiatives

Shopper Stop Back end SC and use of lT

Figure No.20 Activity Flow Diagram

Sr. Obiective lntanqible Benefits Tanqible Benefits1

CustomerLatest mechandiseavailable

- Availability of mechandise.- Prooer oroduct & Price info.

2Partner

TransparencyPartnership

- Timely payment- Greater efficiency- Growth

3

Stakeholder

Higher Customersatisfaction level throughCSI (Customer Satisfactionlndex)

- Profitability- Lower distribution cost.- Greater etficiency in execution.- Scalabilitv to 50 store.

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Strategic Management Policies and Practices of Walmart as against

those of future group (Big Bazar) and Shoppers stop (Main Finding)

The point. 7.15 has provided authentic information supplied all the groups

which are as follows

a) Over all impression from information received is obviously in favor of

Walmart and it can be stated that Wal-Mart vision statement is not only

longest and comprehensive, exclusive statement but it has qualities of

specificity, objectivity and rationality. No where in their vision statement, there

are tall, lofty and exaggerated claims, lhey have down to earth practical

business management approach, blended with sincere urge for achieving

growth, well being, prosperity of entire world community as well as

commitment to uphold the permanent, ethical and moral values and promotion

of distinguished and dignified company culture "No where they accept myopic,

self interested concem for profits, instead they talk very strongly about lowest

cost assured to customer, best quality given to customer and most prompt

and efficient customer service. On the other hand they are concemed aboui

maximising gains and benefits of their suppliers, manufactures, contractual

transpofters, employees, vendors, dealers and shareholders. Their directors

have great priority to replough their profits into more intensive investments for

the optimal glow and efficiency of the company. ln their minds, their company

is the focal interesting aspect and nothing else, comparing their vision

statement of Walmart Future Group, gives too paftial consideration to their

customers, and give more attention to their own profits!

Shoppers stop a typical pompous and exaggerated statement which is aproduct of Indian Psyche making highly exaggerated statement to become

Global retailer no. 1 in India and World! (Although it has not attended number

one position in India).

As far as mission statements are concerned, Walmart mentions specific

intentions such ?s, lowest cost, best quality, quickest delivery, genuine

customer seruice and making customer feel that "they are at home" in all the

stores of Walmaft wrth in USA and outside USA. As against this mission

242

statement, mission statements of 'future group'and 'shoppers stop'are vague

and over ambitious.

Walmart specifically mentions its concern of values as against this, future

group lays on emphasis on belief and respect for retailing "lndianness" that

indirectly suggests future group's appeal to popular support of Indians for their

promotional and their own interest. As far as values are concerned, shoppers

stop statement is again vague.

As far as, corporate groMh strategy is concerned Walmart provides central

focus on positive brand building and company recognition, where as, future

group and shoppers stop mention about need of penetration in existing cities

and expanding their network.

In strategic management "Critical Success Factor" are to be properly defined,

Walmart enlist them as

a) 1) lowest price 2) best quality 3) online delivery 4) best customer

seryice and satisfaction uncompromisable being the focal point.

b) Loyal and committed employees

c) World class corporate Governance

d) Ethical business

e) Cross cultural adaption

f) highly flexible and etfective organisation.

g) Ability to work in low margin and high volume strategy.

h) Lowest price differentiation

i) Exremely effective ERP supported well developed supply chain

management

As against critical success factors of both 'Future group' and 'shoppers stop'

seem to be pedagogic and immature.

243