CASE STUDIES ON RETAIL MANAGEMENT
CASE STUDY 1
A NEW STEP TAKEN IN CHENNAI
Saikrishna was pleased that he had pole-vaulted over his father’s anxieties and got his consent to run the
kirana shop, Gopistore. Saikrishna is an MBA from the Bangalore University and he wanted to continue
his fathers business, but his father does not want him to run a kirana shop after an MBA. Saikrishna had
strong ambitions to run a kirana shop and to be a top retailer in the city. After finishing his MBA he
convinced his father to join him for his kirana business. Ultimately he could also be able to convince him
by introducing him to the world of organized retailing. Sai has collected a lot of information on the
retailing business and he wanted to improve his fathers business from a kirana shop to a step further and
to be top retailer in the city. Sai started telling his father that, there is a retail revolution taking place in
India. All metropolitan cities across cities today have traditional retailers of all sizes and specialties and
are threatened by formidable organized and modern chains and stores.
These range from, at one extreme, the 1,25,000 sq ft Spencer’s Plaza mall to outlets such as Food World,
Nilgiri’s, Subhiksha, and Vitan supermarkets, the Vivek’s chain of consumer durables outlets, the Health
and Glow beauty outlets and sundry food retailers like Pizza Corner, Pizza Hut, and Café Coffee Day.
In between these are the department stores. They look their part- huge, multi-storey hulks, glass windows
all around, floodlight at night and with their names splashed boldly along. Even within this format, the
main chains of department stores are using different strategies merchandising to expand nationally.
Large corporations own the four largest chains with units in other cities and national plans. Of these four
departmental stores, three have been open for a little more than a year: the 38,000 sq ft Globus owned by
the Mumbai-based Hathaway Group, the 30,000 sq ft Life Style which is linked to the Jagtiani-owned
Landmark group based in Dubai, and the 17,000 sq ft Westside, which is owned by Trent, the retailing
wing of the Tata Group. The fourth store, the 35,000sqft Shoppers’ Stop was the last to enter Chennai.
There are other upcoming department store players in the country, like the Delhi-based Ebony chain or
the Mumbai-based Pyramid, but Chennai is the only location where four of the largest players battle with
each other directly. Shoppers’ Stop may be the latest entrant, but it can claim certain precedence. Its
pioneering store in Mumbai, followed by successes in Bangalore, Hyderabad, Delhi, and Jaipur, showed
that large-scale organized retailing works in India.
In layout, special promotions, staff development advertising and brand building, and customer
relationship development, it was Shoppers’ Stop set the standard among chains. The chain’s Managing
Director, B.S.Nagesh, could be permitted some hyperbole when he claims that it’s a sign of its power that
the other stores, barring Westside, “Started off much like Shoppers’ Stop, but have felt the need to
diversify once we entered the market.”
Whether or not they were reacting, all these stores are following subtly different strategies- though they
are all aiming for essentially the same middle and upper middle-class consumer, with much the same
apparel-centered product mix. The grounds for such differentiation are hence not great. Decor may vary,
but only marginally, The retailer rarely has the money to spend heavily on advertising their brand. So
what do you differentiate on? The answer is merchandising, a retailing discipline that is becoming
increasingly important in India. Merchandising, is essentially the skill that decides which items will go on
the shelves. It requires analysis of fashion trends, forecasting future ones, designing appropriate garments,
sourcing, checking the finished merchandise, putting it on shelves, and ensuring it is best situated to grab
customer attention.
As H. Ramanathan, Managing Director, Life Style International, says, “customers don’t realize that in
retailing, 80% of work is done behind the scenes to get the products on the shelves”. Merchandising
along with information technology have been key areas for investments. Shoppers’ Stop has gone to the
extent of recruiting professionals from abroad to spearhead their merchandising efforts. Globus and
Westside have both invested significantly in developing their merchandising team, while Life Style has
benefited from its association with Landmark, one of the largest retailers in the Gulf.
Ramanathan says that they don’t apply international expertise blindly to India. He says, “we take into
account, for example, issues like the way Indians seem to need more customer service from our
employees”. Most of Life Style’s senior management team, including Ramanathan himself, have been
posted to India from international operations of the chain, while people from India have also gone
abroad for training in areas like merchandising. The key merchandising decision that these stores had to
take was between selling own label brands or other companies’ brands. Own label is the classic retailing
strategy, where all the products stocked have either the same brand as the store (as with Gap), or store
developed brands (as with Marks & Spencer’s – the St Michael label).
In India, apparel retailers ranging from Charagh Din to Arvind Mills have had success with this strategy.
It allows for higher margins as the retailer controls manufacturing. But Nagesh points to the limitations
as welll: “a brand, through its multiple activities has created an image of a lifestyle that the consumer
has come to expect. It’s very difficult for a retailer, with his limited resources, to do that”. By stocking
other brands, retailers avoid the headache of manufacturing and marketing, concentrating instead on
their core competency of providing a good retailing experience. It is the rapid way to enter retail, and
ensures a product range with a guaranteed level of acceptance. For example, from the onset in the
Indian market, Shoppers’ Stop concentrated on other brands, which account for around 80 % of its
stock. The store has gone in for its own brands principally in areas where general brands are weak, like
women and children’s wear. The store plans to extend its own brands from the current ‘Stop’ and ‘i’
labels to include labels like Kashish for ethnic wear and Life for fashion.
But Nagesh has no doubt that non-store brands will remain its basic business. The same goes for Life
Style, which has not developed store brands specifically for the Indian market but only stocking some
own label brands that are anyway being manufactured for Landmark’s international stores. The same goes
for Life Style, which has not developed store brands specifically for the Indian market, only stocking
some own label brands that are anyway being manufactured for Landmark’s international stores.
According to Ramanathan, the proportion varies depending on the level of acceptability of local brands:
“in household products it’s as much as 80% own label because of the lack of good local brands. On the
other hand, with men’s apparel where there are a lot of good brands, it’s just 20 % with women and
children’s wear it’s around 50%
That’s the opposite of Westside’s strategy. The store’s genesis was in the manufacturing operations of
Little Woods, a major British retailer, which Trent took over along with their single store in Bangalore.
Westside struck to Little Woods own-label strategy, with most products in the store under the Westside
label, or variants of the umbrella brand like West Sport. Ajay Mehara, Vice-president, Marketing, admits
that this is a harder strategy, but insists it makes long-term sense. “In the next five to ten years, if all
retailers offer the same brands, the main differentiator will be location and customer service.” Frankly,
these are not great differentiators, so we’d rather have something more basic, like a product range that
customers could only get from us.”
The store does not rule out stocking other brands, Mehra says, “but only if they could be exclusive to
us.” Mehra admits that higher margins of store brands tend to be nullified by extra marketing cost. But it
opens a franchising option for the company. While Westside doesnot have immediate plans to do this,
Mehra says its something they could think of in the long term, “perhaps for smaller format stores in
cities where we have already established a main store.” Globus’strategy lies in between, but is
increasingly tending towards own brands, Ved Prakash Arya, CEO, Globus admits, “A lot of people are
not satisfied by existing brands which aren’t offering the products they want, or at acceptable prices.”
The company has invested heavily in developing its own products, particularly for Pavilion, the second
store format, launched in Chennai. Pavilion offers value-for-money apparel, entirely under its own brand
name. An extensive merchandising system has been put in place for Pavilion – the merchandising team
is entirely separate from Globus. But with this level of expertise, it seems likely that Globus will
increasingly be leveraging this to move towards, if never entirely to, the Westside model. The other
important merchandising decision a store must make is which basic categories it will give prominence
to. Apparel is at the heart of all these stores, but they have other categories as well. Life Style in
particular, emphasizes its household products, shoes and children’s apparel ranges. It’s leveraging the
advantage it gets from its international partner, which has specialized retailing formats for all these
categories.
So it’s simply a matter of applying this experience, and quite often the same products sourced by its
global operations, to its Indian stores. International contacts give it another advantage in a critical area
or recruiting and retaining good staff. Life Style is able to offer employees the chance of moving abroad
as their careers develop. “Quite a substantial motivational tool,” notes Ramanathan. Nagesh for one
admits he rather envies Life Style this advantage, particularly with household products, “it’s an area of
the future, “he says. Shoppers’ stop will be expanding its household products’ though not to the extent
of Life Style. “Our focus will always be firmly on apparel, “says Ramanathan. The other area, which the
store has been expanding is its accessories and cosmetics business. Nagesh says this is not from a
profitability point of view.
But other big differentiator Shoppers’ Stop has put into its Chennai store is the sale of books and music.
It’s tied up with the RPG group-owned Music Word to open a store on one floor of the Shoppers’ Stop
outlet. Alongside, it’s placed an outlet of Crossword, the Mumbai-based bookstore chain that the Raheja
group took over from India Book house earlier this year. The store pioneered this combination in
Hyderabad, and is enthusiastic about it. Nagesh says it rounds out their offering, giving customers more
reasons to come to the store. Life Style also offers books and music in Hyderabad, but Nagesh
emphasizes the importance of offering them through separate stores. They bring a different type of
customer- and a critically important type. Book, and particularly, music do more than just bring
customers to the store. They bring a different type of customer- and a critically important type. “We had
realized that our store was good at appealing to the 25-35 age group, but not the 15-25 group,” says
Nagesh. That mattered because these were the important future customers and if they had the
impression that the store was too old for them, it was setting itself up for future trouble. Music is now
bringing in the younger crowd, which is why in Mumbai the store has tied up with the Planet M chain of
music stores. “We will continue to have such tie-ups, with Planet M in the North and West and Music
World in the South,” says Nagesh.
Lessons like these, learned on the Chennai battlefield are going to be critical as the stores continue their
roll-out across the country. Shoppers’ Stop had to open two more suburban stores in Mumbai, in
Ghatkopar, followed by Bandra next year, as well as a second Delhi store. Westside recently added to its
original four stores in Bangalore, Chennai, Hyderabad and Mumbai, one store in Pune, and plans to go to
Delhi and Kolkatta. “Our aim is to have 12 stores by 2002,” says Mehra. Life Style plans to go in regional
blocks. Its Bangalore store had opened in the first quarter of the year 2001, and Ramanathan says they
might consider a fourth southern store “may be some where like Coimbatore.” After that they’ll move
north, to Delhi, and maybe Chandigarh. “Obviously we’ll have to look at Mumbai at some point, but the
property scene is really tough,” says Ramanathan. Globus will move more slowly. It started with stores
in Indore and Chennai to experiment with small versus large towns. Arya says the Indore experience has
been mixed. They have no competition in the city, and as its largest store Globus is seen with pride and
has huge customer loyalty. “But large stores need large footfalls, which aren’t always immediately
available in smaller towns,” Says Arya. Their next venture will be in Mumbai. The battle goes on.
Ramanathan for one welcomes the prospect “All these stores have actually helped each other,” he says.
“It’s created a tremendous awareness in Chennai. People have become comfortable shopping in them,
and together they have helped create a culture for large scale retailing in this city.” Now it’s going to
happen in other cities as well. Sai took his father in to the world of organized retailing and got his
consent to run his kirana shop. When his father understood about the organized retailing and saw all
shops, he felt like he should support his son and made up his mind to invest to his sons idea.
Sai bought land (10,000 sq ft) at the cost of Rs.10,00,000 in his city, that city is a District place with a
population of 4,00,000 and is 75 Kms away from Bangalore. He constructed a two-floored building and
invested 40,00,000 for the one stop shop retailing his was combination of super market and discount
store. The store is being inaugurated by a famous Kannada film star.
Will Sai become the top retailer in the city?
Do the shops around the store affect the business?
Does this concept of retailing work in the small District?
Has Sai made the right decision?