Stop
Private Label of Shopper’s Stop
Market Development Strategy
By:
Abhilasha Eva Paul
Puneet Khurana
Sunaina Jakhar
Executive Summary
Stop is a private label of Shopper’s Stop. This project is intended to present a
market development strategy for Stop. Shopper’s Stop was founded in 1991 and
is owned by K. Raheja Group. It is positioned as a family store for better to
bridge market customers.
Stop is one of the ten private labels of Shopper’s Stop and contributes the
highest among them. It’s merchandise is available in all Shopper’s Stop’s outlets.
The prices of shirts range from Rs. 499 to Rs. 1299, trousers from Rs. 499 to Rs.
1299 and that of t-shirts from Rs. 399 to Rs. 899.
The market development strategy for Stop is to take Stop out of Shopper’s Stop
and sell its merchandise in different markets. Chandigarh is the target market
studied for this particular project.
The initial investment required for this project is Rs. 297259060. The break even
point in Sales is Rs. 1219392 and Net Profit in the initial year comes out to be
Rs. 49486187. Hence the break even point would be achieved in the initial year
itself.
Contents

Company Profile
o Background
o Portfolio

About Stop

Environment Scanning

Target City Selection
o Criteria
o Rankings

About Chandigarh
o PEST Analysis
o About Kapsons

Branding

Advertising

Supply Chain

Financial Feasibility
Overview
Shoppers Stop is one of India's leading departmental store and has been one of the
pioneers of Organized Retail in India. Over the years, Shoppers stop has forayed into
specialty retail formats like cosmetics, mother care, home solutions, gaming, etc. and
hyper-mart format of Hyper City.
Shoppers Stop has evolved from being a single brand shop to becoming a Fashion &
Lifestyle departmental store for the family and is now positioned in the 'Bridge-to-Luxury'
Segment. In 2000, Shoppers stop diversified into Bookstore Retailing by acquiring 51%
stake in Crossword that it later increased to 100% in 2005. Shoppers stop has also
ventured into various categories like cosmetics through MAC, mother and infant care
through Mothercare, home solutions through Home Stop, food and beverages (F&B)
through Brio and Desi Café, gaming and entertainment through Timezone, Ladies nonapparel and accessories through its luxury format, Arcelia, and into airport retailing
through its 50:50 joint venture (JV) with the Nuance group. Shoppers stop also has 19%
stake in the hyper-mart format of Hyper City and has plans to increase it by 51% by end
of June-2010 (Angels Broking, 2009).
Vision
"To be a global retailer in India and maintain its No. 1 position in the Indian market in the
Department Store category."
Mission
“Nothing but the best.”
Objectives

To continuously improve the benefits and offerings to loyal customers.

To work towards making this Company the Best Place to Work, Shop, Trade &
Invest in.

To deliver higher level of sensory experience, touching the Heart and Mind of our
Consumers.

To deliver this Experience through Fashionable Merchandise, Great Store Layout
and Ambience, Associates focused on Service, and Unmatched Events
Values

We shall not take what is not ours.

The Obligation to dissent (against a viewpoint that is not acceptable).

We shall have an environment conducive to openness.

We shall believe in innovation.

We shall have an environment conducive to development.

We shall have the willingness to apologise and/or forgive.

We shall respect our customers' rights.

The value of trust.

We shall be fair.
Customer Profile
Shoppers’ Stop’s core customers represent a strong SEC A and SEC B skew. They fall
between the age group of 10 years to 45 years, the majority of them being families and
young couples with a monthly household income above Rs. 20000. A large number of
Non - Resident Indians visit the shop for ethnic clothes in the international environment
they are accustomed to.
Current Performance
In year 2008-09 Shoppers stop achieved revenues of Rs. 14000 million. Whilst
company saw decrease in Sales per sq ft and customer footfalls by 10% each over last
year, all other key parameters of conversion, cash memo size and average selling price
have seen growths of 12%, 9% and 8% respectively over last year. Shoppers stop also
saw a like-to-like growth in sales of 2% whilst chain level growth in sales was 16%, cash
margin at gross level grew by 15%. In 3rd quarter of 2008-09, in Mumbai and Jaipur,
company added more than 2,19,000 square feets in the year 2008-09 (Shoppers Stop,
Annual report, 2009).
Shoppers Stop Portfolio
About “Stop”
Stop is one of the 11 private labels Shoppers Stop has also its own line of clothing in
the classic, value classic and value fashion segments. These are:
Shoppers stop earns around 40% Net Margins on Private Labels, but it has not been
able to capitalize on the growing demand for Private Labels in the Apparels Segment
with Private Labels contributing a mere 20% to its Total Sales. In comparison, Private
Labels contribute around 85% of Pantaloons' Total Sales (Angel broking, 2009).
Source: (Angel broking, 2009)
Comparison of Prices of all Private Labels
(Figure
Stop
in Rs)
Kashis
Life
h
I
Push
Mario
Acropo
Vettorio
Jeanswe
and
Zegnotti
lis
Fratini
ar
Shove
499
Shirts
to
-
-
-
-
-
-
-
-
699
s
Tshirts
Denim
Ethnic
wear
499
to
1099
to
599
-
899
-
-
to109
9
2499 to
3499
499
-
299
999
499
to 599
to 359
1099
to 899
1399
1399
-
-
799
1699
to
1699
1299
399
to 1099
1199
1299
Trouser
to 499
479
to
to
-
-
1099
to
to
1399
699
899
-
-
-
-
-
-
to
Merchandise Mix for Stop
Shirts is the most prominent item in Stop merchandise mix, it constitutes around 40% of
total merchandise, followed by trousers and t-shirts which constitutes of 20% each.
SWOT Analysis
Strengths:

Shoppers stop has a very strong loyal customer base with 12, 77,000 loyalty card
holders. These customers contribute 70% of overall sales (Shoppers Stop,
Annual report, 2009). The spending power of these customers can be exploited
more through a brand endorsed by Shoppers stop.

Strong distribution and logistics network and supply chain: The five distribution
centers of Shoppers stop are located in five zones of the country and together
the cover more than 4000,000 square feet and they handle over 400,000 SKUs
per year (Shoppers Stop, Annual report, 2009). Thus reaching into new markets
would not a challenge for “Stop”.

Strong bargaining strength: Having been in existence for so many years and due
to its strong brand image, the Company believes that it is well placed in
negotiations/re-negotiations of property rentals, better commercials terms with
merchandise suppliers etc. The increased market of “Stop” would provide more
business opportunity to these suppliers and thus the bargaining power of “Stop”
will increase even more.

Knowledge about various brands: Shoppers stop houses various brands in its
stores, thus they have all the knowledge related to product, price and promotions
of all brands. This knowledge can be very helpful in developing a strategy for
“Stop”.

Brand Image of Shoppers stop: Shoppers stop enjoys a very good brand image
in apparel market; they have a very huge loyal customer’s base. Such a strong
brand image of Shoppers stop can be leveraged on to its private label i.e. Stop.
Weakness

New Initiatives impacting Bottom-line: Recent Shoppers stop new Initiatives, viz.
Home Stop, MAC, Clinique, Arcelia, etc. have affected the bottom line of the
company during FY2009. Though these new initiatives posted CAGR of 13%
over the past eight quarters to achieve a turnover of Rs59cr in 4QFY2009, they
were negative at the PAT level in FY2009 (Shoppers Stop, Annual report, 2009).
These new initiatives will break even at the PAT level by FY2011E, thus
company might be restrained for looking into a new project.

Awareness and Identity of “Stop”: So far “Stop” merchandise is only been sold
through Shoppers stop stores and there has been no advertising and promotions
of “Stop” outside stores. Thus “Stop” as a brand doesn’t have an identity of its
own.
Opportunities:

Margin on Private Labels: Private label offers higher margin to the retailers
because of several reason like no intermediaries and no advertising cost. Thus
they are more profitable than selling manufacturer’s labels. Shoppers stop earns
a net margin of 40% on its private labels (Angels Broking, 2009).

Growth of smaller cities: The recent growth in smaller cities and saturation in
metros has opened the gates for retailers to move into such small towns.
Moreover the recent downturn in market has affected population of metros more
so than smaller cities, reason being majority of these people earn their earning
through unorganized sector.
Threats:

Tough competition from unorganized players in small cities: Small cities has
numerous number of organized players, these players already have well
established footprints in such markets. These players due to their operational
cost and exceptional retail locations will offer very stiff competition to “Stop”.

Relationships with existing business partners: Over the years Shoppers stop has
ensured that they do not rely upon the sales of their private labels. This has
helped them in maintaining sound relationships with B2B Partners (Other
brands). This business plan of selling “Stop” through other MBO’s might not be
welcomed by these partners.
Porter’s five forces model of competition
Threat of New
Entrants
Bargaining
Power of
Suppliers
Rivalry amongst
Competing Firms
in Industry
Threat of Substitutes
Bargainin
g Power
of Buyers
Threat of New Entrants

Economies of Scale: Shoppers stop has a huge base of suppliers and also a very
well established distribution network. Also Stop has multiple product lines thus it
would not be easy for any new entrant to have that kind of economies of scale
that Shopper stop has.

Product Differentiation: Stop offers a very basic range of merchandise which can
be easily replenished by a new entrant.

Capital Requirements: It would require huge capital for a new entrant to set base
a new business on such a large scale.

Access to Distribution Channel: Moving into Tier II and Tier III cities requires a
very well established distribution network, which would be difficult for new entrant
to access into.
Bargaining Power of Suppliers
Suppliers are likely to be weak, because:

There are plenty of suppliers available in Industry and who are willing to work
with an organization like Shoppers stop.

Shoppers stop is an important customer to the suppliers because of huge orders.

Supplier’s product is an important input to Shoppers stop but there are plenty of
substitute supplier’s.

There is no such differentiation in supplier’s product.

Switching cost to a new supplier is not high.

Supplier’s doesn’t possess a credible threat of forward integration.
Bargaining Power of Buyers
Buyers are likely to be reasonably powerful, because:

Products are not highly differentiated

Buyer’s faces no switching cost

Buyer has full information

There are plenty of other buying options available to buyer

But there is a scope of backward integration
Threat of Substitute

Online retailers

Direct marketing

Catalogue retailers.
Rivalry among Existing Competitors
There is a very intense rivalry among Shoppers stop and Pantaloons. Even pantaloons
has planned of opening exclusive stores for its private labels, thus the rivalry is
expected to intensify even more.
Target Markets
To select the target markets a weighted average was developed, under which each city
was rated on following parameters:

Population of the target customers

Per capita income

Presence of competitors (Peter England and Kouton’s)

Proximity from existing distribution centers of Shoppers stop.
There
are
total
ratings
given
to
each
of
city:
On the basis of above rankings following 5 years role out strategy is prepared:
North Zone (Number of Stores)
North Zone
Year 1
Year 2
Year 3
Year 4
Year 5
Total
Delhi/NCR
50
50
Lucknow
25
25
Ludhiana
13
13
Jodhpur
4
4
Chandigarh
10
10
Jalandhar
7
7
Jaipur
29
29
Meerut
8
8
Amritsar
11
11
Allahabad
7
7
Agra
11
11
Kanpur
TOTAL
15
138
26
11
15
15
0
190
South Zone (Number of Stores)
South Zone
Year 1
Chennai
14
14
Bangalore
18
18
Hyderabad
17
17
Kochi
4
4
Mysore
4
4
Mangalore
3
3
Thiruvananthapuram
4
4
Vijaywada
Vishakapatnam
Year 2
Year 3
Year 4
2
Year 5
Total
2
2
2
TOTAL
64
2
0
Year 2
Year 3
2
0
68
East Zone (Number of Stores)
East Zone
Year 1
Kolkata
20
Year 4
Year 5
Total
20
Guwahati
19
19
Bhubaneswar
14
14
Varanasi
TOTAL
20
0
33
0
Year 2
Year 3
Year 4
10
10
10
63
West Zone (Number of Stores)
West Zone
Year 1
Year 5
Total
Mumbai
30
30
Pune
11
11
Surat
5
5
Vadodra
6
6
Goa
2
2
Nasik
4
4
Ahmedabad
14
Bhopal
14
3
3
Nagpur
8
8
Indore
4
4
12
87
TOTAL
52
6
14
3
In order to avoid channel conflict, the price at each retail store would be kept same. The
price of merchandise would be kept same as the existing prices. The merchandise mix
would also be kept but the final products would be varying as per the taste and
preference of the localities.
Chandigarh
Socio-Economic Profile
The Chandigarh tri city, consisting of Chandigarh, Mohali and Punchkula has a total
population of more than 30 Lakhs. Government is the major employer of the city, with 3
governments having their base in the city. A significant percentage of the population
does consists of people who are either working or retired employee of these
governments. For this reason Chandigarh is also called as “Pensioners Paradise”.
Chandigarh is known for its high standard of living with highest per capita income (2330
$) in the country and also tops the list of Indian states and union territories with a
Human Development Index of 0.674 (Jones Lang LaSalle, 2008).
Economic Factors
The economy of the tri city is changing in character as the knowledge revolution sweeps
in, leading to tremendous growth in IT and Service sector. The administrative authorities
are promoting Chandigarh as a destination for knowledge sector projects. Other
industries included in the city are food products, auto parts, machine tools and
pharmaceuticals.
Demographics
Total Population: 9,00,635
Male: 5,06,938
Female: 3,93,697
Urban Population: 8,08,515
Male: 4,50,122
Female: 3,58,393
Rural Population: 92,120
Male: 56,816
Female: 35,304
Literacy Rate: 81.9%
Source: www.chandigarh.nic.in
Retail Scenario
The central business district of the city lies in Sector 17 housing all major brands,
commercial centers and government offices. Besides Sector 17 other famous markets
are Sector 7, 8, 9, 22 & 35. The city has always been the first choice shopping
destination for the people of Punjab, Haryana and Himachal Pradesh.
Rentals:
Sector 17 market: Rs 250 – 500 per sqft / pm
Sector 34 market: Rs 100 – 150 per sqft / pm
Source: (EWPL, 2009)
Consumer Profile
Chandigarh has a large Punjabi population and Punjabi‟s are known for their lavish
spending lifestyle. The majority of Punjabi families are widely travelled or have relatives
abroad. Therefore, they are familiar with international food brands. About 60 percent of
the Chandigarh's population is employed in the public sector or in government run
organizations.
About Kapsons
Kapsons is multi brand outlets chain which houses several national and international
brands. The first ever store was opened in 1989 at Sector 17, Chandigarh which sold
merchandise only under Kapsons label. The retail outlet covered just 1,000 sq.ft of retail
space; however, today it is a three level store with multiple brands and an approximate
area of 7,000 sq.ft. At present, this store is rated as one of the best and most popular
stores in the complete territory of Chandigarh, Punjab, Haryana, Himachal Pradesh,
Jammu and Kashmir (Indiaretailer.com, 2009).
Kapsons also has exclusive stores for Women’s and Kids under the name Kapkids.
Kapsons currently has 5 MBO’s in Amritsar, Bathinda, Chandigarh, Jalandhar and
Patiala. The store also has a customer loyalty program named as “Kapsons Royale
Club”.
Following are the brands that are currently available at Kapsons outlets:
Branding block for “Stop”
Because of no advertising and limited clientele for Stop, till now there is no identity of
brand Stop. However now when the brand will be sold outside the Shoppers stop
premises, there is a need for developing the brand identity for Stop. Thus the first step
is to the review the branding options on the basis of 3M model.
There is a primary brand name “Shoppers Stop” available for the product reason being
that Shoppers stop over the years has developed a very strong image in the apparel
industry. Stop on its own cannot justify a new primary brand name because it doesn’t
have the awareness in the market and without a well established brand name it would
be difficult for the brand to compete with its competitors. However the brand Stop
justifies being a secondary brand name to brand Shoppers stop.
Thus the existing Strong brand identity of Shoppers stop will be leveraged upon the
identity of Stop. The product will be marketed and promoted as “Stop by Shoppers
Stop”.
Endorsement Branding
In endorsement branding the product brand name “Stop” is used along with the
corporate brand name “Shoppers Stop”, but the product brand name is given more
significance whereas the corporate brand name is relegated to a lesser status.
Branding Decisions
Proposed Brand Identity
An effort would be made to inherent all the positive and transferable attributes of brand
Shoppers stop in brand Stop. On this basis only, following identity prism is proposed for
Stop:
Advertising and Promotions
Launch of Stop
Plaza Carnival:
The Chandigarh Plaza Carnival is a weekly event that is held every Saturday. The
festival is held in an open-air stage in the Central plaza in sector 17. The carnival is
three hour long festival which attracts a huge crowd from all across the city. The Plaza
Carnival in Chandigarh involves a large number of cultural events and programs. The
different types of programs that are held over here includes magic shows, dance
performances, music performances, singing competitions, theatres and short plays and
similar such programs. The most striking feature of this festival is that every week there
is something new and innovative. No program is repeated. Hence, unlike the other
festivals and events in Chandigarh, this festival offers variety and, hence, is known for
its innovativeness.
Hence Stop’s hoardings would be displayed at this event which is very popular in
Chandigarh.
Advertising and Promotions
Medias used:
Television: At the launch of Stop, Stop would be advertised only in Chandigarh on
cabel. It would also be advertised in cinema’s before the start of the movie and in the
intervals.
Print Media: The launch would be advertised in local newspapers popular in
Chandigarh.
Hoardings: Hoardings would be displayed in the market, 17 sector and other markets as
well. They would be put up in events such as the Plaza Carnival.
Hoarding
Hoardings
In Store Promotions: In store promotions would be done heavily by Stop because the
merchandise is going to sell in a multi brand outlet.
The posters would be displayed on the windows ok Kapsons.
Stop Bags:
Stop Bags:
Supply Chain for Stop
Supply Chain for Stop
Fabric Suppliers
Base
Apparel
Manufacturing
Factories Base
Distribution Centres
Retail Store
Stop’s fabric suppliers are based in Ludhiana, Surat and Ahmedabad. They will supply
the fabric to manufacturers in Ludhiana, Tirupur, Mumbai, Dellhi and Bangalore. The
manufacturer’s will then transfer the finished goods to the warehouse in Delhi which will
further transport the goods to Kapsons in Chandigarh.
Supply Chain Mechanisms
1. Merchandise to be sold on Outright Basis. This means that Kapsons would by
the whole merchandise from Shopper’s Stop and then sell it.
2. Final decision on merchandise at stores will be taken by store owners but
sales team of “Stop” will provide inputs about various trends.
3. Credit period of 15-30 days will be offered to stores.
4. Logistics department will ensure on time delivery of merchandise at stores.
Reverse Logistics
Incase of any damaged goods, following reverse logistics chain would be followed:
Financial feasibility
Initial Investment
Particulars
Preliminary Expenses
Working Capital
Fixed Assets
Total initial investment
Amount
155956744
136902316
4400000
297259060
Income Statement
Particulars
Sales
Less: COGS 41%
Gross Profit
National Retailers Margin
Regional Retailers Margin
Logistics (4%)
Depreciation
Employee Salaries
Advertising expenses
Preliminary Expenses W/o
Operating and administrative expenses
Total expenses
Operating Profit
EBIT
Less: Interest (15.25% on debt) (Assumed)
EBT
Less: Income Tax @ 33.99% (Assumed)
Net profit
Amount in Rs
Worst Scenario
1039711625
831769300
426281766.3
341025413
613429858.8
490743887
110216312
88173049.6
61128375
48902700
41588465
33270772
3975612
3975612
13984000
13984000
83176930
83176930
31191349
31191349
170081780
170081780
515342823
472756192.6
98087036
17987694.4
23119323
74967712
25481525.38
49486187
23119323
-5131628.6
0
5131628
The net profit for the initial year comes out to be Rs 4, 94, 86, 187. Even in the worst
case scenario after deducting 20% of sales Stop will manage to earn Rs. Fifty one
lakhs, thirty one thousand, six hundred and twenty eight.
Break Even Point
Break even point = Fixed cost/(Variable
cost of unit-SP of one unit)
Fixed Cost
Variable Cost
Variable Cost Per Unit
Selling Price
BEP in units
BEP in sales
304848
793875.00
543.75
725
1682
1219392
The break even point would be achieved in the initial year.
Sources of Funds
Total capital investment required
Debt (51%)Assumed the ratio which shoppers stop has at
present
Equity( 49%)
297259060
151602121
145656939
297259060
Working Capital
Inventory Holding period
Daily cost of sales= Cogs/360
A) Investment in Inventory
B ) I5 days expense= (Initial investment*15)/360
c) Investment in Debtors
Debtors collection period
Daily Sales
Investment in Debtors= daily sales*debtors collection period
A+B+C= Gross working Capital
d) Funds provided by suppliers
Payable deferred period (Industry assumed)
Daily raw material purchases= (Total quantity*cost per
unit)/360
e)Credit on wages and Salaries
Salaries due days (Industry assumed)
Daily salary cost
75 days
963667.99
72275099
7743692
25 days
2888087.8
72202196
152220987
45 days
161556.9
7270060.4
7 days
38844.444
271911.11
f) Credit on overheads and other expenses
Expenses due days
Daily expenses per day
Expenses due days*Daily expenses per day
7 days
1110957.1
7776699.5
A+B+C
D+E+F
Net working capital=(A+B)-(C+d+e)
152220987
15318671
136902316
Salaries
CEO
Marketing
department
Marketing manager
Marketing Executives
PRODUCT
Head Designer
Designers
Buyers
Quality Controller
SUPPLY CHAIN
Logistic Manager
Warehouse manager
Operating Staff
FINANCE
Senior accountant
Accountant
Administration
Executives
IT
Executive Staff
SALES
Sales Head
Key Accounts
Manager
Key Accounts
Executive
1
100000
100000
100000
100000
Monthly
Total monthly
Salary for two
No. Salaries
salary
months
Annual Salary
1
70000
70000
840000
2
30000
60000
720000
Total
50
1
2
4
1
45000
18000
30000
30000
45000
36000
120000
30000
90000
72000
540000
432000
1440000
360000
1
5
#
30000
25000
10000
30000
125000
100000
60000
250000
200000
360000
1500000
1200000
1
1
30000
12000
30000
12000
60000
360000
144000
5
15000
150000
900000
2
12000
48000
288000
1
60000
75000
0
24000
0
60000
4
45000
180000
2160000
8
20000
160000
1920000
720000
1030000
1030000
13984000
Costing of one Shirt
MENS SHIRT
Fabric
Cutting
Stitching
Thread
Buttons
Collar and Cuffs
Box and Poly Bag
Transportation
Total
over head 5%
Manufacturers Margin
Cost of shirt
Gross Margin
Retail Price
Amount in Rs
190
14
14
3
3
15
10
3
252
5
129
386
339
725