Shoppers Stop gets selective with labels

Monday, 18 April 2011

“Start Something New” is not only Shoppers Stop’s message to its customers but also to itself. Walking the talk, India’s pioneering retail chain is now engaged in an act of doing new things within. One aspect of this change involves private labels. Shoppers Stop is steadily reducing the share of private labels as a part of its positioning as a ‘bridge to luxury’ brand, which is the space between premium and luxury. The share of private labels has reduced from 20.6 per cent in 2007 to 19 per cent in 2010 to 17.9 per cent in the first few months of FY 2011.

Compliments are coming in because of this strategic change. Rating firm Fitch has said due to its better inventory management and slower expansion, Shoppers Stop has become “the rare listed retailer in the country with positive cash flows.” Due to the trading model change, Shoppers Stop has also seen sharp decline in cash conversion cycle from 30 days in 2007 to below 10 days. Cash conversion cycle measures the time between cash paid to supplier and cash recovery by a retailer, and lower cycle reflects better operating cash flows. Though others have also seen a dip in the cycle between 2007 and 2010, it is still high at 95 days for Pantaloon, 130 for Next Retail and 70 days for Trent.

However, its competitors are in no rush to emulate this strategy. Other department store chains such as Future Group’s Pantaloons and Trent’s Westside, however, follow a private brand-led strategy, wherein 80 per cent of their total merchandise comes from their own brands, which carry higher margins. “Every company has its own strategy. At Pantaloons, we follow a private brand based model. Though it requires a fair amount of working capital, with right management and operations, this (private brand-led) model can be profitable,” says Kailash Bhatia, Director, Pantaloon Retail.

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