At 10.45 every morning, Shoppers Stop employees all over the country stand up to sing an anthem Hadh se age jana hai (let's cross the limits)--along with Sonu Nigam. Penned by Gulzar, the anthem was commissioned by the premier retail chain in April this year when it launched its image makeover through a new logo. Going by the rough external environment, the song is getting louder by the day. No wonder, Shoppers Stop Managing Director B S Nagesh says the actual impact of the slowdown in the economy has still not been felt as yet.
"Consumer demand is still up around 10 per cent and is likely to be so in this festive season. But things will be a lot worse in the next 12 months if companies, which are under severe pressure, are tightfisted on increments next year. That's the time when retailers will face the real squeeze," Nagesh says.
Results show the company has been facing the squeeze already. Though its revenue shot past Rs 1,000 crore in FY08, net margins took a knock down 0.6 per cent from 3.3 per cent in the previous year due to sharp increase in lease rent and employee costs that surged over 60 per cent. But, with seven new stores planned this year, Shoppers' Stop in fact expects to grow at a faster rate of 50 per cent compared to the previous years when it had growth rates between 30 and 35 per cent.
Nagesh says the real estate cost and employee cost are expected to sober down this year, and that would mean a sharp increase in margins. While its competitors are aggressively trying to ramp up their presence across all categories, Shoppers Stop has always been focusing on the mid-to high segment a category that is least affected by slowdown. "Conversions are much more in this segment and the margins are high. This segment has the highest disposable income. In fact, 30 per cent of Indian consumers contribute to 70 per cent of our sales. We would remain focused on that 30 per cent," he says.
Nagesh reels out customer profile data to prove his point. While 61.2 per cent of Shoppers Stop customers are from the A1 category (top-end), 29.3 per cent are from the A2 category, 6.7 per cent from B1 and just 2.8 per cent from the B2 category.
