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‘Retail chains are making efforts at differentiation’

Retailing in India is finally getting organised, with as many as 300 shopping malls expected to come up in the country within the next five years. And these shopping areas are largely following the mall concepts of the west, even as the areas occupied by such complexes are much smaller. In an exclusive interview with Reena Mital, Ms Bela Gupta, managing director and CEO, Spink Marketing Company, one of the few consulting firms for this sector, talks about how the sector is expected to evolve over the years, and what are the factors influencing success in retailing.

Is there a retail boom happening in the country?

Yes, there is a lot happening in terms of organised retailing. Almost 300 shopping malls are expected to come up in various parts of the country within the next five years. A lot of organised shopping area is being created. And the organised retail chains are expanding.

What is more important is that the retail chains have now begun making profits.

And there is an ancillary sector that is emerging to support the retail boom. For instance, lack of trained personnel is a barrier towards growth of the sector, but a number of institutes, recognising the needs of the retailers, have begun offering specialised courses in the various aspects of retailing. Space is available not just in the main metro cities, but in the B-cities too. Duties are being brought down, which has attracted foreign entrants, though of course, there is not much progress on FDI in the retail sector yet.

So, the demand-supply equations, the changing lifestyles, etc are driving growth in retail, and infrastructure to support this growth is now being put in place.

What according to you are the ingredients for success in retailing?

The right location, trained manpower, software assistance, product with a distinct differentiation, a strong value proposition, efficient supply chain management - these are the factors that influence the success of a retail outlet.

With competition in this segment increasing, differentiation and a strong value proposition assume significance. Retail chains are realising that they cannot be another ‘me-too’ store. The differentiation today among the 5-6 retail chains has come through private labels, which in some cases account for as much as 70 per cent of the total merchandise in the outlet. And an outlet like Westside is a 100 per cent private label. Another way of differentiating is to make a strong statement in a particular segment. Thus, we have LifeStyle that is very strong in the home section, footwear, infant wear - this is the place you can go to for all your needs in these segments.

Or there are outfits like Big Bazaar, more a hyper market, and definitely a success story. And with the success of Big Bazaar and Food Bazaar, we are also seeing Gold Bazaar and now Shoe Bazaar. So what we are seeing in organised retailing is some movement and efforts at differentiation.

In fact, this is what the branded apparel manufacturers are doing too. Realising that the formal men’s shirt segment was getting saturated, many players added partywear, formal suits, or accessories to their portfolios, not just to differentiate but also to get a larger share of the market.

Mismanagement of stocks and inventories could be the undoing for a retail outlet. How can this be addressed?

Almost all retail chains realise the importance of stock management, and a number of supply chain management softwares and concepts are being utilised for better inventory management. Retailers like Shoppers’ Stop have invested heavily in such programmes, so that the retailer and the brands have easy access to the latest stock positions, the movements of various collections, and replenishments can be accordingly done. Retailers are increasingly using such software to also analyse the trends, all this information is shared with the brands, to help all concerned to take correct and timely decisions.

A lot of shopping area has already been created in metros, to the point of saturation. So, where do you see the growth in retailing happening?

Yes, a saturation is definitely being felt in the big cities, which is why a lot of retail chains are looking at the B-cities like Pune, Nagpur, etc for opening up stores. And outlets in these cities are getting very good response. There are a number of reasons for this. Firstly, the real estate costs are lower, and a shorter gestation period makes sense for any business. As against this, rentals in metro cities are quite obstructive to the growth of retailing, and retail chains take much longer to break even.

Secondly, the B-cities did not have such organised shopping areas even as the demand and the capacity to satisfy this demand existed. Sales achieved in these smaller cities is much higher than in the bigger metros.

So, while the smaller towns and cities are definitely proving lucrative for retailers, they are looking at innovative management models in the metros too, to face competition. One such concept is of profit-sharing between the retailer and the mall/outlet owner, so that all energies are focussed towards driving sales, and enhancing footfalls.

How viable are exclusive brand outlets as a retail proposition?

There are 2-3 channels for expanding shares for a brand. Most brands start with being present in multi-brand outlets, where the brand experience a customer gets is what the retailer packages along with other brands on the shelf. Then there are chain stores, where a brand can have some amount of exclusivity by way of a shop-in-shop, however, a brand here can display only 40-50 per cent of its complete range, which is controlled by the retailer depending on the segment that the retail outlet is catering to. And an exclusive brand outlet is all about the complete brand experience, which includes the entire product range, the visual merchandising, the music, the look, the ambience. In their attempts at differentiation, brands are increasingly moving into exclusive outlets and retail chains.

How good is the infrastructure for the retail sector?

Not too good at present, but as I said, the ancillary sector to support retailing is coming up. It is probably because of this lack of infrastructure that retailers are today forced to concentrate on all aspects of the business - merchandising, visual merchandising, trend analysis, etc. This is not so in the developed countries, where the support services are very well developed, and the retailer only has to focus on its core competency, while outsourcing the rest of the services. A number of small players in these ancillary segments are cropping up, but there aren’t many big and good players here today.

With so much happening in this sector, what is Spink’s positioning and its activities?

Spink caters to differentiated fronts, and Bonsai is one such project. Bonsai, in Pune, is a departmental store exclusively for kids, which came up two months ago, and the response has been very good. We are now working on setting up a factory outlet in an area of 25,000 square feet, which would be in the form of a large departmental store. We are also specialists in retail chains for international brands like Hang Ten, and cater to all the needs of the brand - software operations, manpower, merchandising, etc. We are planning another Bonsai outlet in Pune in the next six month and a third one either in Nagpur or Kolhapur, both these would be in an area of 8,000-12,000 square feet. We are not planning any such outlet in Mumbai as there is lot more competition here, than in the smaller, as yet unexplored towns and cities.

We are also the consultants for Oobe, and are developing the retail network for this brand. We plan to have at least 10 Oobe stores across the country this year. Another area that we are planning to focus on is mall management, which becomes important in the light of so many malls and retail outlets expected to come up in the near future.