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INDIA’S BEST SELLING MAGAZINE ON MODERN FUTURE OF BUSINESSES APRIL 2012 • VOL. 11 NO. 4 RETAIL `50 US$10
The art of closing stores to bounce back into profitability
Entrepreneur: Vikaas Gutgutia MD, Ferns N Petals Opportunity: Taking Your Business Online Show Reports: India Fashion Forum; Food & Grocery Forum India Retail Excellence: Himanshu Chakrawarti CEO, The MobileStore APRIL 2012 • PAGES 108 • VOL. 11 NO. 4
Editor in Chief Amitabh Taneja There will rarely be an ambitious retailer who doesn’t Editorial Director R S Roy want to grow big and expand his presence nationwide. Publisher S P Taneja But geographical expansion is of little use if the store-level Chief Operating Officer Sandipan Singh profitability goes haywire. Indeed, the graveyard of the
Editorial retail world is littered with retailers who tried to grow too Editor-in-Charge Sanjay Choudhry (Deputy Editor) fast and imploded because the new stores proved unviable Chief of Bureau (Mumbai) Nivedita J Pawar (Sr. Assoc. Editor) and dragged the entire company down. That is why the Copy Editor Shipra Sehgal art of closing stores and withdraw gracefully to a more Sr. Correspondent Payal Kapoor sustainable level is something that every retailer must Correspondent (Kolkata) Shubhra Saini Correspondent (Bangalore) Roshna Chandran know. Our cover story this edition focuses on the important issue of store closure, the many mistakes retailers make that Business Development lead to downing shutters down the line, and the best way to Assoc. Vice President (North) Vineet Chadha optimise the store count without harming the reputation of Assoc. Vice President (West) Santosh Menezes a brand in the market. Assoc. Pice President (South) Suvir Jaggi Assoc. Vice President (East) Piyali Roy Oberoi Our newly launched Retail Excellence column takes the Asst. Manager (North) Sachin Khanna spotlight this time to The MobileStore of the Essar Group, Asst. Manager (West) Udayan Awasthi which, with 800 stores across 145 cities, is one of the Asst. Manager (South) Ashraf Alom largest mobile phone retail chains in India. The retailer has Sr. Executive (East) Rohan Narayan carved out a niche for itself in its segment and plans to
Circulation & Support grow aggressively to a 1,000 stores in the next few years. Assoc. VP - Circulation & Subscription Anil Nagar We believe that each successful entrepreneur has an General Manager – Administration Hemant Wadhawan interesting story to tell. That is why from this issue we have Sr. Manager – Circulation R P Singh begun a new section on retail entrepreneurs of India where Dy. Manager – Circulation Ranjeet Kumar Yadav we will tell their story to our readers in their own words. Dy. Manager – Operations Rajesh Kumar Sr. Executive – Subscriptions Kiran Rawat We begin the series with Vikaas Gutgutia, the down-to-earth founder of the flower retail chain Ferns N Petals who has Creatives carved out a niche in a category that is still dominated by Art Director Pawan Kumar Verma the ubiquitous footpath florist. His story proves that the Dy. Art Director Deepak Verma much-touted American dream can be lived in India too Sr. Layout Designer Prakash Jha Layout Designer Rakesh Kumar provided you have enough grit the and determination to Sr. Photographer Vipin Kardam make it big. Asst. Photographer Deepak Malik Photo Coordinator Kamal Kumar
Production General Manager Manish Kadam Amitabh Taneja Sr. Executive Ramesh Gupta [email protected]
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IN THIS ISSUE
34 ...... Interview 76...... Column “For retailers today, the real opportunity lies beyond the metros” Malls Have to Respect Customers Ashish Garg, MD, Promart, talks about the company’s business Harminder Sahni insists mall managers to respect their customers philosophy and future plans. as customer footfalls define their success.
52 ...... Entrepreneur 78...... Column Flower Power! Shifting Gears: From Offline to Online Vikaas Gutgutia shares the success story of Ferns N Petals and how The growing popularity of online retail has forced offline retailers to he changed the face of the Indian flower retail industry by creating a sell their goods online, says Amit Jain. category that did not exist before. 82...... Event 62...... Retail Excellence India Fashion Forum 2012 Dial S for Success Top fashion industry leaders assembled at IFF 2012 to share their The MobileStore CEO Himanshu Chakrawarti has introduced a slew experiences and insights and thrash out issues facing the sector. of measures to consolidate the retail chain’s market position and expand it further all over the country. 98...... Event Food & Grocery Success Recipes 70...... Online Marketing The Food & Grocery Forum India 2012: A report. Social Media: Are You There Yet? R EGULARS Sweta Sharma urges retailers to go social not only to engage with their customers directly but also to take the competition head-on. 12...... International Updates 74...... Human Resource 20 ...... National Updates Employees Are Your Partners! Treat Them Like One! Indian retailers should learn from their global counterparts about 28 ...... New Openings partnering with employees and treating them as equals, says Sheetal 102 ...... Situations Vacant Choksi. 104...... Index
closing stores may be an embarrassing and unpopular activity with retailers, but it is one of the essential arts they have to learn to survive when the chips are down. however, there is more to it than just pulling down shutters and letting the employees go – there are legal and financial implications involved. yet, rationalising the store count is critical if a retailer has to jump back COVER STORY into profitability and live 40 to fight another day cover story
closing stores may be an embarassing and unpopular activity with retailers, but it is one of the essential arts they have to learn to survive when the chips are down. however, there is more to it than just pulling down shutters and letting the employees go – there Store are legal and financial implications involved. yet, rationalising the store count is critical if a retailer has to jump back into profitability and live to fight Count another day Optimisation By Priyanka Dasgupta
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Parikshit Sharma COO, NewU
Mohit Seth Business Head, Nautica
Nasir Jamal The issue of optimising store count came into spotlight after Subhiksha became over-extended and imploded Founder, Citywalk Shoes
The decision to rationalise of profitability. Best Buy is closing Factors such as managerial neglect, store count by closing down the 50 large-format stores and will now inadequate capital, poor sales, over- loss-making or unviable outlets is expansion, and insufficient or ineffective focus on smaller stores selling mobile something that almost every retailer advertising may gradually lead to a electronics to increase profits. High worth his salt has to take at one time situation where a retailer needs to shut business rates and rents are forcing or another. This is needed to alleviate stores to maintain profitability many retailers to close stores. the negative effects of breakneck expansion, wrong choice of location, why stores close or poor sales. This is not a pleasant In a low-margin business There are many entrepreneurs who process for anyone because closing like retail, adequate fund are attracted to India’s consumption down stores is not only an indication infusion is the key. In India, story and want to take advantage of that the retailer made some mistakes, However, access to funds the spending power of its consumers. it has its fair share of challenges and for retailers is limited at the However, after the initial surge, legal complications too. But industry time of scaling up nationally many retail businesses loose track experts say it is worth the effort as the and flounder. This is dangerous brand can bounce back to profitability because, like anything else, a business and embark on a more cautious Aditya Birla Retail has announced requires careful maintenance by expansion strategy later. it intends to shut over three dozen the management to sustain its For the Indian retail industry, the stores which have become unviable performance. A steady stream of funds issue came into spotlight after the R due to wrong location or high rentals. to finance day-to-day operations is Subramanian-promoted Subhiksha It has already shuttered over a also important. According to Parikshit started shutting down stores after it dozen ‘More’ branded stores and is Sharma, COO of the national beauty ran into a huge debt due to a massive identifying other loss-making ones to retail chain NewU, factors such expansion spree. The discount retail reduce its net loss of Rs 423 crores. as managerial neglect, inadequate chain’s fate – it imploded after it In the West too, store closure is a capital, poor sales, over-expansion, became over-extended with 1,600 routine phenomenon. With consumer ineffective or insufficient advertising, stores and ran out of cash – was an spending still moving at a slow pace, and cash-flow problems may gradually eye opener for other players who international players are identifying lead to a situation where a retailer realised that, all said and done, size and shutting down their weakest needs to shut stores to survive. does not matter – it is profitability stores to protect profits. By doing Says Harish Bijoor, CEO, Harish that holds the key to success in a low- this, they are putting themselves in Bijoor Consults: “In a low-margin margin business like retail. a stronger position and not spending business like retail, adequate fund Many retailers thereafter started cash in places that are not likely to infusion is the key. While some taking a fresh look at core issues produce the results they want. companies are able to start up with such as the bottom line, locational For instance, Superdrug Stores, little capital, they often reach a point feasibility, and conversion rate rather the second largest health and where they need additional financing than just focussing on scaling up beauty retail chain in the UK, selling to continue operations. Without those nationally. The Future Group re- products such as vitamins, toiletries, funds available, they are unable to evaluated its various formats and and beauty products, is currently meet their day-to-day expenses. In stores some years ago and merged rationalising operations. American India, access to funds for retailers is its single-store formats with its retailer Abercrombie & Fitch closed limited, especially during the time of department stores. almost 50 stores in 2011 for reasons scaling up nationally.”
april 2012 . images retail . 41 retail excellence Dial S for Success
The MobileStore, India’s first national chain of telecom retail outlets, has 800 outlets in 145 cities
The MobileStore, a part of the Essar group, took an Mobile telephony over the last early lead in the modern retail of mobile phones two decades has turned India’s by setting up a nation-wide chain of stores in 2006. telecom market upside down. The Today, it has an annual turnover of `1,500-1,600 crore mobile subscriber base in India through more than 800 stores, and claims over 40 is expected to rise 9 percent this percent market share of the modern telecom retail calendar year to reach 696 million market in India. The company’s offerings include multi- (Gartner figures). The market is being brand handsets, accessories, mobile connections, driven by expansion into rural and tablets, data cards and value-added services such semi-urban areas and the availability of inexpensive handsets. as handset repair and exchange. The MobileStore India has emerged as the world’s CEO Himanshu Chakrawarti, who joined the chain in largest mobile handsets market after April last year, has introduced a slew of measures to China, with revenues expected to consolidate its market position and expand further rise from `25,591 crore in 2010 to all over the country `35,005 crore in 2016 (Frost and
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mobile insurance, and costing around `1,000 (Nokia 1280/ extended warranty. Samsung 1081) to those on the very All major handset top, such as Apple 4S (64 GB) priced brands – both Indian around `55,000. and global – in mobiles, The MobileStore has also tied tablets and data cards up with leading telecom services are retailed at The operators including Airtel, Vodafone, MobileStore to ensure BPL, Uninor, Idea, MTNL/BSNL, all consumer needs and Reliance and Tata Indicom to sell new tastes are catered to. connections. These include names such as Samsung, Reach BlackBerry, Nokia, Over the last few years, The Apple, Sony Ericsson, MobileStore has grown to over 800 LG, Samsung, HTC, outlets across 145-plus cities, covering Spice, Karbonn, and almost every major town in every Micromax. Customers state across India. The national can get phones at mobile-phone retail chain today various price points, boasts of a combined built-up area of from the entry-level 4,04,827 sq.ft. Its stores are located all The MobileStore CEO Himanshu Chakrawarti basic instruments over, from malls and high street to the residential areas. Sullivan figures). Around 200 mobile All the The MobileStore outlets handset brands are today vying The MobileStore, with an annual turnover put together attract over 1.2 million for the consumers’ attention, from of `1,500-1,600 crore, claims more than footfalls each month, accounting for global ones like Nokia, Samsung, and 40 percent market share of the modern about six lakh transactions monthly. Blackberry to home-grown ones like telecom retail market in India. It is also the largest organised chain in Micromax, Karbonn and Spice. India selling new mobile connections Sensing the market opportunity, the – over 4 lakh are sold each month. Essar Group in 2006 set up a pan- The national mobile-phone India chain of telecom outlets called retail chain today boasts Store Formats The MobileStore Ltd. It is currently of a combined built-up area The MobileStore’s outlets are a mix led by CEO Himanshu Chakrawarti of 4,04,827 sq.ft. Its stores of company-owned and company- who joined the mobile phone retailer are located all over, from operated (coco) stores, shop-in-shops, in April last year. franchised stores, and kiosks. Only malls and high street to the about 50 of its 800 stores are run by Positioning residential areas. the franchisees, though the company The MobileStore is positioned as a aims to increase this figure to 60 in one-stop mobile-solutions smart shop that offers a convergence of mobility solutions and mobile lifestyle. It is India’s first and one of the largest national chains of multi-brand and multi-service mobile phone outlets where customers are offered the touch and feel experience of buying phones through experiential selling in a sophisticated shopping environment. The MobileStore, with an annual turnover of `1,500-1,600 crore, claims more than 40 percent market share of organised modern telecom retail in India. Its offerings include multi-brand handsets and accessories, mobile connections and recharges, computer tablets and data cards. Some value- added services are also provided such as handset repair and exchange, apps, The MobileStore is positioned as a one-stop mobile-solutions smart shop
april 2012 . images retail . 63 human resources Employees are your partners Treat them like one! By Sheetal Choksi
The success or failure of any business to a large extent depends on its employees. Most companies talk of the importance of treating employees as equals but only a few follow on through the promise. we can learn from their global counterparts and begin to treat our employees as partners in progress. since employees contribute to the ROI and sales of a business, they should be given an equal chance to share in its success and profits
Indian retailers should learn from global players about partnering with employees
Rising consumerism in India is existing in our country, most retailers the Need to Treat Employees as leading to an upsurge in the number automatically feel uncomfortable Partners of brands available to consumers. The entrusting front-end employees with Let us begin with understanding domestic brands are not the only ones decision-making responsibilities. and, more importantly, accepting proliferating – international brands Most of the time, they do not get our basic psychological block: it too are being launched at a lightning any opportunity to make some real comes naturally to most of us to view speed. Looking at the larger picture, contributions to the growth of the our employees as subordinates, as we find that global brands do not business beyond sharing a few of people who need to follow orders enter India with their product range their ideas with the management. and instructions of their immediate alone – they actually walk in with a But it is time for all of us to involve superiors. But if, for a change, very different set of work culture and our employees in our business we begin to consider them as net professional ethics. and treat them as stakeholders. contributors to our ROI and sales, We may not like to accept it but the International success stories like perhaps we can remove this mental fact remains that internationally, retail Walmart, Starbucks, and John Lewis block and view them as our valued employees carry with them a much show us the way. We must shed partners. better sense of pride and commitment our reservations and unleash the Employees can contribute much to their work compared to what we combined wisdom of our employees more to the company than they see in India. Due to the work culture to mutual benefit. usually do. They shall be more
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Malls are mushrooming all over india and they all depend on customer footfalls for survival. why Malls Have to then do most of them insist on fleecing customers and humiliating them in an atmosphere of monopolistic exploitation? forget about customers, most malls and stores do not trust even their own managers to take independent decisions to diffuse a crisis with customers By Harminder Sahni
Parking Lot at a Mall: What are mall managers trying to achieve by fleecing customers over parking charges? Respect
Every single time I visit a mall they can get away with, in India, I am simply amazed at the because they know that audacity of mall managers to increase consumers would not Customers parking charges for visitors’ vehicles. mind paying relatively charge a premium on parking tickets? It is ridiculous to note that the charges small amounts of money, even if Are the mall managers trying to during weekends are almost double the charges are unreasonable. But dissuade consumers from coming to those charged from mall customers the point here is not the money but the mall over the weekends? I really during the weekdays. (It is not that the mall managers’ attitude towards do not get it despite trying my best. the charges during weekdays are consumers who are actually the insignificant either!) I really do not very reason why the malls exist and Humiliation and fleecing understand what mall managers who pay for everything at the mall, The humiliation and fleecing of are trying to achieve by fleecing including mall management’s salaries. visitors does not end at the parking consumers who have no choice but I am quite certain that mall mangers lot but goes inside the mall right up to shop over the weekends and park will have a sufficient justification for to the stores. Once you are at a store, their vehicles at the malls. We are all charging extra parking fee from mall or – let me say – most of the stores, well-aware of the terrible shortage of visitors, but I do not think even they the security guard pounces on you parking spaces in our cities. can justify increasing these charges to collect your bags as if each one every few months. Does the cost of of us walks around the mall with an monopolistic exploitation parking, which is basically a fixed intention to shoplift. We are supposed This practice is nothing but asset, increase so often? Is there some to trust the security guards with all monopolistic exploitation at its worst. serious running cost that goes into the shopping done so far and collect If some mall manager’s logic is that managing a parking lot that rises so a plastic token as receipt. How are they are trying to woo consumers to often? What happens to the parking we supposed to know nothing will be shop during weekdays by offering lot during the weekend to justify stolen from our bags by the guards? lower parking charges, I am not higher parking charges? And if something is missing, how willing to buy it. I do not think any A parking lot has a certain space would we prove that the object was consumer will decide her shopping for vehicles and any mall manager actually in the bag when we deposited trip based on the level of parking would be happy to see it packed to it with the security? charges. It seems to me that the mall capacity all the time. If it fills up It is amazing we do not see disputes managers are applying this same logic during weekends, that is an excellent around this at stores all the time. For to charge from customers as much as situation for the mall – why then this, I will give credit to the general
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Shifting Gears: By Amit Jain From Offline to Online growing popularity of online retail is a formidable challenge to traditional retailing. offline retailers are forced to think out of the box as online retail increasingly becomes “the new norm” than a “nice to have.” retailers can no longer afford not to sell their goods online
In the last 12 months, there has the age of 24. That is a lot of people Bahu shows, making them aware been a lot of media coverage about looking for goods and services, from of the latest fashions and gadgets e-commerce, led by players which basic needs like food and clothes and the lifestyle of those in the have become household names now, to white goods, entertainment, and metros. There is a rising demand for such as Fashion and You, Myntra and luxury products. About 40 percent of famous brands and products. It is Snapdeal. Most of these are pure- these live in tier 2 and 3 cities where just a matter of getting access – the play Internet businesses started by modern retail has not reached yet and consumers are already there. entrepreneurs from the technology is unlikely to reach even in the near Tablet PCs will breach the Rs 3,000 space. A lot of money being spent future, given the expensive real estate, barrier this year, broadband costs by them is private equity or venture wastages in supply chain, and paucity will become comparable to voice capital and most of them are still of trained manpower. telephony and, most importantly, not making money. So what does all The mobile and TV penetration in regulations on mobile payment this mean for brick-and-mortar retail India has reached 80 and 50 percent, systems are in the works. stores (offline retail)? respectively, which means that Given the favourable demographics, India is a nation of 1.2 billion majority of people in small towns get awareness level and accessibility, people, with over half of them below to watch IPL matches and the Saas the question for established offline
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