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| Shoppers Stop tweaks Hypercity model in pursuit of turnaround |
| Press Trust of India / New Delhi Feb 20, 2012, 17:35 IST |
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The K Raheja Group firm Shoppers Stop Ltd (SSL) is changing business model for its loss making hypermarket stores, Hypercity as the format has taken longer than expected to become profitable.
The company is also keeping its options open to join hands with international retail companies for its hypermarkets depending on government policy on multi-brand retail.
"Hypercity is taking more time to become profitable than expected," SSL Managing Director Govind Shrikhande said.
For the quarter ended December 31, 2011 Hypercity registered retail sales of Rs 214.70 crore and net loss of Rs 24.51 crore.
With an eye on improving profitability, he said the company is changing the business model for Hypercity and will focus more on apparel range for better margins apart from changing the trading model for sourcing.
"In Hypercity we are increasing the over all apparel share and plan to take it to 14% from 7-8% at present as apparel gives more margins, compared to food and grocery," Shrikhande said.
At present, food and grocery accounts for about 60% of Hypercity's Retail items.
"We are also bringing down the percentage of the food and grocery items," he said without specifying details.
On the sourcing side, he said the company is replicating the 'consignment-based model' in Hypercity as is being done with its departmental stores 'Shoppers Stop'.
In a consignment-based model, the retailer pays for the goods only after completion of sales and unsold items are returned to the supplier.
The retailer has been steadily reducing the proportion of bought out goods while increasing the proportion of non-bought ones, which are on consignment basis.
For Hypercity, it is also looking at concession model that involves sharing space with manufacturers in return for rent or share of revenue.
Commenting on expansion of Hypercity format he said: "We will open two stores every year but only in the existing cities."
The company currently operates 12 Hypercity stores in Mumbai, Bangalore, Hyderabad, Pune, Bhopal and Jaipur.
When asked about the company's plans to attract FDI, Shrikhande said SSL is waiting for clear guidelines from the government on multi-brand retail.
"Once the rules are clear, we would be willing to look at partnering with international players for our Hypercity format," he said.
There is a lot of potential in back-end and cash and carry by bringing in international best practices and technology, he added.
In the meantime, SSL is also aggressively expanding its flagship departmental store format Shoppers Stop and home decor and furnishings format Home Stop.
"At present we operate 51 Shoppers Stop and are looking at a number of 70 stores in the next two years. We will also open two Home Stop stores every year," he added.
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