Beauty, private labels will take Shoppers Stop margins to double-digits: MD

In a Q&A, Venu Nair, talks about the company's strategy to expand in tier-1 and tier-2 cities

Shoppers Stop plans to lay significant emphasis on increasing the share of beauty and private brands going forward. In an interview with Sharleen D’Souza, the firm's MD & CEO, Venu Nair, talks about the company’s strategy to expand in tier-1 and tier-2 cities. Edited excerpts:

How do you expect margins to play out going forward considering the company’s emphasis on beauty and private labels?

Our margins have been consistent, and it has been inching up. If you take out the last few quarters where Covid obviously had multiple impact, but overall, we have a strategy in place and part of our strategic pillars is beauty and private brands. Both categories would help our margins to go upwards in the case of private labels. The differential in margin is double digit compared to our current margin, so it is a significantly higher margin that we would be making, and we are already getting there.

However, the fact is that we have got our private brands performing strongly and it has had seven quarters of increasing growth.

Private labels today contribute to 14 per cent of our total business, up from roughly 11 per cent a couple of years back, and we intend to grow it upwards of 20-25 per cent in the next two to three years.

For our private labels, if you look specifically at apparel, last quarter it contributed to 18 per cent of our total business. Beauty is 17 per cent and again this has grown by over 160 basis points from the Q3 of the last year. Both these are big businesses for us and we have a clear strategy to grow them further.

What are your expansion plans for small format stores and how will the mix of stores play out eventually?

Traditionally, our store sizes used to be between 40,000 to 50,000 square feet (sq ft), and these were the large format stores. Over a period of time as we have gone into the smaller towns and cities, especially beyond metros into tier 1 and now tier 2 cities, we are rationalising the size. We have narrowed it down to 25,000-30,000 sq ft, which makes it a lot more productive, and easier for us to find the right location at a rapid pace.

Our plan is to open 11-12 department stores every year, and this year we have opened 3. We’ve got another 5 which are ready to open, and we are reasonably positive that we should be able to open another 2 by March.

We’ve got 12 stores that have already been signed and will open in FY23. Most of these stores are in tier 1 or tier 2 cities, predominantly outside metros and the big capital cities, which is where we see a lot of our growth coming as we go forward, and that is the one area we are focusing on.

What about the ‘beauty’ small format stores?

The other small format stores we are also looking at are beauty standalone stores and within that we have 1. The Estee Lauder stores that we operate are MAC, Estee Lauder, Clinique, Jo Malone, Bobbi Brown and Too Faced. All these standalone stores are operated by us and here we expect to open around 10-12 stores every year.

We have also opened SS Beauty, which is our own Shoppers Stop standalone beauty format which is between 1,500 to 2,500 sq ft. The key differentiator is makeup, makeover, and the experience-led retailing that we are bringing in on beauty. And this is an area where we have a clear expertise.

Can you elaborate on your expansion plans for the SS beauty stores, considering there are online players which are also expanding in the offline space?  

In the physical space we have about 420 beauty stores currently – shop-in-shop, standalone beauty stores, and SS Beauty stores included. So, we have a clear runway already of the stores we have opened and our plan is to open between 10-20 SS Beauty stores where we opened one last week and another one is expected shortly. Adding these, gives us a clear pathway in the beauty space.

Leveraging brand partnerships and also working on getting new brands into the country – that’s how we’re going to aggressively focus on beauty.

We have a significant presence, and we are the largest players in beauty. To maintain our leadership status, we have opened SS Beauty with the intention of opening 30 stores every year, accelerating as we go into the future. We will also expand more Estee Lauder stores as the opportunity comes up.

Another focus is our own private label Arcelia under which we have launched bath and body range about 2 quarters back. Going forward, we are launching our own nail spa and makeup and we intend to continue and complete the entire portfolio of makeup brands in the next quarters, so that’ll be another big area of growth apart from the physical stores.

How is the current demand scenario playing out for you post the festive quarter because, as the third wave has impacted footfalls coupled with restrictions?

We did see a minor glitch due to the covid third wave but we have seen extremely positive consumer sentiments almost till the end of December. We saw the impact varied from city-to-city and the timings were different too so the impact was significant in the metro cities in the first two weeks of January post that in the last 2 weeks major cities like Mumbai, Delhi, Kolkata, and Chennai the impact has slowed down while the next set of cities like Bangalore, Pune, Ahmedabad have a solid level of impact.

However, the impact has been much lower than we had seen before because we as a team have matured in terms of the reaction, pressures, and restrictions that have been put in place.