 "B S Nagesh")
The so-called e-commerce 'threat' is actually a blessing in disguise for offline retailers who are looking to make inroads into appropriate markets beyond the metros, B S Nagesh tells Devina Joshi
If we observe the last two decades of Shoppers Stop, back when you were the MD and CEO, we find that despite competition, consumer sentiment has consistently favoured the Shoppers Stop growth story. What has been the secret sauce for this success?
We started with a small team in a 2,800 square feet men's store back in 1991. The success can be attributed to the orientation of the business towards the customer and employees since early days. We gave empowerment to our front-end staff as early as 1994 - the store could take a decision, no questions asked, for anything to do with front-end customers. The conflict of buying versus merchandising went away. These kind of things bought stickiness, as the customer was able to get what he or she wanted. An unhappy customer usually asks to speak to the store manager, but this situation occurred rarely at Shoppers Stop, as half the decisions were taken by sales staff.
The second point was Shoppers Stop's ability to innovate. In 1995, we did a British festival, importing English goods into India. We did a Disney Carnival where, for the first time, Disney characters came into India through Shoppers Stop. We created a rewards scheme called Seven Wonders of the World - a 30-day package to visit the Seven Wonders. Or look at our black-and-white advertising which broke the mould in mass fashion advertising. It has been 20 years now, and still stands unchanged. The Rahejas gave us the freedom to run the business like entrepreneurs. What was most critical to our success when we started out? I would say, ignorance - none of us came from a retail or fashion background and so, we were willing to try anything.
But organised retail is still 8 per cent of overall retail. How do the hurdles of today compare with those over two decades ago, when you started out in retail back in 1991?
At that time, the hurdles were about creating an industry, so they were very different...the next phase was sustaining the creation, followed by funding it for scalability. Today, it is about competing to maintain the scale. Next, the consumer has tremendous options today and as a retailer, your job is much more difficult - a retailer has to understand the consumer so well that out of the ten pieces he stocks, the consumer must pick one up.
With popularity, ease of use, and exclusive product launches, the boom in e-commerce has made offline retailers uneasy. Recent reports state that organised offline apparel retailers are sitting on three-four months worth of unsold 'festive sale' inventory, where e-commerce has played catalyst. Isn't this worrisome for offline retail?
I would disagree with this observation. Online retailers, on the contrary, have provided a beautiful conduit for offline retailers to clear their merchandise. When an offline retailer gives a discount, he has to say it is the 'end of season sale' etc. But online, which is permanently discounted, you don't know whether you are getting current or last season's stock. Are offline inventories stuck? I don't think so, because I am seeing a huge opportunity here for opening up non-competitive markets. Most retailers are in 40-50 towns, but online ones have reached some 500 towns. They are selling wares in markets where offline retailers won't go for the next three years. And an offline retailer isn't worried about his brand getting damaged because his brand doesn't exist in those markets. Online and offline retail are almost undergoing surrogate collaboration.
As of today, they are not competing except for growth in the metros - offline retailers who had started out with the intention of booming along with the economy, perhaps won't get that much of a spike because some of it is being taken by e-commerce. But e-commerce is also paving the way for non-metros - an offline retailer can easily crunch data on which brands stocked by him are getting sold most (through e-commerce) in a Tier-II or Tier-III city, thereby figuring out where online is managing its growth from, and subsequently opening a store there.
What can offline retail learn from online? What are the newbies doing right?
I think brick-and-mortar retailers are not as quick at decision-making as their online counterparts. Second, is customer connect. For offline, there is a physical, empathetic connect, while online has a non-physical, technical, instantaneous and transactional connect, where you can get the pulse of the customer much faster. But, e-retailers may not be able to quickly pinpoint whether each customer is satisfied. Third, an offline retailer may not be able to put heavy investment in marketing and brand building, the way e-commerce players do.
You have always propagated the concept of collaboration, even with competition. In the face of international retail behemoths eyeing a share of India, is this truer than ever?
Yes, absolutely. Let's not forget that online retail uses the marketplace model. Isn't that a collaborative environment? Or look at logistics - if I told two competitors to combine their consignments and send to the customer, they would refuse. Today, what is the logistics provider doing? He is combining your consignments. Every aspect of competition is collaboration.
Whether we are talking of Indian offline retailers, online retailers or international players, it all boils down to three things. First, there is no option for replacing the product. Second, eventually, the transaction is an experience delivery, never the product delivery. And that definition of experience is changing - for instance, a lot of websites now offer you mix and match sections and personalised mock drapes. All of this is an experience. Third, the relationship is important. After delivering a product and experience, are you able to go back to the customer to start a relationship? I'm not talking about loyalty - that happens when a relationship is maintained many-a-times. But can you go back to see how the customer feels about your purchase? If three companies are offering discounts, what, as a customer, will make you choose one over the other? That is the key.
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