Shoppers Stop to beef up online business

Shoppers Stop expects the online business to contribute 10% of sales in 3 years

Faced with competition from the e-market places, department store chain Shoppers Stop is planning to strengthen its online business, which will later be integrated with the physical stores.

The Raheja-owned chain plans to invest Rs 50 crore over the next two years to develop ‘omni-channel’ - a multi-channel approach to sales to provide customers with a seamless shopping experience regardless of whether she or he is shopping online or in person at a bricks-and-mortar store.

Heavy advertising by e-commerce portals had affected the sales growth of Shoppers Stop in the third quarter of FY15. Shoppers Stop saw a modest 0.8 per cent growth in its like-to-like sales in the December quarter, one of the lowest rates in many quarters.

Online retailers spent an estimated Rs 300 crore on advertising in the December quarter, 10 times more than all physical retailers put together.

Shoppers Stop expects the online business to contribute 10 per cent of sales in the next three years. It had recently appointed Sachin Oswal as CEO of the online business. Oswal was earlier with Infibeam, an online marketplace, as chief operating officer.

Shoppers Stop’s omni-channel strategy will be implemented in three stages, according to its managing director Govind Shrikhande. “The target is to really move from online to multi-channel to omni-channel over a three-phase period within two-and-a-half years,” Shrikhande said in a recent conference call with analysts.

In the first phase, the company would strengthen its online platform by increasing options available at the website and improving user experience.

In the second stage, operations of online and physical stores will be integrated. The customer would be able to access the store through the online as well as the physical store route though the experiences might differ.

In the third phase, the company would move to the omni-channel route where it would have a single view of the customer and inventory.

The company is also looking to launch its own brands such as Stop, Haute Curry, Kashish in e-commerce portals to increase revenues.

“Online players do not have the physical option, but physical retailers have that option. Fits and sizes are important in garments. Omni-channel retail enables shoppers to check online and buy from stores,” said Abneesh Roy, associate director (institutional equities, research) at Edelweiss Securities.

Some analysts say Shoppers Stop's omni-channel foray could limit the impact of online retail on the chain.

They added that gross margins in omni-channel would be similar to physical format, but net margins would be negative for the first two to three years.