Till 2006 our focus was mainly on department stores, although we also had Crossword since 2000. Post 2006, we started Hypercity, Homestop, Arcelia, Argos. We got into food and beverage, and airport retailing. Then for many reasons like the meltdown, H1N1, etc that happened almost simultaneously, we had a loss in 2008-2009. Today we are coming out of that problem. Maybe we got into too many formats simultaneously
. We realised that food and beverage requires a huge scale. So we got out of it and now Café Coffee Day runs our cafes. We closed Argos as we felt that the Indian mindset was not yet ready to shop out of catalogues.
In order to distinguish our positioning and to catch up on customer changes, we moved from premium to ‘bridge to luxury’ positioning. We changed our logo. So we started launching MAC, Clinique, Estee Lauder, Esprit, Tommy Hilfiger, Calvin Klein, French Connection. We also adopted international store design. And then came a point when the world decided to go on a slowdown.
With the formats that we had and the changes we made, I would say we encountered a path that was challenging. We saw quarter three and quarter four sales going down last year.
Really speaking, when I look at it the losses, they were more because of closing down formats, than the slowdown in real buying. Of the Rs. 65 crore losses we had, Rs. 25 crore was from the closure of the Argos business and the balance bulk of the losses also came from new formats, including food and beverage that had still not scaled up. We have changed our cost model radically.There are multiple things we have done to cut costs. These include things that don’t affect customers
— like reduce power consumption. In the last three years we have saved more than 40 percent in the total unit consumption of power.
We recalibrated the service standard as footfalls reduced. As an industry, although a number of stores are closing, the number of players entering the market is still pretty high. So, attrition is still high. We right-sized the organisation and reduced our manpower cost by 10 percent. Top management took a salary cut of 15 percent. The logo change that we made last year cost us Rs. 14 crore. This year, as there was no such cost, that money straightaway went to the bottom line. We carefully spent the marketing money and optimised our throughput. The biggest conflict in my mind was that we changed our positioning when the economy was going down
. Here was the first time we were seeing a fear about job loss. In such a situation, do you downtrade to lower products or do you maintain your lifestyle?
The question bothering us was, having changed positioning, was this the right track or should we have gone after volume or the middle of the market?
We had built the logic of ‘bridge to luxury’ based on the understanding that customers wanted a differential offering. Our research was showing that the customer liked what we were doing. So we decided that we will face the brunt. This is a short-term issue.Analytics has been an ongoing tool, but, we gave it more of a piecemeal attention or tactical focus. Now it is more strategic.
At our department stores, footfalls were down 17 percent for the first half. Once you have such a high footfall drop you push ticket size, which we increased by 10 percent. We pushed conversion, which was another 3 percent. Overall we drove our operational efficiency to counter the footfall drop.
The ‘bridge to luxury’ positioning is a new phenomenon in our stores, for the last 18-24 months. If this positioning contributes 22 percent share then has it brought new customers for us or have existing customers got upgraded? That is the kind of analysis we are trying to do.
We now have a large base of loyalty customers crossing 14.75 lakh. Earlier, we had a small base, so we could not pick up trends, to project across India and check out the differential across seasons, festivals, men and women. Analytics should be able to give us two clear winners: How do I get to know my customers better and their shopping trends, and two, how do I bond with my customers better. I think it is important that you have a balanced portfolio in your mix of stores and zones
. The last three quarters we saw incidences that were non repetitive in nature. There was the film producers strike that lasted almost 45 days in May. Out of 27, 22 of my stores are located in malls with multiplexes. So, when mall traffic drops, automatically store traffic drops. In Quarter 2, there was swine flu in Mumbai and Pune where again, say 30 percent of my stores are located. Again my stores were impacted.
The minute you have too many stores in one zone and the stores get impacted you have a problem on hand. In the new store openings that are happening, we are covering a lot of new cities. We are opening in Amritsar, Ahmedabad., Aurangabad, Bhopal, Vijaywada, Coimbatore, etc. One key questions during a slowdown is how do you get your associates to believe in things
. The top management did a lot of town hall meetings across all the stores. Every time I went to a store, the store staff asked — why had we introduced such high end products? I had to tell them with full confidence, that this is the ultimate way. They have now seen things working well and our customer satisfaction indices have gone up significantly.
[Also,] the store staff always feels that they are under the pressure of standing in the store everyday, servicing the customer, smiling all day whereas the backend staff has a relatively easy job. But with the town hall meetings, clear objectives at each level, everyone has bonded with positive energy and tremendous teamwork. (As told to Saumya Roy)
(This story appears in the 22 January, 2010 issue of Forbes India. You can buy our tablet version from Magzter.com. To visit our Archives, click here.)