As chief executive officer and president of Shoppers Stop, the country’s leading department store chain, Govind Shrikhande has been part of the careening growth of India’s retail market over the last 17 years.
He has left the retailer after a significant nine months: Amazon India invested in Shoppers Stop last November, three key investments were sold and the company is on the path to become debt free by the end of this financial year in March 2019. Shoppers Stop reported a net profit of 97.70 million rupees, or $1.42 million at current exchange for the quarter ended June 30, versus a net loss of 37.10 million rupees, or $530,000, in the corresponding quarter a year ago.
Here, Shrikhande looks back at the market’s development during his tenure at Shoppers Stop, and what were some of the key learnings he gleaned along the way.
WWD: You have been leading the growth in Shoppers Stop for more than a decade. Why leave now?
Govind Shrikhande: I will be 58 in September. That is the retirement age in Shoppers Stop, and I thought that rather than wait until September, I would leave on a high, take a break, and then start looking at new things. It’s been our motto at Shoppers Stop to start something new. I felt it’s time I did the same.
WWD: You’ve left just when Shoppers Stop is anticipating being debt free for the first time, in March 2019. Is that satisfying?
G.S.: Over the last year we worked on the exits of three major companies. One was Hypercity [the hypermarket chain], the second was Timezone [gaming company] and the third was Nuance [travel retail joint venture]. Between these three companies we had invested more than 1 billion rupees [$145.63 million]. We were losing more than 1.1 million rupees a year [$16.01 million]. It was important for us to exit them properly and also recover some of our investments.
Hypercity exited by being bought by the Future group, who bought it for approximately 8.96 billion rupees [$130.47 million]. We exited Nuance, through its parent company acquiring the shares, and Timezone bought back the balance share that we owned. Between these three stake sales, our debt as of March 2017 was 8.3 billion rupees [$120.87 million] and in March 2018 and with the investment coming out of Amazon’s investment arm it dropped to 670 million rupees [$9.75 million]. The way things are growing, in the next three quarters the company will be debt free completely by normal business, meaning without having to do anything else.
WWD: The tie up with Amazon India happened in the last year as well. That was huge.
G.S.: Yes, getting Amazon’s investment arm to invest in your company is a big movement for any company and they invested 1.79 million rupees [$26.07 million] in January this year. Apart from that, there is also a commercial tie-up with amazon.in where the Shoppers Stop site is now listed on its site.
WWD: More and more global brands are looking at India now. What can they expect from the Indian market? Will pure consumption really double by 2025?
G.S.: I think consumption definitely is on the rise. And if the economy continues to grow at 6 or 7 percent, if you talk about eight years, then we’re talking about 60 percent growth by simple terms. Compounded it has to grow by 70 or 75 percent. Depending on which category one is talking about, this much growth is very much on as pure consumption.
Now whether the growth is going to be in unit terms, or price terms is unclear. But definitely consumption is on.
WWD: Will this growth be fueled by global brands?
G.S.: The question whether the demand will be more for Indian brands, or for global brands, is a good one. In my opinion, it is going to be a mix because there are categories where international brands dominate, there are others where Indian brands dominate. In a few there is a healthy competition.
If you look at ethnic wear, it’s Indian brands, no competition. In simple terms, the middle and lower end of the market will get dominated by Indian brands, the premium and above will be dominated by Western brands. If you look at beauty, it is all international brands really speaking, in terms of fragrance. In terms of makeup, Lakme is putting up a good fight.
If you take per capita consumption of multiple items in India, and you will realize that the per capita consumption in India is very small compared to global numbers. It has to go up.
WWD: This year, Shoppers Stop had a turnover of 42 billion rupees, or $611.74 million. In terms of valuation, haven’t the e-commerce companies raced ahead?
G.S.: The valuation of Shoppers Stop is at 1.2-times of sales, at 50 billion rupees [$728.23 million]. The online companies’ valuation is not comparable as they get valued on ever elusive future profits. I believe that Shoppers Stop has big scope for growth in valuation in the coming years.
WWD: Recent studies cite 80 new malls coming up over the next couple of years. Is that realistic?
G.S.: I don’t see 80 malls coming up, but I do see 30 to 40. Forty malls if you take them at a million square feet, that is 40 million square feet of new retail. That’s possible. But of these, new malls are coming up in cities where malls did not exist. If you look at new cities where Shoppers is opening now — Bhubaneshwar, Guhati, Calicut, Cochin — these are cities where there were no major malls. But if you look at bigger cities, like Mumbai and Delhi, there is very little space for building new malls.
WWD: When you look at apparel as a category, between global brands and private brands a lot has happened these last 10 years. How do you view these shifts?
G.S.: In apparel, two major things have happened. One is if you look at men’s wear — men’s formal used to be a big category for us, that has slowed down completely. And what you call casualwear — that is sports-inspired casualwear — whether it is U.S. Polo Association, Tommy Hilfiger, Indian Terrain, Jack & Jones — these brands have taken off very, very well. The second category is men’s denim. That has really taken off as well. So, the growth in formalwear has seen a shift to casualwear and denim.
On the women’s side, Western wear has continued to grow dramatically, and we have also seen a lot of brands enter the market — Zara, H&M, Only, Vero Moda — all these brands have entered this space and fueled this space further. Western wear has had solid growth. That has been a big change in terms of apparel.
Luggage has shown a big growth as well. Air traffic is zooming. That has fueled retail sales in airports, and luggage has grown tremendously.
WWD: Shoppers Stop was a big driver for beauty in India.
G.S.: Yes, Delhi and Bangalore airports have recently got MAC outlets and yes, trends have changed. Beauty and makeup have really grown very well in the last five to six years, across cities. There are now more than 100 stores in beauty, including shop-in-shop and stand-alone, which include Estée Lauder, Clinique, MAC, Bobby Brown and Smashbox.
WWD: In all these years, with all the hurdles and changes in the retail industry, you have been remarkable in the composure with which you handled the changes.
G.S.: I am generally a very positive person. That energy is what makes you work, and if you enjoy what you’re doing, the energy remains. If you don’t enjoy it — if things don’t happen according to your objectives, if you put in a lot of energy and things don’t work out, you feel more dejected. But you have to overcome those, come out of that.
WWD: Haven’t there been many such moments over this decade?
G.S.: Yes, there have been three such times at Shoppers. When I joined in April 2001, the company had just declared a 240 million rupee [$3.5 million] loss. A business paper had the headline, “Has the biggest retailer failed?” Another business magazine had a similar front page article and that came right in the month I joined. But we were able to turn things around and by end of March 2002, we were profitable. It was a great turnaround.
Then in 2008-09 when the whole world was melting, globally, everywhere there were big problems, many banks, big companies went under and demand was declining, we had to shut a number of companies, which we had launched. So when I took charge as president in 2008-09, then the first thing that we did was to shut five companies one after the other, we declared a big loss, but within a year we were able to turn around completely and were able to come out on top again.
Sometimes there are challenges that are external that we cannot control. There are controllable changes, like your merchandise, service, assortment, location. But you have absolutely no control over things like the economy, goods and service tax, demonetization. The only control is how you react to the situation. So, if you are cool, you are proactive, you can come up with the right solutions. They may or may not work, but you learn to tackle them head on.
WWD: So, is there life after Shoppers Stop?
G.S.: Yes, very much. I think I still have a good working career ahead of me — but this time I want to enjoy it more rather than run day-to-day businesses, and because I have been in textiles, then apparel, then retail — I have learned a lot over these years. I have learned a lot about beauty, about nonapparel, about store planning, merchandising, retail profitability, about building omnichannel systems. Now I will be able to utilize all these learnings better.
I feel I have a lot to give back, and that’s what the plan would be.