Consumers will benefit from the tussle between online and physical modes of sales as also from consolidation among large players, Govind Shrikhande, managing director of Shoppers Stop, tells Sumit Sharma. Clarity of government policies will help organised retail. Excerpts:
Retail sales reflect consumer confidence. How has the outlook for retail sales been?
In the quarter ended June, we saw revival in consumer demand and return of positive retail sentiment. We see double digit growth compared to 4 per cent growth in the March quarter. New range by retailers and new fashions bring back consumers.
Which segments are seeing steady spending and which ones are lagging?
Ladies western wear has grown at 20 per cent each year, over the past three years. Fine jewellery has been a challenge over the past two years because of volatility in gold prices and change in duties.
You are the largest retail with 68 stores in 31 cities. What are your expansion plans?
We plan to open 18 stores over three years. Our big expansion is also led by online investment. We are investing Rs 60 crore in our Omnichannel effort over three years, with a target of hitting 10 per cent via online shopping.
How do you see consolidation in the industry affecting your business?
Consolidation helps as competition becomes sharper. The market is quite large for any big impact to happen. We don’t see any negative impact. It should help clear consumer confusion over different brands and formats.
Who will win the battle between physical and online?
It’s the customer who will finally win. The battle will continue because a lot of disruptive money has crept in. About $5 billion Private Equity is driving the online market. If you analyse the $3 billion of sales, about $1 billion is going into discounting, half a billion is going into advertising and another $1 billion into returns. I don’t know what the bottom-line looks like for any of the players. If they continue to bleed there is no business model coming out of it. Like global retailers, we plan to leverage the link between online and physical to drive growth.
Are online sales eating into your business and your margins?
Not in a big way. There was some disruption during the peak period of Diwali. With growth now coming in at double digits, we don’t see that big an impact. We aim to take online sales to 10 per cent of the total sales in three years.
How serious a threat are e-tailers for you?
We have stopped considering e-tailers as a threat. They are expanding the market and we can join in by co-investing in technology and infrastructure.
How do you see FDI impacting the sector?
FDI policy is clear in text but the way it is being applied, there is a step-sisterly treatment towards physical retailers. We have petitioned the Supreme Court through RAI for level playing field. Under the present FDI rules, we don’t see any money coming to physical retail, while online retail continues to draw investments. That is the issue.
What kind of a future do you see for retailers in India?
The market has been growing at 15-20 per cent per year. Clarity of policies by the government will help with regard to FDI in retail, availability of real estate for retail, and also with the recognition of retail as an industry.