India’s oldest department store chain Shoppers Stop has big plans to scale up its value-for-money ‘Intune’ stores by opening more than 120 new outlets in the next two years, but doesn't see Tata-owned ‘Zudio’ as a direct competitor.
Intune aims at providing the latest fashion at an affordable price starting as low as Rs 199 for adults and Rs 149 for kids with more than 2/3 of the in-store assortment under Rs 499 and everything under Rs 999.
The chain, launched in June this year, currently comprises six stores, including three in Hyderabad, one in Bangalore, one in Dombivli and one in Pune.
The pricing puts Intune squarely in Zudio territory as the brand too focuses on the same price range.
However, Kavindra Mishra, CEO of Shoppers Stop, said that he is not daunted by the prospect of going head to head with Zudio, which has over 350 outlets. Partly, he pointed out, this will be because of the difference in focus and positioning.
Zudio, he pointed out, caters to the youth, while Intune will have offerings for the entire family. “Our product is specifically curated for the young Indian family with varied fashion needs across men's, women's and kids,” said Kavindra Mishra, CEO of Shoppers Stop, in an interaction with investors.
This, he said, impacts the way the customer experience has been designed.
“So when you visit a store you will realize everything from the tone of communication to the priority of categories, the handwriting of products, everything changes when you are talking to a 76-year-old or you're talking to a 25-year-old parent of a young child. And I think that's the fundamental difference between the two. And that's the context in which we are dealing,” he pointed out.
Moreover, said Mishra, the obvious size difference between Zudio and Intune also necessitates a change in strategy for the latter. As such, Intune plans to follow a ‘clustered approach’ compared to Zudio, which is “a much largely distributed brand”. To this end, Intune has mapped the competition to ascertain what locations are available.
“We want to build dominance versus the biggest player in the market in the clusters where we prioritize,” said Parikh. “Having said that, in the clusters where we are focusing, I think by the end of FY '23, Intune Will be comparable to Zudio,” said Parikh.
For this, Intune plans to add another 20-25 stores by year-end and has plans to add over 60 new stores per year for the next two years.
Parikh is quite confident that the market will be able to absorb the new investments.
He pointed out that the organized sector accounts for only 28-30% of the overall market of Rs 1.3 lakh crores to Rs 1.4 lakh crores.
Moreover, with an improving economy the market can be expected to expand further, leaving room for all organized players, pointed out Karunakaran M, CFO of Shoppers Stop.
“So, whether whoever is the competitor whether it's Zudio, or anybody else, with the shift of the public from the unorganized market to the organized market, we feel our expansion is completely justified,” he said.
Parekh too believes that besides focusing on positioning and branding, Intune will be able to draw upon Shoppers Stop's parentage and experience.
“So buying, sourcing, merchandising, VM, marketing, the functions where the difference in identity needs to come out is all there and all other functions, we are obviously leveraging the organizational infrastructure that Shoppers Stop has,” he pointed out.
Profitability
Interestingly, the company maintains that the new chain has been quite profitable, despite catering to the value-conscious buyer.
“..we have opened six stores, the margins which we are achieving are above our expectations, and we have made positive EBITDA at store level within the first 4 months of operation,” said Mishra.
“I must say that from the time we opened Intune, we had a favorable response exceeding all our expectations,” he added.
On the margins, the company said that it expects ‘Intune’ to clock between 35 percent to 37 percent and on the cost (store cost) it expects between 23 percent to 25 percent.
“So that gives a decent margin of close to double digit on the store EBITDA level,” said Karunakaran.
The management noted that as of now the operating cost for Intune is relatively small but as it continues with its aggressive expansion plans the cost margins are also expected to shoot up.
“So we do expect the EBITDA to be anywhere between 7 percent to 9 percent in the first three years,” he added.
The management said that it has seen an increase in its average transaction value and average selling price by 5% each and expects the trend to continue during the festival and wedding season.