Shoppers Stop To Spend Rs 15-20 Crore A Year On Online Platform In Near Term
Shoppers Stop will raise Rs 179.26 crore through an issue to Amazon.com’s investment arm.
Lifestyle retailer Shoppers Stop Ltd. announced on Saturday that it will raise Rs 179.3 crore from online retail giant Amazon to scale up both its online and offline business.
The retailer will issue preferential shares to Amazon.com NV Investment Holding LLC., an investment arm of the e-tailer, and the deal will require shareholders’ approval, the company said in a press conference.
The proceeds will be used for expansion, Govind Shrikhande, managing director of Shoppers Stop, said in an interview to BloombergQuint. The company is working towards strengthening its omni-channel presence, he said. The retailer has so far invested Rs 60 crore in its digital platform, and plans to invest another Rs 15-20 crore every year in the near term.
Here are edited excerpts of the interview.
What will be the investment used for?
We are on a path of continuous growth. We believe that Indian retail, the physical side as well, is still under-penetrated. So, this will help us further invest more and we are going to open about five stores in the second half of this year. There is also a plan for another 15 stores in the next four years.
So most of it is going to adding infrastructure?
Expanding footprint as well.
And this has nothing to do with the investment in Hypercity. That is a completely different?
Absolutely different, correct.
What’s the update on Hypercity?
For Hypercity, we have been talking to multiple investors for the last 24 months to bring investments. As of now, we are in the final lap of discussion with a few players and are confident of announcing the next step in about four weeks.
Will it be in a range that you have already mentioned - between Rs 150 crore and Rs 200 crore?
I can’t say the number right now; but yes, we will be in a position to announce what will happen in Hypercity. I can’t talk about it right now, but in four weeks, we will be ready with the announcement.
You said recently that the company has been working on its omni-channel strategy for two-and-a-half years. But it’s falling into place only now. How will this change your sales mix?
Over the last 13 months, we invested about Rs 60 crore in building technology infrastructure for our online store to really take us omni-channel. As of now, at the end of first quarter, we are at about 1.1 percent online sales. The target is to hit at least 10 percent in about three years.
We also believe that digital influence on online as well as physical stores is large, in the region of 13-35 percent. So, all these investments will help us not only drive the share from 1 to 10 percent, but also bring in customer traffic to physical stores.
You said you’ve invested Rs 60 crore so far. What’s the investment in the online platform likely to be in the near term?
I would say that all investments into infrastructure are already done. So, there would be a Rs 15-20 crore investment every year now.
There have been disruptions in the first half of the ongoing financial year and also in the last quarter of the previous year. What is the outlook for sales in the second half of the year?
I think we have to treat all disruptions as normal now because now we are seeing... first came demonetisation, then the Goods and Services Tax (GST). Now I think the whole GST thing has settled down now, pretty well, in terms of supplies, etc. - although pricing in certain categories has gone up.
But our belief is in the third quarter, which is the major festival season right now: Dussehra around (September) 30 and then Diwali coming in, is pretty strong. The mood right now, especially in the east where the (Durga Puja) pujo season has already started, we see a pretty strong season ahead. It should be a good third quarter.
With regard to the second half, with regard to the margins, where do you see that moving?
We don’t see a big change happening from what you saw in the first quarter. In fact, we believe that in the second half (of fiscal year 2017-18), our margins will actually go up and you should see far better numbers.
The target is to up the EBITDA margin between 60 basis points and 100 basis points for this full financial year. It will be clear in the third quarter.
And finally with regard to the stores that you are planning to open, and as you said that you plan to open a few of these in the remainder of this financial year, is one of them going to be in South Mumbai?
I wish I had a store in South Mumbai but not right now.
And I believe that the strategy is to have a different format in South Mumbai?
In fact in South Mumbai, the idea is if we are not able to really get a physical store, can we actually do a digital store or experience store.
That’s something that we will work upon in the next year, not right now; because as I said, if I get my omni-channel piece right, digital is a simple step, really.