B.S. Nagesh, CEO, Shoppers' Stop: Leveraging tech for growth

It's 9.30 on a Thursday morning, and Sanjay Bindra is at his 800-square feet Kemps Corner office in Mumbai, surfing the Shoppers' Stop intranet on his laptop. It's a daily ritual for the Executive Director of Biba Apparels-one that allows him to track the status of the salwar kameez that his Rs 25-crore company supplies to Shoppers'. On this particular occasion, the 35-year-old Bindra finds that sleeveless salwar kameez aren't selling at the Hyderabad outlet, which is also Shoppers' biggest of the 13 stores. With any of his other buyers, including Sheetal and Crossroads in Mumbai, this would have been a serious problem. Bindra would have had to go from one store to another in order to know the stock position, or make phone calls periodically. But with his largest customer, shuffling SKUs is as simple as moving the cursor on Bindra's laptop. Literally. Result: the trendy sleeveless sets are moved from the conservative Hyderabad to the more fashionable Delhi, where-again, Bindra's computer tells him-the variety is selling like hot cakes.

Welcome to Shoppers' Stop. India's biggest and the most wired retailer, where approximately 15 per cent of the company's net worth is invested in information technology. Why? It's not just because Shoppers' has 13 stores with approximately 400,000 sq ft of retail space, or 38,000 options on offer, or 300 suppliers to handle. Rather, it's because the chain has 30,000 demanding customers walking in every day and selling to them isn't easy. "The paradigm for us," explains B.S. Nagesh, Shoppers' Managing Director and CEO, "is 1x1x1x1. One customer in one moment, to sell one product from one sq ft. There is no alternative." In other words, the retail business hinges on just one thing: availability. If the customer doesn't get what she wants when she wants it, then it's not just loss of sale, but potentially a customer-and often for good.

Wired for Growth

On that count, Nagesh hasn't done badly. Although the chain was started out of a defunct movie theatre in Mumbai in 1991, Shoppers' remained a three-store entity until 1998, with revenues of Rs 80 crore. Thereafter, it went on an expansion spree, and today boasts of a Rs 300-crore topline. And it has been a key-if not the only-driver of its growth.

A clutch of software goes into wiring up Shoppers' (See What Drives The Shop). Sourcing and selling have been integrated via a JD Armstrong software. An Arthur Enterprise Suite takes care of stock planning. And Siemens BconnectB hooks up one hundred of the chain's 350 suppliers. There are three parts to the chain's supply chain management. The first part is handled by the b2b module of JDA. Its uniqueness: the partnership with suppliers allows them to actually control their products. Not only do the vendors tell Shoppers' when their supply is reaching replenish level, but they also shift stocks from one store to another to maximise sale (that's what Bindra was doing that Thursday morning).

The second part deals with warehousing, which again is part of the JDA module. The system actually tells the store staff where to put what. If it were to be done manually, the process would take Shoppers' an extra week for an SKU of 5,000. The third part of the supply chain is taken care of by a bar-code system. It logs every sale and deducts the appropriate number from the inventory column. Therefore, at any point, Nagesh and his suppliers can find out exactly how many units of one product have been sold. And they can get this information across their stores.

The result: Shoppers' supply chain cost, which used to be between 1.5 and 2 per cent, is a mere 1 per cent of its sales, versus an industry average of about 1.5 per cent. And its stock turn ratio has risen from 4 per cent two years ago to about 5.5 per cent now, significantly higher than the industry average of around 4 to 4.5. A ratio of between five and six is considered to be an international benchmark. And shrinkage (industry euphemism for pilferage) is just 0.6 per cent compared to a world average of 1.5 per cent. Says Arvind Singhal of KSA-Technopak, a retail consultancy: "Since the beginning, Shoppers' Stop was clear that it wanted to be a national player. They could not go national until they had data. And for data, they were required to invest in information technology."

Wiring up Shoppers' Stop: The much-criticised investments in IT in the late nineties are now paying rich dividends

Keeping track of inventory and sales is just part of the game. An equally important task is of finding out why, when sales fall short of target. The Arthur Enterprise Suite, the stock planning, does that job. How? It simply puts focus on SKUs that didn't move. It could be sleeveless salwar kameez, a particular style of footwear, a denim line, or even jewellery. Through this software, the SKUs get linked to financial plans as well, thereby allowing the chain to stock better when the next season comes along. A vendor like Bindra, for instance, can analyse the top five styles and the least popular styles, and suggest discounts to incentivise purchase. "This software is also very useful for interpreting fashion trends," points out Nagesh. In fact, using the planning software, Shoppers' has even revamped its store layout to put more popular and impulse items at strategic access points.

An in-house software, called the STC 400, runs the customer loyalty programme. Through STC 400, which is part of the JDA module, the chain tracks the purchases of its First Citizen customer. Once all the data on the purchasing patterns of a customer is put together, the chain can actually make customised offers and provide special privileges. That's 1.4 lakh members to woo individually. A co-branded card, with Citibank, offers customers reward points every time they use it. However, there's no data-mining software, which means the chain cannot make a more intelligent analysis of the tonnes of data it collects every day. Nagesh says there are plans of buying one soon.

Finally, Justified

Today, investing Rs 40 crore in it may seem like a smart move. But back in 1999, it was it that brought Shoppers' almost to its knees. In his bid to create global best practices at the chain, Nagesh bought the best software in the market then-JDA. (In fact, the first time Nagesh approached the company to buy the software, it refused because it didn't believe in doing business with companies with turnover less than $30 million or Rs 144 crore). "We had to really persuade them," recalls Nagesh. The implementation, handled by an India-based it multinational, turned out to be harder than expected. Soon after the trials began, the system crashed. Sourcing and inventory management were in disarray. It took seven months to fix the bug.

Because of expansion and poor sales, Shoppers' logged losses of Rs 23 crore on revenues of Rs 217 crore in 2000-01. But with the system fully in flow, the chain has made a turnaround, with a marginal net profit of Rs 14 lakh. "It's our philosophy (of free flow of information, apart from open office) that worked to our advantage." Since most of its it system is in place, Shoppers' will now slow down on investment but still spend between Rs 1.5 crore and Rs 2 crore on technology. In the near future, in the wireless environment that it is creating in its stores, Shoppers' will be able to take the cash register to customers anywhere in the store, instead of making the customer find one and then stand in a queue to check out.

By 2007, Shoppers' plans to be present in 13 cities, with a total of 32 stores. Nagesh says that he has already shortlisted some cities including Ahmedabad, Cochin, and Noida, where stores are to be opened shortly. "Today, the company runs pretty much on its own," says Nagesh. "And if B.S. Nagesh leaves, there will only be an emotional blip in the company. It will not affect the functioning of the organisation." If only Nagesh could go shop for a software that could take care of the emotional blip, too.