BUSINESS 2 BUSINESS

MARKETING
SHOPPERS STOP

By Srishti Singh
B2B Group3
Sub Group 1
 SHOPPERS STOP PROFILE
Setting up shop in 1991 with its flagship store in Andheri, Mumbai, and
Shoppers’ Stop is a member of the K. Raheja Corp. of Companies.
Shoppers' Stop is the first retail venture by the K. Raheja Corp.
Promoted by Mr. Chandru L. Raheja, Mr. Ravi C. Raheja and Mr. Neel C.
Raheja, the K. Raheja Corp. have been leaders in the construction
business for over 48 years.

With its wide range of merchandise, exclusive shop-in-shop counters of

international brands and world class customer service, Shoppers' Stop
brought international standards of shopping to the Indian consumer
providing them with a complete shopping experience.

Customer Profile
Shoppers' Stop's core customers represent a strong SEC A and B+
skew. They fall between the age group of 16 to 40, the majority of
them being families and young couples with a monthly household
income above Rs. 10,000.

Shoppers’ Stop Motto: "We are responsible for the goods we sell".

Hierarchy in the logistics department

Director Buying and Merchandising

Supply chain management head

Manager logistics and distribution

Distribution Coordinator (link between SS and DC’s)

Four Distribution Centres

 SWOT ANALYSIS of SHOPPERS STOP

STRENGTH WEAKNESS
• Loyal Customer Base of • Employee Retention
782000 First Citizen members • Inadequate Promotional
• Efficient logistics Strategies
• Strong and Well Established • Follows Low – Risk Strategy
Management Team • Less control over inbound
• Systems and Processes logistics
• Suppliers
OPPORTUNITY THREAT
• Geographical Reach • Threat of New Entrants
• Preferred Partner for Foreign • Competitive Rivalry in the
Players Industry
• Hyper city – An entry into • Economic Slowdown
Value Retail • Rapidly changing systems
• Ready to sell garments

BUYING CHANNEL

Manufacturer

Mumbai DC Delhi DC Bangalore DC Calcutta DC

6 stores 3 stores 3 stores 1 store

Shoppers stop has 4 regional distribution centres. Previously each store had
its warehouse(DC) but that turned out to be a wrong strategy as the flexibility
was being affected and costs were building up. There was also a lot of
inventory pile up in each of these stores and hence added to cost in inventory
and transportation from one store to another to transfer excess inventory.
 PROCUREMENT STRATEGY
Shoppers Stop has Centralized Procurement and no regional buying, the
following are the benefits of centralized procurement:
• Target profile same across the country
• Better Cost Controls
• Better Bargaining Power
• Better inventory management
• 100% inventory control
• 100% tracking of inventory – (what’s selling what’s not?)

BUYING PROCESS

Purchase Order Sent to the manufacturer

Delivery Authorization

Manufacturer Dispatches merchandise to the DC

DC’s check the merchandise and confirms through its systems

Accounts Department receives the DC transports weekly requirements to the

confirmation store

Payment to the manufacturer Stocks updated in-store

Pre-retailing team displays the

merchandise

ILLUSTRATION
Purchase order for 5000 shirts of Arrow
Purchase order is a guarantee from shoppers stop that they will buy
but supplier cannot dispatch goods on PO. PO helps is reducing
inventory cost as the goods are ready and stocked at the
manufacturers place, so no inventory pile up at the DC’s or stores. 4
purchase orders are sent by the buying and merchandising manager
for 4 DC’s.
For eg Vendor ABC gets 4 Purchase orders from shoppers stop, for
four DC’s
Mumbai DC 2500 shirts catering to 6 stores
Banglore DC 1000 Shirts catering to 3 stores
Delhi DC 1000 shirts catering to 3 stores
Calcutta DC 500 shirts catering to 1 store

Delivery Authorisation for 500 Shirts

Delivery Authorization is an international system followed by all
major retailers. DA is prepared on the projected sales for that week.
So if the PO (6monthly for 2 seasons) for all 13 stores is 5000 and
for a particular week shoppers stop sells 500 shirts, it will send a DA
for 500 shirts. Thus with delivery authorization system Shoppers
Stop can place order according to the demand assessment with the
condition that it would pick up a fixed amt every week. Thus it
doesn’t have to stock goods at his place and block money in
inventory. It also helps in better inventory management as it is
based on weekly projections. It is an assurance for both the
Shoppers Stop as well as the manufacturer.

Manufacturer dispatches the weekly requirements to the 4 DC’s

according to the DA’s

DC’s check the details (date, number) of the product and match it
with the invoice. Anything not matching even if it is one piece is
rejected. If accepted it causes a mis-match between the Purchase
Order and Delivery Authorisation. Hence the PO has to match with
the Invoice carried by the Manufacturer.

Accounts department receives confirmation in the system for the

pieces physically accepted. The accounts department can make
payment that very second, in which they receive confirmation. This
process is so stable and fast because of being connected and fully
integrated.

Once the confirmation is sent by the DC, the stocks are transported
to the stores. Dispatches are always made early morning. There is a
PRE-RETAILING Team that receives the stocks and their duty is to
put them on display before 10.30 when the store opens, so that
when the customer enters everything is on display.

Stocks are updated in the store

WAREHOUSING
o Regional Warehouses
o No in-store warehouses
o Number of warehouses - 4
o Location – Metros (Mumbai, Delhi, Banglore, Calcutta)
o Floor Area – 20,000 to 22,000 sq.ft
o Transportation from warehouse to Store – Done by the
DC’s

Distribution centers
Distribution centers for S.S are 100% outsourced to another company.
Each of the distributions centers has a floor area of around 22000
sq.ft.. The DC is divided in to zones and1000 based on the brands or
vendors. When a delivery comes in the person in-charge feeds in the
details like merchandise type, brand name, size, color, batch number,
date, etc. the system give him a ticket describing where the
merchandise has to be kept. It gives a detailed description of the pile
and rack number. Thus, even if the person is unacquainted with the
slots of the DC, the system will tell him where to keep the
merchandise. The systems are thus not dependant on any person and
can work independently. This whole activity is outsourced to another
company who acts as a internal supplier for SS. The delivery
transportation from the DC to the stores is the DC’s task.

Advantages of having outsourced the activities

• Cost benefit
• No Labor problems – handling labor unions
• No liability for pilferage by own staff and damages
• Specialized expertise of the company
• Dictate terms to the outsourced company – 24 hours delivery,
etc

INVENTORY MANAGEMENT
SS has a system of checking stocks on a continuous basis. There are
90 departments at SS each day one department is frozen after closing
hours and the staff is made to scan the tags and feed in the stock
levels in the system. The staff is completely unaware of the stock
levels according to the system. The system then compares the actual
to the customary and gives a variance reports. Thus there is stock
matching done everyday and the entire store completes a cycle in 3
months. That means SS conducts 4 cycles of stock taking each year.
This has helped them get the pilferage to its minimum. As each day is
accounted for and there is a complete match on a constant basis.
In the day inventory levels get collated store wise. While in the night
this information gets polled in the server and is integrated at the
national level. Thus, each day the information on stocks available for
that day and at which store is made accessible to each and every
store.
Every day Auto Replenishment:
Shoppers’ Stop has determined its minimum stock keeping units and
as soon as the stocks in the store touch that level, the DC is triggered
to send the replenishment. Thus the system automatically checks for
stock out and replenishes it. The lead time for replenishment is 1 day.
Every night data is collated and a store-wise list of merchandise is
generated. During the day the dispatched is made ready and the next
day morning 6.00am the truck leaves reaching the store in an hours
time. The Pre-retailing team display’s the stock and by 11am when the
store opens their work has to be complete.

Stock keeping Units

Stock keeping units are determined on the basis of moving averages.
The system generates averages of the required quantities for the last
two weeks. As the process is concurrent to the market conditions they
go up with the demand and fall with the slump. The minimum units are
fixed which are based on the past lows and highs.

How does the organization handle product discrepancies?

Saturdays and Sunday’s account for 40% of the week’s business hence
most fluctuations are expected on these two days. Inventory is stocked
up on Friday based on the weekly forecast. But demand is never really
unpredictable at shoppers stop. product discrepancies takes place very
rarely.

SALES FORECASTING
Sales forecasting is done for each brand then built up to the
category then the division then store and then the entire
organization. For example the men’s division head decides how
much business Arrow can do this year and thus similarly for its
other brand similarly the other division heads build up the figures
for each brand and then each division arriving at a common figure
at the top. After further deliberation and discussion with the CEO
and Division head the company finalises its sales forecast.
 Sales forecast for the spring summer season (1st April to 30th
September) is done on 1st October, six months in advance. This
sales if broken down division wise and further brand wise.

For Example:
Shoppers’ Stop has targeted a business of 1crore with Arrow for its
Andheri branch for the year 2003-04.
For its spring summer business it targets a sale of 50,00,000
• Season – 50lakhs
• Monthly - 8.33 lakhs
• Weekly – 2.08 lakhs
They keep a cover of 7 weeks hence need a stock of 14.56lakhs.

On an average a Arrow shirts Costs Rs.1000/- and a Arrow trouser

costs Rs.1200/-. And the ratio of shirts to trousers is 70:30
That means it needs to stock shirts worth 1.46lakhs and trousers
worth 0.62lakhs of trousers for a week. This is equivalent to 146
shirts and 52 trousers. Shirts are in the ratio of 1:2:3:1 for sizes
38:40:42:44.

At the store Arrow shirts are kept at their average required units,
that is 2 of size 38, 3 of 40, 4 of 42 and 2 of 44, and trousers too in
their respective ratio. As soon as one shirt of arrow of size 38 is
sold, the system alerts the DC to send one shirt of size 38 of arrow
for the specific style and option. Thus the stocks are automatically
replenished.

The DC also follows the same system. The DC stocks with a cover of
7 weeks so as soon as its stocks are at its minimum levels it sends a
DA to the manufacturer to dispatch the order already kept ready for
them. Shoppers stop give a 10 days delivery time to the
manufacturer. If the good don’t reach in 10 days the order is
cancelled. Thus they are very stern on the execution of their
policies.

PAYMENT MODELS
Payment Systems: Shoppers stop uses 3 models for payments.
1. Outright Model:
In this model the company picks up the total merchandise on the
payment of cash or on credit terms depending on the terms decided in
the contract. They buy on outright 100% payment depending on the
normal credit terms of 10 to 15 days. The main advantage in this
model is they can avail discounts but if the stocks are unsold they
incur losses as the last stage is that they have to be sent to charity!

2. Consignment Model- In this case the company pays only for the
number of products they sell & the unsold are given back to the
vendor. Pay only for Sale. They have this model with Arrow Shirts,
wherein they put arrow shirts on display but pay only for the ones that
are sold and the rest are returned. The benefit here is, no inventory
cost and no risks, but the margins are very low in this model.

3. Concession Model- In this case space is given to another co. for

opening a store within S.S something like shop in shop. EG: Dior
Perfumes . The advantages are Fixed rentals and commission but it
suffers from low margins.

SYSTEMS
o Secondary (Update Records) – ERP – JD Edwards
o Merchandise Management system and front end
o Warehouse Management system
o B2B website - S.S has around 400 vendors supplying
around 450 brands. Most of the vendors are connected to
S.S B2B site. Each vendor can check the stocks and
movement of his merchandise. They can track which
product is selling best in which city and which one is not.
The vendor need not call SS for information when all that
he wants is available by click of a mouse
Realizing the role of IT way back in 1991, Shoppers' Stop was among
the first few retailers to use scanners and barcodes and completely
computerized its operations. Today it is one of the few stores in India
to have retail ERP in place which has now been integrated with Oracle
Financials and the Arthur Planning System, the best retail planning
system in the world. With the help of the ERP, they are able to
replicate stores, open new stores faster and get information about
merchandise and customers online, which reduces the turnaround time
in taking quick decision. Shoppers' Stop has also set up a WAN system
to link all units and distribution centers and facilitating seamless
operations across all the outlets.

Supply Chain Management

Realizing the importance of distribution and logistics in ensuring the
availability of merchandise on the shop floor, Shoppers' Stop has
streamlined its supply chain. The company has developed process
manuals for each part of the logistics chain. These modules include
vendor management, purchase order management, stock receiving
systems, purchase verification and inventory build up, generation and
fixing of price and store tags, despatch of stocks to the retail floor and
forwarding of bills for payment. The Company now has an off location
warehouse and has also streamlined the layout of its Distribution
Centre. Shoppers' Stop has also tied up with Sembcorp Logistics (P)
Ltd. as its logistics partner

Reverse Logistics
Reverse logistics comes in to action for 3 reason return due to
• Manufacturing defects
• Laying defects
• Consignment stocks – Stocks purchased on consignement
basis need to be sent back if they are unsold
• Line defect- Here the no. of complaints are more & the problem
is also same across all the sections so the product line itself is
withdrawn from the stores across the country. For eg. There is a
constant complaint for arrow’s blue checks shirt. The entire stock
for blue checks in all the sizes is removed from the store and
sent back to the manufacturer.

Process for Reverse logistics:

1. Physical transfer of goods from stores to DC’s
2. DC makes RTV(return to vendor)
3. System Debits the vendor

FUTURE PLANS
Shoppers' Stop aims to position itself as a global retailer. The company
intends to bring the world's best retail technology, retail practices and
sales to India. Their goal is to increase sales and cross the Rs 800 cr.
mark by the year 2005-06. To achieve the set target, they plan to
expand their family by opening 4 new stores every year. The latest
addition to their family is the Calcutta store.

Internalize in-bound logistics to exercise more control and efficient

planning. Today the manufacturer takes 1% as cost for transport which
may or may not be the actually cost. Shoppers Stop ran a pilot and
concluded that there are definite cost advantages and the cost can be
lowered to as low as .80% if done internally.
IT system for reading manufacturers tags: Shoppers stop has to
re-tag all the merchandise because their systems cannot accept
manufacturer’s codes. This involves re-packing expenses, expenses for
tags and plastic holders, labor cost, etc. All these cost could be
completely done away with if the system could understand the
manufacturer’s codes. SS is in the process of buying a system which
reads these codes.

The Reasons for Sales and Markdowns

Sale is the best method to increase sales volume or to get rid of the
excess stock piled up. But the reasons for Shopper’s stop’s sale are
different.

Wrong predictions of fashion:

Fashion is highly unpredictable! Knowing what a SEC A customer of 25
years of age would want to buy six months from now is rather a
difficult task. And this task lies in the hands of the Buyer and the
Merchandiser at Shoppers Stop. They are together responsible for the
bad performance of a certain style or option. Sales at Shoppers are
usually to get rid of this failed merchandise or out of fashion styles.

High sale forecasting:

Sales forecast is rather aggressive than conservative. Sales forecast
are purposely kept higher than achievable to push sales and keep the
pressure on the employees. Thus it is not realistic and the deviation is
expected. Shoppers stop needs to have a more realistic sales forecast
and it their aggressive selling strategy should not be only based on
stocking up the stores but by concurrent promotions and programs to
make customer buy more and have a higher rate of conversion.

Suggestions:

 They should introduce more schemes, discounts, sales to

increase the sales.
 They should introduce Low rate Brands which will attract the
middle class customers also or brands for masses.
 The stores becomes a bit messy because of a large footfall &
small size of stores so they should have larger outlets
 Shoppers stop‘s competitors used aggressive medium of
advertisement like television commercial ads, thus to gain a
competitive advantage over the competitors Shoppers Stop
should also use such medium of marketing.
Bibliography:

1. www.shoppersstop.com
2. www.scribd.com
3. www.financialexpress.com
4. www.economictimes.com