Jul 12, 2011|
Shoppers Stop Vs Wal-Mart: Which is better?
How does an Indian retailing company compete with a global giant? Is there really a difference between the way an Indian family managed company works versus the way a foreign multinational works? With talks about Foreign Direct Investment (or FDI) in retail becoming a reality, there's a need to understand the main differences between the Indian and global retailing companies. In our next few articles, we will try and compare Indian retailer Shoppers Stop with global giant Wal-Mart with the same objective in mind.
Shoppers Stop is a retailing company from the business group K Raheja Corp. Set up in 1991, Shoppers Stop has evolved from being a single brand shop to becoming a fashion and lifestyle store for the family. What sets Shoppers Stop apart from the rest of the Indian retailers is its long list of loyal customers - the first citizens. Shoppers Stop provides a range of benefits to these privileged customers, discounts at eateries and spas/ beauty parlours as also the usual card points on purchases. It sells a variety of merchandise in the stores including apparel, home furnishings, leather, watches, accessories, jewellery, and electronics. The company like other companies has of late started concentrating more on in house brands- i.e.private labels. These now account for 18% of total sales of the company.
The world's largest retailer Wal-Mart was founded by Mr Sam Walton in 1962. It serves customers and members more than 200 m times per week at more than 9,000 outlets in 15 countries. It is mainly a discount seller i.e. sells merchandise on discount to the maximum retailing price. This is its unique selling proposition (USP). Wal-Mart sells different goods across categories with a mix of private and own brands to suit different tastes and habits of customers. The founder believes in giving customers what they want. Wal-Mart is known for its robust supply chain, convenient hours, friendly and knowledgeable customer support and most of all a pleasant shopping experience. The work culture in Wal-Mart imbibes the guidelines and values set by Mr Walton which help the customer and make him feel at ease.
Wal-Mart vs Shoppers Stop
Let us now evaluate both the retailers based on a few parameters that are very crucial for evaluation of retailing industries these days.
- Business model
Wal-Mart operates on discount selling concept i.e. the goods are sold at significant discount to the MRP (maximum retail price). Shoppers Stop is now predominantly a luxury play. The company is shifting focus to premium segment of the market and has tied up with big international brands which are being sold at the company's stores.
- Scalability and types of stores
Retailing is mainly a play of scale- more goods sold result in more sales and ultimately more profits. Economies of scale do help the retailers as they are able to stock more varieties and more product categories under the same roof. They need not pay extra rentals for the premises. Thus, they always focus on selling more. Wal-Mart currently operates 9,000 outlets in 15 countries worldwide. Shoppers Stop presently has 3.3 m square feet under operation in a total of about 100 stores.
Having a number of store formats helps in catering to a bigger group of customers. It is about looking after all sorts of customer requirements from groceries to apparels to electronics. Both Wal-Mart and Shoppers Stop have a variety of formats in their store portfolio. Shoppers Stop has department stores, hypermarkets, book stores, home furnishings and personal care stores. Wal-Mart has discount stores, hypermarkets, grocery stores and warehouse clubs that stock groceries and general merchandise in large quantities.
- Robust back-end and supply chain
Efficient supply chain and store operations are very crucial for a retail outlet to run successfully. In case of groceries and perishable items, it becomes all the more important. Wal-Mart has always been known for its robust supply chain systems and is emulated by all retailers alike for the same. Shoppers Stop too has a strong system in place to cater to the needs of its customers. It focuses on long term relationships with customers. But, Wal-Mart certainly scores much more than any other retailer in this aspect.
- Private labels
Private labels help a company in rationalizing costs. The companies are able to earn better margins on these and hence charge customers lesser for such products. Also, more options are available in the case of store brands. Shoppers Stop does have a few brands of its own but majority of the sales are from the other brands. The private labels account for 18% of the total sales. As for Wal-Mart private sales contribute in a significant manner. About 40% of the products sold in Wal-Mart are private label store brands.
- Loyal Customer base
A good way to gauge the popularity of a retailer is the number of loyal customers/ members that it has. Both Shoppers Stop and Wal-Mart have a huge fan following among retail consumers. Shoppers Stop's department store chain by the same name has more than 2 m customers. These account for 75% of sales for the company and the discovery club members (of Hypercity) account for 36% of sales.
In the next article, we will have a look at the financials of both these retailing companies.
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