Online retail is getting more competitive than ever with the introduction of private brands on top ecommerce platforms. At the same time, online vendors are wondering why marketplaces are causing them trouble. On top of this, losses are a major battle ecommerce players are struggling with. And, some seem to be suffering from defeat.
The infamous retail chain Shoppers Stop experienced slow sales in the fourth quarter of the previous year but is looking to strengthen its online sales through its presence online. Taking a page out of Flipkart’s and Amazon’s playbook, the retailer will be using exclusive brands and private labels online to push its sales.
Why concentrate on private labels via ecommerce?
The Shoppers Stop chain receives a gross margin of 33%. Its private brands, Stop, Kashish, Life, Haute Curry, Eliza Donatein and Vettorio Fratini contribute to 11.5 % of its sales. Exclusive brands like Virat Kholi’s brand Wrogn, Spanish fast fashion brand, Desigual and Shraddha Kapoor’s Imara brand provide around 4.1% sales for the company.
According to the company’s MD, Govind Shrikhande, “At a gross margin profitability level, private brands lend more margins but national brands have a higher customer pull. Private brands and exclusive brands alone clock margins of 45-50%.”
The retailer began pushing private labels and its online presence only after it saw its private label sales fall by 5.4%.
Shrikhande said, “Exclusive and private brands will drive the online customer base especially from smaller cities where we are not physically present.”
What about competition?
The etailer makes only 1% of its revenue through online retail sales. With everyone promoting private labels, what will the K Raheja Corp-promoted retailer do for more sales? Well, first of all, it will concentrate on improving its e-retail through an aggressive approach, Shrikhande mentioned. The company will utilise its Rs.60 crore investment to power its specialised online operations.
Shrikhande said, “We have spent Rs 45 crore of the planned Rs 60 crore for ecommerce expansion. The remaining Rs 15 crore will be completely spent this year (FY18). In three years, our online sales should form 10% of our overall sales.”
Through its online and offline outlets the retail chain sells 400 brands. It has 80 stores in 38 cities and has limited the activity of unprofitable outlets, say reports. But this cut operating expenses of the etailer by 50 points in FY17’s fourth quarter.
During the second half of FY18, all brands will be sold on online and offline channels and 5-10% of the Shopper Stop brands will be exclusively available on the internet.
The company incurred a Rs.36 crore loss and a weak final quarter last financial year as a result of reducing the value of its investment in its subsidiary HyperCITY retail.
In a financial statement, the firm claimed, “Losses of Hypercity Retail, a subsidiary company, have substantially eroded its net worth.”
The subsidiary piloted ecommerce operations for more than a year to revamp its operations. By the end of June, it may launch its online business. When the ecommerce operations begin, Shoppers Stop is looking plans to introduce subscription-based delivery services for HyperCITY’s grocery business.