Regional retailers start to think big
This is THE EIGHTH PART OF ‘YESTERDAY ONCE MORE’ – A series of stories initiated by Images Retail about successful local OR REGIONAL retailers spread across urban India, who continue to expand and grow despite tough competition from national and international retailers.
My bharat yatra began in hometown Bangalore, from where it took me to my birthplace Kolkata and the east, then west to Maharashtra, from there north to UP, back down to the south, followed by a taste of Gujarat. This time, I come to the rajdhani – Dilli – and the very colourful and vibrant state of Punjab. I hope you have enjoyed the journey of discovering hidden regional jewels who are part of the India shining story. There is still a lot more of India shining to see ….. and discover.
WILL KAPSONS CAP SHOPPERS STOP’s DREAM OF TRANSFORMING INTO INDIA’S FIRST UPSCALE DEPARTMENT STORE CHAIN?
Vipin and Darpan Kapoor were just 28 & 26 when they started retail business back in 1989. The Ka”poor” family was not exactly “poor” – they had a flourishing construction business catering to the agriculture & irrigation sector. But these young boys were not interested in wasting their youth on the farms and canals. They wanted to be in a modern (read glamourous), organized business. So they opened a 1280 square feet franchise store of Playboy Fashion in Chandigarh’s Sector 17C.
Two years later, they canceled the Playboy franchise and rechristened the store as Kapsons. In 1992, they became distributors of Pepe Jeans for Punjab.
Fast forward to 1998 – a 3000 square feet Kapsons Junior store was opened just behind the original store. The very next year, the Kapoors roped in Rohit Bal, Rina Dhaka, Rajesh Pratap and five other designers for their design collection store – Kapsons Exclusive – located above Kapsons Junior. This business did not really take off. Footfalls were low. Without wasting too much more time, they converted the store to sell women’s branded westernwear.
Between 2000 and 2004, the original Kapsons store expanded (in stages) to 15,000 square feet, perhaps the largest in the state. In 2005, a 5000 square feet store was added at Amritsar. A year later, another 5000 square feet store was opened at Bhatinda. But by then, the brothers (now with 17 years experience in this business) realized that they needed to open much larger stores.
So, in 2007, a 12,000 square feet store was started at Jalandhar, followed by another 12,000 square feet store at Patiala in 2008.
In 2010, Kapsons closed their old 5000 square feet store at Amritsar and opened a brand new 27,000 square feet store in the city. On the very same day, they also opened another 24,000 square feet store in Ludhiana. The year also saw many other changes. Many international brands were added, especially in menswear – Tommy Hilfiger, FCUK, Calvin Klein, UCB, Nautica, IZOD, US Polo, Gant, Esprit, Lacoste, S.Oliver, Sisley – amongst them. The focus was now more on international brands rather than domestic ones – especially for men’s fashion. Several professionals were hired.
By now, the Kapoors firmly believed that they could manage stores of 30,000 square feet and therefore needed to open bigger stores. Accordingly, the old Kapsons Junior and women’s stores in Chandigarh have been shut and the building (owned by them) is being remodelled to house a brand new 32,000 square feet flagship store.
Another 31,000 square feet store is being opened this summer at Moments Mall in Delhi’s Kirti Nagar area – their first in a major city and the first in the NCR region. This summer will also see the opening of a 12,600 square feet store at Jammu. Come autumn, and there will be three more stores.
Apart from the 6 Kapsons (mother brand) stores, the 107-store chain also has 7 Kapkids (formerly Kapsons Junior) stores, 8 Krome stores and 86 brand EBOs. Krome is their midprice range stores trageted mainly at the youth. The 86 EBOs include 20 Puma stores, 19 of UCB (12 of which were acquired from the company itself), 18 of Wrangler, 12 of Arrow, 9 of Lee, 5 of Tommy Hilfiger, 3 of US Polo and 1 each of Calvin Klein Jeans, Gant, FCUK, Indian Terrain and Global Desi.
Apart from the 107 operational stores, Letters of Intent have been signed for 70-80 new stores. In FY 2011, the group achieved a topline of Rs.287 crores from retail space of 288,000 square feet, giving them an ATD of Rs.830. Out of this, Kapsons itself did a turnover of Rs.146 crores from 95,000 square feet – or an ATD of a whopping Rs.1281. In the current year, they are confident of reaching a turnover of Rs.500 crores (Westside’s is Rs.570 crores). Of the Rs.287 crores, about 80 crores came from international apparel brands, about 155 crores from domestic apparel brands, about 44 crores from footwear and 8 crores from accessories. The Chandigarh and Ludhiana Kapsons stores each contribute to about 10% of the group turnover.
Kapsons is in the process of moving into their new 70,000 square feet headquarters in Mohali. Last year, they have already started a B2B wholesale business, where ordering is completely automated and web enabled. They have set up a 40,000 square feet central warehouse with a bin system. The warehouse has already recorded a single day despatch of Rs.1.50 crores. An online store will start in less than six months.
The ABV is Rs.2000, much higher than that of national department store chains Lifestyle and Shoppers Stop. “This is because we sell shirts up to Rs.7000 a piece and jeans of up to Rs.8000 a piece,” says younger brother Darpan Kapoor.
Kapsons is slowly inching towards occupying the space for an upscale department store chain like a Nordstrom in USA or Central in Thailand. Currently, no one ocuupies that space in India, as Lifestyle and Shoppers Shop moved to the midprice segment over the last several years, although Shoppers Stop has announced its intention to start inching up again. Aditya Birla Group’s Collective is still in its infancy and is probably too premium to be able to scale up too much (Darpan Kapoor had not even heard of The Collective). The chain is hiring staff only from retail training institutes and is spending a lot of time on recruitment and training. “Even the customers have become much more mature compared to 7-8 years ago,” says Darpan Kapoor, “they know their sizes and brands.”
Kapoor does not seem to think of the national players as a big challenge. “North is a different market, because of seasonal changes and many festivals,” he says, “Shoppers Stop knows the western market better and Lifestyle understands more of the south.” He claims that Kapsons is beating Shoppers Shop by a mile at Amritsar. Kapoor shrugs off other regional retailers as being inefficient.
In five years, Kapsons hopes to achieve a turnover of Rs.1600 crores. “If Delhi is successful, we will go to Mumbai, Bangalore and Chennai.”
Kapsons is planning an IPO in 2012. It has already got a CRISIL rating of 9.5, has hired a CFO and is in the process of converting to a public limited company. So here is one regional retailer who is at least thinking big – very big.
RITU NOW WEARS THE BIG LIFE
Mrs. J.D. Sahni had started a small kidswear shop in her garage in 1965. Her husband was an architect and she too wanted to be occupied. After losing her husband three years later, she had to run the family. So, in 1969, 20 years before the birth of Kapsons, Mrs. Sahni opened a 200 square feet kidswear store called Ritu Wears (named after her oldest daughter) at Delhi’s Lajpat Nagar area.
In 1983, her older son Sanjay Sahni joined the business. They bought the building in which the 200 square feet shop was located (she had obviously done well), expanded the shop to 1500 square feet and added women’s wear.
Three years later, younger son Samir Sahni also joined the business. An upper floor was added and Ritu Wears now became a 3000 square feet shop. After a long gap, in 1999, an extension was added and the shop again doubled to 6000 square feet – menswear was added. Today, three adjacent stores in the same block add up to 13,000 square feet in the original location.
Four years later, in 2003, an 8000 square feet second shop was opened at Noida. New categories here included toys, colour cosmetics, skincare and fragrances. In 2005, a 17,000 square foot store opened at Ghaziabad’s Pacific Mall. New categories here included household items, fashion jewellery, saris and ethnicwear.
In 2006, 37 years after the first Ritu Wears shop opened at Delhi, a 34,000 square foot store opened in the Rohini area of the capital. Ritu Wears was now also selling footwear and eyewear. In 2007, the chain added a 28,000 square feet store in Amritsar. This was the city’s largest retail store. “India was moving forward very fast and we were catering to the aspiring middle class’” said Samir Sahni, commenting on this jump from 8000 square feet to 17,000 square feet and again doubling to 34,000 square feet stores.
In 2008, Ritu Wears opened a 17,000 square feet store at Eldeco Station 1 mall in Faridabad. During the recession in 2009, RW opened a 30,000 square feet store at Sunrise Plaza, Indirapuram, Ghaziabad, as well as a 34,000 square feet store in Jalandhar – the largest retail store in the city.
In 2010, RW expanded into central India “because central India and north India have a natural link,” as per Sahni. A 34,000 square feet store was opened in Indore’s C21 Mall and a 29,000 square feet store in Bhopal’s DB Mall.
During the year, the retailer also changed its brand name to Biglife. Both the stores in MP were opened with the new name. “As a company, we knew that the name Ritu Wears only conveyed women’s apparel to new consumers who didn’t know us,” says Sahni, “as we were opening in new locations, we needed a name that would mean much more for everyone.” The name Biglife is inspired from the fact that the aspirations of the middle class are changing and they now want a bigger lifestyle. The retailer did a market survey to test the new name and it came out with flying colours.
In FY 2011, Biglife did a turnover of about Rs.200 crores from 10 stores and a retail trading area of 240,000 square feet, giving them an ATD of almost Rs.700. About 20% of this turnover came from private labels.
This year, a 25,000 square feet store is opening at Haridwar, followed by a 30,000 square feet store at Raipur. Going forward, Biglife wants to open 43 stores (of 30,000 to 40,000 square feet each) across north and central India in five years. Sahni says that they can open 3-4 new stores per year from internal accruals, but this can go up to 8-9 stores per year if they get some funding. He says that they need Rs.100 crores for excpansion and working capital for the next two years and another Rs.100 crores for the next two years after thar.
Biglife is also looking at an IPO by the end of this year. Just like Kapsons, they too have hired a CFO and are in the process of converting into a public limited company. “We were already working like an organized retailer and only had to change to a corporate management structure,” says Sahni. The company has hired many professionals – planners, category heads, business heads, supply chain / logistics managers, operations managers, store managers, HR managers. Most people have been hired from Lifestyle, Shoppers Stop and Future Group. They attracted these people with more responsibility and seniority during the recessoion, when the biggies were slowing down. They brought North Indians employed in Mumbai, Bangalore and Chennai back closer home. Now, hiring is no longer a problem according to Sahni, as the existing people bring more people.
Moving one step ahead of Kapsons, Biglife have even appointed Motilal Oswal Securities as their investment bankers to handle the IPO. Simultaneously, they are open to PE funding. “If a PE player wants to invest before the IPO, they are more than welcome,” says Sahni.
Sahni believes that his competitors are Lifestyle and Shoppers Stop and considers Biglife to be similar to these stores. He claims that he is doing better than Lifestyle in Jalandhar and Rohini and better than Shoppers Stop in Bhopal. While Lifestyle is a “family store” according to Sahni, Shoppers Stop is moving towards a premium positioning, so there are many gaps in the market and he expects to fill those gaps. But what about Reliance Trends, Pantaloons, Max and Westside – are they all also not doing the same?
I asked Sahni whether it would not make sense for Biglife to merge with a strong regional player in the South before the IPO, so that the combined entity would have a pan-India presence, a strong presence in north, cenral and south India, could learn from each other’s strengths and weaknesses and prove the paradigm “do aur do paanch.” Sahni seemed to be very interested in the idea and felt that two like-minded people could create more wealth together. I am going to try and make such a merger happen.
clothes bought at kapsons & biglife need a good wash
The year was 2002. The Indian economy had already experienced a decade of liberalization. The Y2K scare was over. Growth was steady. Shiv-Vani Oil & Gas Exloration Services Limited (a leading onshore oil & gas integrated services provider in India & Middle East with current annual turnover of about Rs.1100 crores) was in business for 13 years and was doing well. Shiv-Vani’s promoters, the Singhee and Dugar families, were looking for a new business opportunity in the retail sector.
They realized that the laundry and drycleaning business in India was very unorganized. Band Box and Snow White were the only players in the organized sector (in Delhi/NCR) and both were not really growing. As per their analysis, this was mainly because both players had not registered their brands as trademarks and many “fakes” were operating under the same names. Consumers were not even aware of what a laundry was – they only understood the concept of dry cleaning. They decided to set up a laundry business with retail contact points (drop-off & pick-up outlets) in every neighbourhood.
Thus, White Tiger was born. Rajeev Sekhri was hired from Havells as the CEO to set up and operate the business. The main central laundry (plant) was set up on a 4-acre plot at Noida (today, this plant has a built-up area of 1,00,000 square feet). The brand name was trademarked. In the first two years, only four outlets were set up (in the NCR) and the company concentrated more on institutional business from hotels and garment exporters.
In 2005, the management of White Tiger took a strategic call that 95% of their business (going forward) should come from retail customers. Twelve new outlets were set up in the NCR, taking up the store count to 16 by the end of the year. Sekhri claims that, during the same year, 25-30 outlets of Snow White in the NCR were shut down. In 2008, a second central laundry (plant) was set up at Ludhiana.
Fast forward to today – White Tiger has 65 retail outlets – 50 in the NCR and 15 in Punjab. One of the stores is inside the capital’s U.S. Embassy compound. The average store size is 100 square feet. Each store does business of between Rs.25 lakhs and Rs.1 crore per year. Apart from washing/drycleaning clothes (or even suitcases and footwear), White Tiger also does pressing, darning, and onsite cleaning of carpets and upholstery (including car upholstery).
Of the 65 White Tiger stores, 21 are company owned and 44 are owned and operated by franchisees. A franchisee’s total investment is about Rs.5 lakhs, including a small franchise fee, a refundable security deposit and store interiors. Franchisees get a flat commission of 30%. A typical franchisee is an existing businessman looking for additional income and profits. The business does not take up too much of a franchisee’s bandwidth. Two “boys” are employed at each store, of which one’s salary is paid by the franchisee and the other’s by the company. Sekhri claims that, in less than two years, a franchisee takes home a profit of Rs.50,000 to Rs.80,000 per month.
The company has ambitious growth plans. Sahni says that White Tiger will have 100 outlets by March 2012, 160 by 2013 and 500 by 2016, by which time the company expects to have a turnover of Rs.150-175 crores. They plan to enter the Bangalore & Hyderabad markets by 2012 and Mumbai & Pune by 2013. In each new city, White Tiger will open 4-6 own stores and grow through franchising.
Other organized sector players have entered the business. In 2007, Diamond Fabcare set up a chain called Wardrobe in the NCR, in a “strategic” collaboration with Brown Gouge (a 96-year-old chain of 35 drycleaning/laundry outlets in Australia’s Victoria state). In just three years, they set up 45 retail locations in the NCR and currently has 62 outlets.
In 2008, Pressto of Spain – reportedly the world’s largest express dry cleaning chain with 520+ stores in 22 countries and a turnover of more than €70 million in 2010 – set up shop in India through master franchisee Dolt Creations. Unlike White Tiger – which operates through a central plant and retail collection points – Pressto does the cleaning at each outlet, and is therefore able to provide express service. Pressto currently has 12 outlets in Mumbai and Delhi, and plans to have 100 outlets by 2005 and claim that Amitabh Bachchan and Mukesh Ambani are its clients.
In 2009, Jyothy Laboratories (a Rs.575 crore company which makes Ujala detergents & fabric whiteners – which has Sachin Tendulkar as brand ambassador – and which recently bought a 14.9% stake in the Rs.520 crore detergent maker Henkel India for Rs.61 crores) set up a laundry service business, Fabric Spa, which currently has 6 outlets in Bangalore. In March 2009, Jyothy had acquired Bangalore’s second largest laundry retail chain Snoways (currently 24 outlets in Bangalore). Last year, Jyothy acquired a 100% stake in Wardrobe, making Jyothy the owner of 92 laundry outlets – the largest in the country.
The Indian laundry market is currently worth Rs.6000 crores and no single player has a turnover of more than Rs.30 crores. It is rumoured that Jyothy is in the process of acquiring laundry chains in Mumbai and Kolkata, giving it a pan-India presence.
So are we going to see the disappearance of our neighbourhood dhobhi in the next five years? “There are pros and cons of using a dhobhi versus a corporate laundry service,” says Sekhri, “while the dhobhi can give much faster service, I’m not sure whether ladies will give their Rs.40,000 salwar suit to a dhobhi – because, if he spoils it, he will just say – sorry memsahib, kharaab ho gaya.” But even White Tiger does not give any guarantee. The maximum refund they offer is up to 10 times their service charge. According to Sekhri, damage claim settlements at White Tiger constitute only 0.3% of their turnover, while the global average is 4-5%.
Asipac got Fabric Spa to open an outlet at Mantri Square mall in Bangalore – hopefully, we will see many more organized sector laundries in high streets and malls – at least I certainly trust them more than the dhobhi.