IS SPENCER’S BACK ON TRACK?

Last year, not only did Spencer’s Retail shut down several stores, but also lowered its expansion drive. However, of late, it seems to have found its lost aggression. And it is paying off as well!

It was raining when we reached the head-office of Spencer’s Retail located at Duncan House in Kolkata. As we made our way into the office we could sense the serenity that prevailed there, in stark contrast to the air of general gloom (and doom) that should have dominated an organisation which is not in profits. But then, there’s a reason behind it and it’s none other than RPG Group’s Vice Chairman Sanjiv Goenka himself. Unlike many others, Goenka doesn’t shy away from revealing the real state of affairs – Spencer’s Retail incurred losses to the tune of `2.2 billion during FY2009. And unlike many more, he’s not one who is willing to weep over losses. “Spencer is into losses but we will soon make it a profitable one,” he tells 4Ps B&M. Today, his team is busy chalking out means and ways to come out of a ‘troubled situation’. In fact, after shutting over 100 stores (a process that started in 2008) across India, Spencer’s Retail is back on an expansion spree and has already committed a whopping `15 billion towards it, over the next few years. But, there’s other side of the coin too. Since the beginning of 2010 we have seen Spencer’s closing down its four stores in Delhi. The situation is somewhat similar in Rajasthan as well. So, when it all seems gloomy, what’s propelling Spencer to be in a sunny spirit? A closer look at the ongoing scenario in the retail industry and one can see that while players like Subhiksha have already bid adieu, global giants like Easy Day (from Wal-Mart) are still in a very nascent stage. The only competition, on the national level, as such remains from Food Bazaar and Big Bazaar (from the stable of Future Group). So, what better time could have Spencer asked for to regain its lost aggression? In fact, to create an edge over its rivals, Spencer’s is deliberately avoiding the time-honoured consumer attracting strategy of economical pricing. The retailer has clearly categorised itself in the experiential marketing category and now focuses on the upwardly mobile and affluent class – SEC A category – in the age bracket of 25-34 years. “We don’t want to claim that we offer the lowest price, but at the same time we are not expensive. In fact, we offer affordable luxury,” Sanjay Gupta, VP – General Merchandise, Spencer’s Retail tells 4Ps B&M.

Further, the strategy now includes equal focus on small towns and cities. But then, looked upon as a retailer providing international experience to its customers with little focus on value-pricing strategy (or the mega discount trend adopted by other retailers), how does Spencer’s plan to home-in on in these smaller towns? The secret lies in private labels which today constitutes over 50% of the group’s total business. In fact, to beat competition and to grab a bigger market share through private labels, the group is busy creating new brands in this segment. For instance, Spencer’s have already floated brands like ‘Living Smart’ and ‘Tasty Wonders’ for its bed-bath and corn flakes range respectively. A new juice brand ‘Alive’ will also be rolled out by August end. While the group has shown wonders in creating private labels, it has failed to create same magic in states like Delhi, Punjab and Rajasthan. Spencer holds high real estate cost responsible for the failure and as such instead of betting big in these cities, the group is once again focusing on its core geographical areas like Chennai. International tie ups too seems minting moolah for it now. For instance, the group has just tied up with American brands Beverly Hills Polo Club and Marc Ecko. Though with these new strategies Spencer’s seems to be well on track towards a profitable future (with same store growth reaching 14% during Q1 FY2010), it should make sure that its efforts are not cornered as other players too seem to now develop a liking for private labels (Aditya Birla Group’s More) and foreign tie ups (Tata’s Trends and Zara). And why not? When it comes to retail, there are little points of differentiation. If Spencer’s has a distinct positioning, then it must go all out and communicate with its customers. Only then it may work in the favour of Spencer’s.