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Mr Sanjiv Goenka

Vinay Kamath
R. Ravikumar

Chennai, Sept. 18 Mr Sanjiv Goenka, Vice-Chairman of the RPG Group, loves his cup of Haagen-Dazs ice cream. To indulge shoppers at the Spencer’s store at the South City Mall in Kolkata, the retail chain imported 1,000 tubs of the ice-cream, which, he thought, would last right through the puja celebrations. Retailing at Rs 300 a tub, the premium ice-cream was sold out in four days flat, much to his surprise.

Mr Goenka narrates this anecdote to illustrate how the Indian shopper has changed in the over one decade that RPG’s retail wing, one of the earliest to enter organised retail, has been around. “The Indian consumer has evolved over the last 12 years; they are prepared to pay for value, they want to experiment and to indulge,” says Mr Goenka, in an interview to Business Line on the sidelines of the All India Management Association’s 36th convention being held here. And, it’s this change in shopping attitudes which will fuel the turnaround for Spencer’s.

Mr Goenka says the crux of the turnaround strategy for the loss-making retail chain is a combination of three things: localised offerings, locations which are cost effective and cheap, and third a strong focus on costs.

“We have shaved off Rs 10 crore a month. So it’s a combination of the three. We are seeing it pay dividends. Also, our sales have grown 18 per cent year-on-year and that’s significant given that the economy is in a recession,” he elaborates.

In the past year, ever since the slowdown hit Indian retail, Spencer’s has pruned the number of unprofitable stores and also growing the stores.

“So the unprofitable stores we have closed, in terms of numbers they were many, but in terms of square footage they were small stores. We focused on stores which we believe will be profitable. Retail is an industry for the long haul and it’s taken us longer than anticipated but we are getting there,” explains Mr Goenka. In Chennai, it will open a large store in the upcoming Ampa mall.

The key learning, he says, is not to be overly aggressive, and take any location that comes up, but do a detailed study of the area the store is in, understand their requirements and localise the offering.

Mr Goenka says now the Spencer’s edifice will be built on three prongs: apparel, food and cafes. The chain has launched four stores in Delhi under the global label, Beverly Hills Polo Club, which he describes as “affordable luxury.” Spencer’s is also taking forward its tie-up with Au Bon Pain, the Boston-based fast casual dining and bakery café chain. Spencer’s has finalised plans to launch a chain across India. Commenting on the plans of CESC, the main investor in Spencer’s, to dilute a 20 per cent stake to PE funds, Mr Goenka says, “We are looking at the option of diluting up to 20 per cent should we get the right investor, and the right valuation; we are in the process of dialogue, we are not in any hurry.”

The average monthly sale for March 09 stood at Rs 750 a sq. ft per month against Rs 675 a sq. ft per month for March 08.

For the financial year 2008-09, Spencer’s Retail reported an income of Rs 1,071 crore against Rs 813 crore in the previous year, an increase of 32 per cent.

Loss for the year before exceptional items and taxes stood at Rs 365 crore against a loss of Rs 150 crore in the previous year. The company reported a loss after tax of Rs 177 crore in the financial year 2009 against a loss of Rs 89 crore in the financial year 2008.

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